Meta Group Quarterly: What CIOs need to succeed

Meta Group senior vice president Luis Leamus looks at the most important issues facing CIOs this past quarter, from SOX compliance to staff retention, and offers best practices for running a successful IT organisation during the coming years.

Many users (and some auditors) are still searching for greater clarification and instruction on exactly what organisations must do to exhibit compliance with Sarbanes-Oxley (SOX). For the most part, they will age and wither before this will occur.

SOX is a concept-based - not rules-based - regulation. The onus is on executive management and boards of directors to interpret SOX mandates - with the help of auditors and other third-party risk professionals - and then promote and document a controls environment that meets the spirit, if not the letter, of the law.

A recent Meta Group study highlighted the importance of strong, tangible management support in addressing SOX compliance efforts. For organisations that were on or ahead of schedule with SOX efforts, 61 per cent cited strong management support as the main contributing factor, regardless of organisation size.

Similarly, for organisations behind schedule, 45 per cent cited strong management support as the leading factor that could improve efforts. Although strong management would seem a given for SOX compliance, for many organisations it appears to be lacking.

One contributor to poor management support is poor communication. Too many IT organisations take for granted that their achievements and services are self-evident. When no messages are communicated, users as well as management often assume the worst or think that IT is hiding something. Seasoned IT leaders therefore practice value management and proactively communicate IT successes to users and managers alike.

Based on Meta Group's market research and best practices, to help achieve IT's mission as a department, CIOs must embrace and mix the following staff skills and traits when working with business clients:

• analytical - sees the relationship between technology, business and cost;
• technical - is adept at languages, technologies, tools, protocols and designs;
• communicative - attracts, leads, motivates, influences and is available to users;
• adaptive - handles ambiguity and adjusts to change; and
• entrepreneurial - uses technology to grow the business and has great initiative.

A key part of an IT organisation's mission is to find ways to increase its ability to impact its bottom line through increased transparency, integrated benchmarking and workflow functionality. To this end, leading CIOs should examine the current crop of vendor-provided portfolio management (PfM) software-based tools. These tools enable executives to rationalise, manage and improve their ability to make increasingly complex business, operational and organisational decisions. Leaders in this market have functionality that centres on scenario creation, assessment and planning; highly automated optimisation techniques that produce actionable opportunity models (e.g., efficient frontiers); and decision output for downstream managers, on which they can execute.

Whilst many CIOs and CTOs may be perceived as lacking the executive leadership necessary to assume more senior positions (for example, COO and CEO), the solution can be found in identifying and aligning with a senior mentor. Through mentoring, CIOs and CTOs can adopt highly effective business management habits that reveal they do, in fact, have the business acumen, organisation, management and political skills necessary to assume more senior positions. By 2005 to 2006, early successes at formal human capital management mentoring programs will become mainstream, with nearly 40 per cent of global 2000 companies using human capital management skill inventories and needs assessments.

As CIOs strive to attain more senior positions, their IT labour costs are going to increase. In 2003, flat base salaries kept IT labour costs at slightly under 50 per cent of IT budgets, but by 2006 to 2007, IT salaries will again escalate as the economy improves, putting labour costs at 55 to 60 per cent or more of the IT budget. As the economy improves during 2004, key IT employees will again look to greener pastures. CIOs should pay closer attention to their human capital management program (for example, management development, employee welfare and morale, performance-based incentives, recruiting and retention programmes) and should promote IT organisation core values to prevent the exodus of highly valued employees.

The major factors contributing to holistic IT retention fall into four broad categories:

• compensation and incentives,
• defined professional development and opportunities for career growth,
• work environment and
• recognition of accomplishments.

Of these domains, the areas most likely to affect the behaviours that lead to the highest retention rates are the last three. Although compensation is a critical component for retention (pay must be fair and opportunities to earn a reward add to the overall appeal of a job), it is far from the most important element in understanding why someone shows up for work every day. CIOs must ensure that compensation is reviewed regularly and fairly administered and, most importantly, that their people have growth opportunities, challenging work and recognition for their work and contributions.

Unfortunately, successful project achievements are tainted by poor project management. According to Meta Group research, 95 per cent of IT projects that experience cost overruns also suffer from scheduling problems and these variances translate directly to increased risk and cost. Meta Group noted that 65 per cent of project managers estimate schedules with a predetermined deadline (that is, dictated by the customer), leading to an immediate mismatch between planned and realistic delivery dates.

CIOs and project managers should avoid 'predetermined scheduling' and focus on proper project estimating, risk management and the project-tasking discipline. Controlling IT investment without jeopardising the fund and a current focus on asset portfolio management - particularly applications - will lead to a wave of projects with valid business cases throughout 2004 and 2005. This, in turn, will bring a focus back to project management discipline during the same time period.

The ultimate aim is to become an adaptive enterprise. These organisations are capable of flexible responses to market conditions and competitive actions because they utilise change scenario planning methods to anticipate, gauge and plan for multiple likely events. These techniques map processes and reporting relationships to information flow requirements (storage, data integrity, networks) and levels of organisational sophistication (culture, market acumen, technology). Each intersection is analysed with regard to levels of change required to adapt to likely events (readily ported, modification required, scrap).

Adaptive organisations routinely determine how their governance structures, business processes and technology architectures must evolve to accommodate each change scenario and build their plans accordingly.

And just as organisations must be flexible and responsive to customers' needs and market variations, IT organisations must follow suit. These same challenges have presented themselves and (at a sufficient satisfactory level) have been solved by manufacturing organisations through lean manufacturing techniques and methods, making just-in-time (JIT) production a reality. The same practices can be transferred to an IT organisation to deliver JIT IT solutions. This becomes the new frontier of the adaptive organisation.

Luis Leamus is senior vice president International at Meta Group. He is an acknowledged authority on the IT organisation, business value of IT, adaptive infrastructure and integration and middleware. Luis has more than 20 years experience in the global IT industry in business development, marketing, financial analysis and strategic planning.