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10Minutes
on the CIO
April 2010

Enlisting the CIO to give your company a competitive advantage

Highlights

CEOs are asking their management teams to refocus on positioning their companies for growtheven as the uncertainties in the economy mean cost efficiencies remainparamount. Chief information officers (CIOs) are well positioned to take up the challenge. CIOs who are true partners with CEOs and other business leaders can help develop new products and services, improve communications with customers and suppliers and use data to make betterinformed decisions while continuing to make their information technology (IT) organizations more efficient. At the same time, the pressure on CIOs is rising as many business leaders expect more from them, especially when it comes to innovation and agility. Thats due in part to the explosion of innovation in consumer technology and the adoption of cloud computing principles andtechnologies.

CEOs and other senior executives see opportunities in technology: 1. In PwCs 13th Annual Global CEO Survey, 65% of US CEOs said they expect to increase their spending on strategic technology infrastructure or applications over the next three years. 2. In the latest PwC Management Barometer, 45% of senior executives surveyed said they expect IT to do more in the coming year to help advance their companies business priorities, and only 22% said they expect IT to contribute more to innovation. 3. This could be a defining moment for CIOs who focus on business goals and position their companies for growth as the economy improves. CIOs who dont think of themselves as just IT people could even contribute to innovation.

CIOs can accomplish business goals such as winning loyal customers and still run an increasingly efficient IT organization. Being in sync with the CEO and other business leaders means focusing on the vision, not the IT project. Leading CIOs have a deep understanding of the business and think strategically about how to position the company for growth. C-suite executives, including the CIO, can work together to use technology to gain a competitive edge.

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At a glance
Do you expect the CIO to contribute to discussions of all aspects of the business? Do you encourage the CIO to develop a deep understanding of the business, including customers needs? How do you measure the CIOs contribution?

CEO

Do you think like a CEO? Do you have something to offer when the subject isnt technology? Can you articulate, in business terms, how technology can help the company grow? Can you explain the IT cost structure in terms of business drivers? Do you spend time with the companys customers and view satisfying their needs as part of your job?

/C

OO

Is your C-suite using technology to gain a competitive edge?

Do the metrics you use encourage the CIO to focus on business goals or on keeping all of the companys systems runningefficiently? How do you measure the effectiveness of IT spending relative to the companys businessneeds? Do you encourage the CIO to use new technology to make the companys IT infrastructure more flexible, both financially and operationally?

FO
C

CIO

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01
How two CIOs are driving toward business goals
Using IT to win business Bechtel CIO Geir Ramleth says his goal is to help the company win new business. Hes getting positive feedback for putting IT systems in place that allow clients to shorten their start-up time upon taking control. A global energy company customer said it would never do it any other way, he told PwC. Ramleth is able to focus on developing new services because his IT organization now operates more efficiently than it once did. Using cloud computing providers as his inspiration, he created a new, more flexible infrastructure to support Bechtels far-flung, project-oriented work. Standardizing and virtualizing serversenabling them to be shared, as they would be in a cloud environment, rather than dedicated to a single useboosted utilization sharply, resulting in a 30% savings on operations and management costs. And he used the savings to finance the effort.1 The company also is more agile now because Ramleths organization can get the IT for most new projects going in a day or two, rather than the 60 days it once took. Using data to engage consumers better At Disneys Technology Shared Services Group, which supports Disneys growing online presence, Chief Technology Officer (CTO) Bud Albers sees his mission as twofold: advancing Disneys goal of giving its audience what it wants, when and where it wants it, and keeping costs under control. He anticipates that an experiment he is now running will help Disney customize its services. What were trying to do is increase the level of engagement, he says. Using a software framework called Hadoop that combines and processes large volumes of data quickly and cost-effectively, Albers expects to give Disney analysts better tools to glean insights about its audience. Analysts will be able to look at more data from various Web sites and analyze it in different ways than they have in the past. Albers has the flexibility to try this because he has been virtualizing his servers to get costs under control. After rising at an annual rate of 27% when he arrived two years ago, costs fell 3% last year. That freed up both budget and staff to work on efforts to improve the customerexperience.2

1 PwC Center for Technology and Innovation, Technology Forecast, Summer 2009.

2 PwC Center for Technology and Innovation, Technology Forecast: Making sense of big data, 2010 issue 3.

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02
The new mindset: its about the vision, not the IT project
Leading companies are using technology to pursue new opportunities and deal with emerging business needs. Health: Connections that improve care CIOs are helping extend delivery of care beyond traditional settings.3 Kaiser Permanente, a leader in electronic health records, is exploring virtual care, including monitoring patients who take their blood pressure and other vital signs at home. More than 3 million Kaiser members already view their lab tests online and use the system to email with their doctors. With a mantra of there are no IT projects, Kaiser aims to deliver what CIO Phil Fasano calls real-time personalized health care.4 New technology gets tested at Kaisers Garfield Innovation Center. To encourage innovation, Fasano launched a fund that provides seed money for employees projects. Retail, consumer products and financial services: Competing for customers CIOs are reaching out to customers via social media, text messages and iPhone apps. Mobile commerce is growing as retailers such as Amazon.comwhich strives to be Earths most consumer-centric companyenable consumers to shop online from their smart phones.
3 PwC Health Research Institute, Jammed access: Widening the front door to healthcare, July 2009.

Target recently began sending electronic coupons that can be scanned at checkout to shoppers smart phones. Because consumers opt to receive them, electronic coupons tend to be redeemed at a higher rate than the paper variety5% to 20% versus less than 1%, according to one coupon company. Banking is going mobile too. And asset and private wealth managers are enhancing their Web sites to improve communications with customers and give them better tools to make investment decisions. Tech: Taking advantage of transition Cloud computing might seem like a threat to networking giant Cisco Systems. But Cisco executives see an opportunity. Cisco developed, with partners, a server/storage/ networking product that they say can help businesses make the transition to a more flexible and efficient cloud model and help service providers create private clouds. Its part of a broader strategy by Cisco to build an architecture that extends from service providers to enterprises to the home while retaining a prominent role for its advanced networking gear.

4 Kaiser Web site http://xnet.kp.org/newscenter/podcasts/2009/ index.html#.

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A balancing act that may require CIOs to develop new skills
CIOs are getting more involved in shaping business strategy, but theyre still responsible for keeping their companies systems running efficiently. Its a balancing act that may require CIOs to develop new skills. The new requirements CIOs who function at this level have a deep understanding of the business issues and are comfortable helping set strategy. They can articulate, in business terms, how technology is changing the competitive landscape and how a company can take advantage of those changes. They view innovating to meet customers needs as part of their job.5 To be able to focus on business issues, leading CIOs invest in staff or vendors so they can take technology management off the table. They find ways to make their infrastructures and their organizations more flexible so they can experiment with new technology without making big capital investments or compromising security. They also understand the IT cost structure and can explain it in business terms. Disneys Albers, for instance, speaks the language of the chief financial officer (CFO) when he says server utilization is really capitalassetutilization.
5 PwC Center for Technology and Innovation, I for innovation: The next-generation CIO, October 2008. 6 PwC Center for Technology and Innovation, The situational CIO: IT problem solver, cost cutter, strategist, December 2009.

PwC believes that CIOs who are adept at these business skills, as well as the more traditional skills of orchestrating outsourcing and ensuring that their companies systems run efficiently, will increasingly be in demand as the economy moves from recession to recovery. We call them situational CIOs.6 Many CIOs arent there yet Evidence suggests that many CIOs arent there yet. In PwCs latest Management Barometer, only 55% of senior executives said the CIO in their organization always speaks the language of the CEO and proposes new ways to advance strategic business prioritiesor does so most of the time. Only 38% described their CIO as extremely or very effective in advancing business priorities. And only 31% said they were extremely or very confident that IT spending would produce a positive measurable business impact in the coming year.

Great expectations
Q: Which of the following best characterizes the role that IT will play in your company in 2013? Percentage of respondents IT will be a full partner in our business, helping us meet strategic objectives in most areas

57%

Along with providing technical support, IT will be inuential in helping us improve operating efciency and reduce costs

34%
IT will mainly be a technical support function, to keep our systems up and running

9%

Source: Digital company 2013, Economist Intelligence Unit survey of more than 600 senior executives.

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Empowering the CIO
C-suite executives can empower the CIO to become a full business partner who can help advance the companys business objectives. Encouraging the CIO to develop a deeper understanding of the business might mean having the CIO spend more time with customers and work more closely with product engineers on new goods and services. Leading CIOs are often called on to brief their boards about how technology is changing the competitive landscape and how quickly business models may need to shift. In some cases, the CIO may have had a non-IT role in a business unit. Seat at the table Leading CIOs also have a seat at the table where key decisions are made. DuPont CIO Phuong Tram, for instance, told PwC in a recent interview that he is a member of two top leadership teams: the operating team, made up of business presidents and key functional leaders, which focuses on the overall company, and the STREAMline board, made up of all C-level functional leaders. Defining the performance metric that unites the C-suite CEOs and CFOs may want to change the ways they evaluate IT spending and, ultimately, the CIOs performance. To encourage CIOs to spend more time focusing on business goals, companies may want to judge their CIOs performance on the basis of the same metrics they use to evaluate other businessleaders. This might mean looking at how much new revenue was generated by an innovative project the CIO helped develop or whether such a project improved customer satisfaction. Based on PwCs experience with clients, changing the way of measuring performance can influence behavior and change mindsets. Using business metrics to evaluate IT effectiveness sends a strong signal to the organization that the CEO, CFO and CIO are working together to achieve businessgoals.

Self-fullling metrics?
Q: How does your company measure its IT effectiveness? Percentage of respondents Operational metrics only

34%
Mix of business value and operational metrics

53%

Source: PwC Management Barometer, April 2010.

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How PwC can help

To have a deeper discussion about enlisting the CIO to gain a competitive advantage, please contact: Robert Moritz US Chairman and Senior Partner, PwC Phone: 646-471-7293 Email: robert.moritz@us.pwc.com Philip Garland CIO Advisory Services, PwC Phone: 703-918-4523 Email: philip.a.garland@us.pwc.com Julien Courbe CIO Advisory Services, PwC Phone: 646-471-4771 Email: julien.courbe@us.pwc.com

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2011 PwC. All rights reserved.PwC and PwC US refer to PricewaterhouseCoopers LLP, a Delaware limited liability partnership, which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity. This document is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. 10Minutes is a trademark of PricewaterhouseCoopers LLP US. MW-11-0211