The changed, then how have they changed
The title of this essay is interesting as it raises a number of questions and issues with regards to what could be considered “really key activities” for a Chief Information Officer (CIO) and their team in organisations where certain aspects or operations of the Information Systems (IS) / Information Technology (IT) function have been outsourced. What were these key activities before IT outsourcing, and what are they post IT outsourcing? If they have changed, then how have they changed and why have they changed? It also highlights a number of issues facing CIO teams in the devolved outsourcing model, and what could be defined as the “CIO team” in the new world. Would the structure of the CIO team remain the same, and, would the same competencies be required if IT outsourcing is the chosen strategy? Does IT outsourcing actually permit a CIO and their team to focus on the really key activities, or is it a distraction?
This essay does not attempt to explain what IT outsourcing is or why organisations choose to outsource any part of their IT department as part of their strategy. It is expected that the reader has prior knowledge, and understands the principles of IT outsourcing. Therefore, throughout the essay, I will concentrate on the progression of the CIO role from the origin of the title “Chief Information Officer”, the CIO team role, and what could be considered their traditional key activities. I will then chart the progression of the CIO role to the present day for an organisations that incorporates IT outsourcing as a strategy. This will highlight the changes and differences, in the really key activities that have been forced upon CIOs during the natural evolution of their role. While I will not explicitly call out the questions raised in the first paragraph, answers will be provided throughout the remaining text of this essay. Finally, a conclusion will be drawn on wether or not, outsourcing allows a CIO and team to focus on the really key activities. From this point forward, IT outsourcing will be referred to as “outsourcing”.
The dependency on IS/IT and its importance within organisations has increased in the past 40 years and the CIO role has duly expanded in line with it. In 1981 the job title Chief Information Officer was coined (Synnott & Gruber, 1981). It was during the job titles formative years in the 1980s when the IT/IS Manager function started evolving into the CIO role. Initially they did not have a seat at top management meetings as they usually reported to another C-level executive. In time, some gained their seat as a response to rapid technological advancements, and the major IT investment in provision of personal computers at every employees workstation with the aim to improving efficiency, and speed of work processes.
Unfortunately there is no widely agreed upon definition of the CIO role. There are a number of reasons for this; the role is continuously evolving, and although it would be similar in most organisations, it has different responsibilities due to the management hierarchy and strategic choices made by the Chief Executive Officer (CEO) and the top level management team of which the CIO is not necessarily a member. What I would deem the most correct current description would be: a senior executive that normally reports to the CEO, with a combined background and knowledge in technology and business, responsible for delivery of information and communication technology that meets all stakeholders requirements whilst aligning IT strategy with the organisational business strategy in order to positively add value to the organisation (Wadhwa and Harper, 2014).
The research, Andrews and Carlson published in 1997 (cited in Wadhwa and Harper, 2014) concluded that there were four waves of evolution in the CIO role in the years up to 1997. These are: “Glorified data processor”, “technocrat”, “business executive” and finally a hybrid “technocrat business executive”. This study appears to incorporate the period of time before the title Chief Information Officer was coined and so it would have covered the first wave of CIOs described as “glorified data processors”. Therefore, in the early 1980s, those who first took on the CIO title were the “glorified data processors” and the role did had very little resemblance on the different descriptions in 2018. The first wave did not last long as as technology penetrated every aspect of employment and personal computers became more powerful. This led to the second wave of CIO, the “technocrat”. This CIO had superior technical expertise but lacked a number of key skills including coordination of resources, IS human resources and the motivation of personnel, planning, communication, IS function repositioning and service delivery (Rockart, 1982).
With further technological advancement and vast quantities of information stored, data fast became an asset to the organisation. If used correctly, competitive advantage could be gained. The CIO became responsible for developing and planning the competitive advantage (Passino and Severance, 1988). CIOs who did so were now entering the third wave of the “business executive” CIO, where they got to sit with the other C-level executives at top management meetings. They became consultants, IT strategic planners and information communication technology managers. This was achieved while focusing on how the business used the technology provided, competitive advantages, IT budgeting and creating a strong position for themselves at the executive level (Dixon & John, 1989).
From the late 1980s and into the 1990s, the fourth wave of a hybrid “technocrat business executive” CIO appeared. They had the technical knowledge, and business savvy required to influence the CEO, and the salesperson ability to promote IT/IS as an essential service. CIOs concentrated less on the technical aspects of the role as they had all the relevant technology experts necessary within their IT department that they could refer to for guidance. In place of the technical knowledge, strategic planning, communication and building relationships with other C-level executives came to the fore. The aim was to leverage IS in order to create greater benefit to and assistance in, creating the organisational growth strategy.
A number of key activities have emerged throughout Andrews and Carlsons four CIO waves. Each of them are as valid today as they were in 1997. They include the creation of business value using information technology, the creation of IT strategy that aligns with business objectives and ensuring that any technology investment aligns with the organisational strategy.
From 1997 to the present day, in the years following Andrews and Carlsons study, I hypothesise that a fifth CIO wave has occurred in the evolution of the role. The CIO has progressed from “technocrat business executive” to what I call a “business integration executive”. The main stimulant for the fifth wave is outsourcing. Outsourcing is defined as “the use of external service providers to effectively deliver IT-enabled business process, application service and infrastructure solutions for business outcomes” (Gartner IT Glossary, 2018).
IT outsourcing downgraded the importance of some of the CIO teams key activities, especially in the area of technological expertise. Technological strides, resulting in standardised and commodified services, means that CIOs may now be considered Chief Integration Officers rather than Chief Information Officers (Ragowsky et al, 2014) This fits perfectly with my fifth wave descriptive term “business integration executive”. Adapting to the changed role can trigger an identity crisis for CIO teams that are traditionally constructed from technocrats and historically to a certain extent sees the business units totally separate to IT. The CIO team no longer require a superior level of technical knowledge as they become more business orientated. This must not be mistaken with not knowing enough about technology to build a business case. It means that they do not have to know every technical detail. Gaps in knowledge and weakness in technical skill are becoming more acceptable within the team as they can be filled using technical expertise provided at a cost by the organisations outsourcing partners.
As the CIO team is more attuned with the business, it introduces new areas that the team needs to focus on such as demand management, partner management and supply management. To succeed at these, the CIO team need to have effective lines of communication that facilitates interaction between the CIO team, outsource providers and the organisations business units. Demand management is necessary to ensure that internal business stakeholders approve and prioritise work and have the necessary budget allocated for the partner company to progress it. Partner management requires effective communication facilitation between the CIO team and all outsource providers collectively, to ensure that they are aware of the upcoming workload and that they prioritise in such a manner that it is scheduled accordingly and resources are allocated on-time. The supply management element is vital for monitoring that all contractural obligations are kept by all parties, work is done as per agreed service levels and pricing, and that deliverables arrive as planned.
The management of demand, partners and supply is time consuming and results in increased effort to integrate all three elements with the business units, partner companies and CIO team. Less effort is spent on the technical aspects that the role previously required, and as a result it is possible that the CIO teams value within the organisation is depreciating. The team no longer requires such a strong IS/IT background and therefore, future waves could emerge where CIOs do not have any technical experience and their teams are constructed from the business units.
In an organisation that has not conducted strategic outsourcing, the CIO generally has a static number of permanent personnel to utilise and manage. If necessary, these can be supplemented with newly recruited staff and/or contractors. People management is at the core of everything the CIO has to plan. The CIO and his team of Senior IT Managers manage staff by assigning them to projects and systems as required in order to meet business needs or IS needs if systems are are down, slow, need maintenance etc. The CIO team is concerned with how each staff member performs and if they have met targets. Individual staff members performance feeds into the CIO teams departmental performance. One of the main problems facing CIOs where everything is done in-house is the lack of flexibility. People are usually assigned to specific tasks or systems. When new changes are required in the form of new systems, it can be difficult to release people from their daily roles in maintaining and updating existing systems, as these are the tasks that keep the show on the road. Additionally, retraining staff in new technology takes time and in a resource limited department this time may not be available.
The worldwide financial crisis that started in 2007/2008 became a major source of outside stress on organisations and in most cases, their previously growing IT budgets remained static or were significantly reduced. CIOs were in the position where this external force, supplemented by internal pressures to reduce costs, yet at the same time add more value to the business within a lower budget, resulted in many turning towards strategic outsourcing. At the same time, users expectation levels increased and “instant gratification” was sought. It was believed that instant gratification could not be satisfied in-house due to the misconception that delivery would be slow and expensive, so therefore, the only way to achieve it was through outsourcing which is often thought to be faster and cheaper (Gefen et al, 2011).
As outsourcing comes in a number of forms, from the simple purchasing an off the shelf software product, offshoring, on-shoring, near-shoring, to project specific and multi-sourcing, it has caused new headaches for CIOs and their team. At a high level, the resultant CIO team hierarchy generally changed from CIO – Senior IT Manager – IT Manager – Staff reporting line, to, CIO – Business/Vendor Relationship Managers – one or many Outsource Partners. For many in the CIO team, the job description change can be challenging as the mindset and skillset required to deal with the new responsibilities is vastly different to what they used pre-outsourcing. The team focus also changed. Rather than managing staff directly, the team members are managing the partner companies that provide the outsourcing through metrics such as severance level agreements and critical success factors. This is often difficult as Senior IT Managers are normally from a technical background and they are forced to deal with relationships and managing companies that they have less control over than if they were managing their own staff. They may also find it difficult penalising the outsource partners by monetary means when they fail to meet the targets set for the metrics. However, the ability of the team members to implement the penalties are a necessity to change behaviours within the outsource partner companies.
The management of outsource providers also incorporates enforcing standards. All partners should be adhering to the same detailed standards to ensure that there is consistency in process and operations as it permits easier measurements on the health of the contract between both parties. These standards must be defined by the CIO and governed by the CIO team. The business side of the organisation should not notice any inconsistencies when dealing with the IS/IT function and its service providers.
Another major change of focus is the requirement to look externally rather than internally for the implementation of strategy and systems because the CIO no longer has the staff available. The CIO team no longer asks the question “how can we do this?” The question now asked is, “what needs to be done, and who can we get to do it for us?” Either an existing or new partner company must be contracted and using such a service provider usually costs a fluctuating amount of money due to varying resource requirements and scope creep within projects. Using external resources is often more expensive than in-house resources as there is less control over the costs. These costs could be incurred due to missing deadlines through no fault of the CIO team, changing requirements from the business units or even issues within the partner companies.
Whilst all of the aforementioned is going on with outsource partners, the issue of other C-level executives going rogue and buying off the shelf software without the CIO teams assessing the impact remains. The pain of shoehorning such purchases into existing IT architecture is compounded by the need to either, re-build an in-house team or, to find an outsourcing partner to support the system. The CIO needs to ensure that good interpersonal relationships exist with all other C-level executives to prevent this from happening.
Implementation of strategic outsourcing has resulted in an unclear future for CIOs and their teams. Many organisations have proceeded to reverse their outsourcing strategy by bringing services back in-house to regain control. The main driving forces for this reversal is, the lack of tangible benefits or, the lack of monetary reward from outsourcing. The vision for outsourcing is often to reduce costs for an organisation but outsourcing is expensive and gets exponentially more expensive with any new technological advance implemented by outsource partners. It is also difficult to change contracts or swap them to other outsource providers as the existing provider has the staff with the IT expertise for the CIOs’ organisation. Taking previously outsourced systems, services or operations back in-house usually requires the transfer of staff from partner companies into the organisation. The CIO team would have to change focus and human resources management may need to be learned/relearned. In-housing may be seen as back-tracking and impact the organisations image. CIOs may revert to the fourth wave definition of “technocrat business executives”. This could reflect poorly on the CIO team if they were responsible for the original outsourcing, or alternatively, it may lead to more internal innovation and evolve into the as yet undefined sixth wave of the CIO role.
Combining my experience of working in-house, followed by transferring to an outsource provider, and the process of researching and writing this essay, it became obvious that the role of the CIO team and the key activities they need to focus on are constantly evolving. The CIO in organisations that utilise strategic outsourcing are, in what I would term the “fifth wave” and are now “business integration executives” and, could alternatively be known as Chief Integration Officers. It is no longer a necessity to have in-depth technological expertise as this is available to them in abundance through strategic outsource partnerships. The knock on effect is that the CIO team role has developed to include the integration of these outsource partners into the organisation, management of the outsource partners and, facilitating integration of the organisations business units with the outsource partner resources. However, even with the changes outlined, the creation of business value using information technology, the creation of IT strategy that aligns with business objectives and ensuring that the technology invested are still key activities that can not be ignored.
As organisations grow, mature or alter direction, the key activities that CIO teams need to focus on will alter in line with any strategic policy changes. Outsourcing is just one of many strategies, and while some of the key activities are different it does not mean that the CIO team will be distracted. The “really key activities” are “really key activities” regardless of what strategy is chosen. They are variable and will continue to change.
Therefore, it can be argued that the essay title statement “Outsourcing allows a CIO and team to focus on the really key activities” is in fact unimportant due to the CIO team having to direct their attention to whatever the continuously changing set of key activities are, in order to achieve a successful IS strategy that adds value and supports the organisations business growth strategy. A more accurate statement would be: Outsourcing allows the CIO and team to continue their focus on the ever changing key activities.