During 2001-03, we predict more than 25% of Global 2000 CIOs that specialize as turnaround specialists (15%-25% of the CIO population) will adopt a process to restructure IT resources and divest (selectively source) low-value IT operations in response to a slowing economy, increasing competitive pressures, and eroding profit margins.
By 2004, more than 50% of turnaround CIOs will selectively outsource 50%-60% of IT functions, thereby taking on the role of general contractor to deliver an optimal balance between investment costs (efficiency) and line-of-business demands for IT service value (credibility and dependence on information, operational effectiveness).
We believe that through 2001/02, more than 25%-30% of Global 2000 CEOs will increasingly seek to employ turnaround CIOs (recruited from competitors or complementary industries) to decompose existing IT services into building blocks that position the IT organization to raise its credibility to a level complementary to the business dependence on IT.
We expect market demand for turnaround CIO executives to increase by 40% from 2001-05 as Global 2000 companies seek to reinvest, reallocate, and realign IT resources (e.g., infrastructure development, operations, personnel, IT portfolio investments). Turnaround CIOs will be in greater demand during this period (than harvester or caretaker type CIOs) to re-engineer IT processes and improve the ITO’s effectiveness and perceived value to the lines of business.
Based on our research, turnaround CIOs have a 12- to 18-month life cycle and are able to deliver measurable, bottom-line efficiency gains in as little as 30-90 days without suboptimizing the IT organization or IT asset portfolio. These CIOs go on to develop more-strategic, long-range plans to further optimize IT investments and drive resource efficiencies after establishing their credibility in the first 100 days in office.
We believe turnaround CIOs in leading Global 2000 organizations (20%) will implement an IT marketing program to inform (communicate IT value and manage line-of-business/executive staff/board perceptions of ITO performance and contributions) while transforming and performing. We predict the percentage of turnaround CIOs adopting a public-relations campaign for IT services and continued investment in technology resources will rise to 40% by 2003/04.
During economic slowdowns, companies (and turnaround CIOs) may be tempted to cut back on capital spending, including IT budgets, because technology is a visible area (perceived to be convenient and low impact) for cutbacks when companies reassess their capital and expense outlays. However, according to our Technology Leadership Index, a direct correlation exists between IT investment and positive business performance, demonstrating that technology investment is a differentiator among company performances.
High-performing turnaround CIOs understand there is a concomitant approach to asset rationalization and the continued investment in IT assets (people, process, technology) that are in alignment with business imperatives to garner the greatest return-on-investment for the enterprise. A successful turnaround effort is not just a function of streamlining costs, but a simultaneous reorganization and redeployment of IT assets to create new growth opportunities and sustained profitability for the company.
How Do Turnaround CIOs Do IT?
In 2000, more than 450 CIO positions went unfilled in the US – and this was coupled with approximately 20% turnover of Fortune 500 executives. In their haste to fill open requisitions, many companies may hire “charismatic leaders” when they need a “turnaround executive” with the courage, tenacity, and conviction to make difficult decisions that a more charismatic leader would be unwilling (or unable) to make.
CIOs that aspire to be recognized/perceived as turnaround specialists or “quick-change artists” and lead the IT organization and enterprise to prosperity should:
- Lead with courage, conviction, passion, high morals, and personal integrity
- Seek the advice, counsel, and input of trusted advisors/coaches within (and outside) the organization
- Disdain bureaucratic processes and petty political intransigencies
- Establish a flat IT organization with clearly defined responsibilities and accountability for personal and organizational performance
- Build high-performing work teams by exhibiting “leadership by example” with common visioning and shared goals
- Not tolerate dishonesty in others and discount “yes men” that simply “go along to get along” (without offering advice, alternative approaches, or solutions)
- Treat people with respect, fairness, and honesty
- Communicate honestly and openly on an ongoing, periodic basis inward to ITO staff members, upward to the executive committee/board members, and outward to line-of-business colleagues, customers, partners, and vendors.
A turnaround CIO must exhibit these character traits to inspire and earn the trust, confidence, and respect of the ITO, business enterprise, shareholders, and customers. A turnaround CIO leader inspires confidence, trust, and respect from the ITO, senior managers, board members, and colleagues. To ensure a quick change and attainment of profitability, the turnaround CIO must have personal goals that are in absolute alignment with the goals of the enterprise.
Business Impact: During times of economic uncertainty, the lack of a turnaround CIO (that can aggressively and successfully implement a plan to eliminate organization and asset redundancies) puts the business profitability and future growth potential at risk.
Bottom Line: A turnaround CIO must adopt a transformation strategy that aligns IT investments with line-of-business goals, make difficult choices, and then have the courage to act on those decisions.
Al Passori is an analyst with META Group. Copyright 2001 META Group Inc. 208 Harbor Drive, P.O. Box 1200061, Stamford, CT 06912-0061. Web: http://www.metagroup.com. Telephone: (203) 973-6700. Fax: (203) 359-8066. This publication may not be reproduced in any form or by any electronic or mechanical means, including information storage and retrieval systems, without prior written permission. All rights reserved. Reprints are available.