I recently analyzed 60 companies in India to understand the CIO reporting structure and the key projects that these organizations are focused on. Some interesting findings from this exercise:
- Currently, 40% of Indian CIOs or top IT executives report to CEOs or the senior-most person (president, managing director, etc.) in their organization. Among the other 60%, most report to CFOs (35%), followed by COOs, group CIOs, and chief sales officers.
- CIOs who report to CEOs tend to have a 30% higher IT budget than CIOs who report to CFOs, COOs, or group CIOs.
- Projects led by CIOs not reporting directly to the CEO focus primarily on reducing IT costs and aligning IT to the business; these projects are typically measured in terms of cost savings.
- Projects led by CIOs reporting directly to the CEO are more likely to focus on customer acquisition and retention and measured more in terms of business outcomes for the organization.
As the boundary between IT and business further blurs, successful CEOs must get more directly involved in business-led technology discussions as a means to differentiate their organization and drive business growth. To this end, most Indian CIOs (who do not report to CEOs) that I’ve spoken with over the past three to four months expect to report directly to the CEO (or senior-most executive in their organization) within the next year or two. This expectation is reflected in current hiring practices in India, where the majority of CIO job openings on the market will report directly to CEOs. With that in mind, we expect that 70% of Indian CIOs or top IT executives will report to CEOs or the senior-most executives in their organizations by the end of 2016.
What it means for CIOs: Technology is increasingly helping to shape the business for a vast majority of Indian companies. In order to become true business leaders, CIOs should:
- Redesign the IT organization to respond to frequently changing business needs. This includes changes in reporting structure, processes, job descriptions, and even culture. For instance, a global transportation logistics firm added a formal innovation function to the existing enterprise architecture group to facilitate business innovation. More examples can be found here.
- Adopt a showback approach to develop an IT-as-a-service model. Per Forrester’s Forrsights Budgets and Priorities Survey, Q4 2012, 67% of business decision-makers in India (the highest among all the countries in Asia Pacific) plan to increase their department’s spending on SaaS, IaaS, and other as-a-service offerings in 2013 through the IT organization. However, fewer than 10% of Indian CIOs currently follow a “showback” model to provide IT consumption information back to the business. CIOs should embrace this showback approach, starting with increased support for public cloud services, to begin evolving toward a well-managed IT-as-a-service model.
- Renegotiate terms with your SIs to deliver greater business outcomes. Organizations increasingly require a more consultative or business-driven delivery arrangement with their key SI partners to respond to changing business needs and justify the large percentage of IT spend that the relationship constitutes. However, Forrester’s recent report highlighted the fact that Indian CIOs don’t think they get much current business value from their SIs. It’s time to renegotiate terms with your SIs by aligning their financial compensation with business objectives, among other ways to deliver greater business value.
What are your thoughts on CIO reporting structure and changes they must adopt to be future-ready?