Perspectives of the IT Organization and the CIO

CIOs and their IT organizations play a central role in the demand for IT consulting. In our discussions with a number of leading CIOs about their impact on the shape of the IT industry, six themes emerged:

1. IT is now an established function in the structure of most organizations. For many years, the IT function was the "new kid on the administrative block." In that tenuous capacity as a newcomer, it was necessary and appropriate to use resources and expertise from outside the company. It was natural for companies to rely on outside sources for guidance on key design and investment decisions and for resource capacity itself. This reliance helped fuel the growth of IT services. Now that a strong IT function is accepted as central to a healthy company as are the HR, Finance or Purchasing functions, the degree of reliance on outside support is both sharpened and diminished.

2. The roles of IT in some companies are being redefined by the nature of what remains to be done after everything else is outsourced. Not everyone is convinced that this IT function design by "default" is a good thing. For example, one CIO sees establishing the "information backbone" of the company as about all that is left after outsourcing maintenance of the data-center, running of the network and programming. This CIO will not outsource ownership of design or maintenance of the so-called information backbone because he believes that the ability to do that is central to the competitiveness of the company.

3. As an established function, IT in the company now has more degrees of freedom to source services for highly specific purposes and value. One CIO describes the IT organization of the future as consisting of the following:

• Business analysis to understand the needs of the businesses
• Technical architecting to oversee and interface between IT and business systems
• Project management to implement change consistent with the practices of the company
• Management of IT processes

For each of these four capabilities, this CIO easily identifies the IT consulting outsiders who currently provide that service to his corporation. And, he states that his strategy aims to steadily bring more capability on the first three into his own organization. He prefers that these capabilities reside in his organization and then, by default, go to the outside if he has no alternative.

4. CIOs have migrated from being mainly IT technical experts to participating in high-level dialogue about the strategic direction of the company. For example, the views of the CIO may be central to design or re-design of the business model or significant in assessing the viability and future value of a major acquisition. One CIO told us, "If you have good people in the IT organization, they are good partners with the businesses." In the past, consultants helped bridge the needs of the businesses and the capabilities of IT. As an established strategy partner with business and corporate executives, the CIO and staff satisfy many of the IT-related strategy needs that IT consultants satisfied in the past.

5. Many CIOs say they will do less outsourcing in the future. This is driven by several factors, including a decrease in the number of new, "gorilla" ERP and CRM initiatives and the increasing need for rapid and flexible modifications to existing systems. What they do outsource will be the "body shop" activity when they need more capacity, but they plan to keep the deeper expertise in their companies.

6. Off-shore suppliers are providing an increasing share of IT services for activities such as coding. These are companies like Infosys, Syntel and WiPro. They market and deliver services on line and are viewed as providing rapid response, high quality, and low-cost service. One CIO told us, "...typically the outsource company will have 60% of their people on a project offshore and the other 40% at our location." These offshore providers were 50% of the cost of the large, U.S. IT consultants.