In late 2006, IBM Chairman and Chief Executive Officer Sam Palmisano issued a challenge to more than 100 chief information officers from around the world at IBM’s first CIO Leadership Forum. He told them that their profession was at an historic turning point. The world was changing—driven by the digital network revolution and the reality of global integration. “This is your moment—one of those moments that doesn’t come along very often—when you have an opportunity to enhance your standing, influence and contribution to the enterprise. Or, the role could be marginalized,” Palmisano said. He called on each of them to become their organization’s “chief innovation officer.”
IBM has been encouraging and advising the top technology officers within businesses and governments ever since the role emerged along with the rise of computing in the 1950s. At first, the job title was director of data processing. Computing was initially seen as a back office tool for automating accounting and other financial matters. Later, when computers became more sophisticated and took on additional tasks throughout businesses, the title changed to director of management information systems. The breakthrough came in the mid-1980s, when chief executives increasingly invited their IT leaders to sit at the table with other C-suite executives.
Among the first people to have the CIO title were Al Zipf of Bank of America, and Max Hopper of Bank of America and American Airlines. “Management’s Newest Star: Meet the Chief Information Officer,” declared BusinessWeek magazine in a headline in 1986. “This reflected the recognition that what started as electronic data processing was beginning to become business strategy,” said Harvey Koeppel, a longtime CIO who is now executive director of the Center for CIO Leadership, a professional community of CIOs sponsored by IBM that has 2700 members in 70 countries.
“To stay relevant, the CIO role must evolve beyond the operational, shared service mentality. Droning on about uptime and upgrades is not going to cut it, and purely operational CIOs will rapidly be ushered out of the C-suite. ... In this world, the CIO becomes a mix of process officer, information broker and skunk works-type researcher. His or her ‘customers’ are those that write the checks for the products and services the company buys, not internal business units, and problems are tackled jointly with line of business counterparts. In this role, the infrastructure is far less important than the strategic direction of the company and a detailed understanding of the company’s markets, processes and relationships. Essentially the ‘Information’ portion of IT becomes far more relevant than the technical aspects.”
"The CIO Is Dead (Long Live the CIO)," TechRepublic IT Leadership blogJune 1, 2009
“For most CIOs, the next few months and years will be a true test of their ability to adapt to this metamorphosis. While many will embrace the change, seeking out opportunities to drive innovation and creating sustainable productivity gains, others will first need to refocus their function from mere operational cost centres to effective business strategy drivers.”
“The metamorphosis of the CIO,” CIO magazineSeptember 2, 2010
“CIOs are investing in business analytics capabilities to help them improve decision-making at all levels. … In addition, in this challenging economy, CIOs understand that analytics can be key to new growth markets, whether it’s new ways to manage a utility grid or smarter healthcare systems. Managing and leveraging new intelligence through analytics is something that today’s CIO is pursuing to gain competitive advantage in these new markets.”
“New IBM Study Highlights Analytics As Top Priority For Today’s CIO,” IBM press releaseSeptember 10, 2009
IBM didn’t coin the term “chief information officer”—its provenance has been lost in the mists of history—but the company laid the conceptual groundwork for the role in the early days, and lobbied corporations to make technology an essential part of their business. Francis G. “Buck” Rodgers, who was IBM’s top sales and marketing executive in the 1970s and early 1980s, recalls the role that he and other young salespeople played in corporations after IBM launched its System/360 family of computers in 1964. At the time, most directors of IT reported to chief financial officers, but the System/360 computers were useful throughout companies. Rodgers recalled: “We were calling on the CEOs and telling them the person in charge of technology should report to them just like the head of personnel or the CFO.”
Companies were so proud of their gleaming, refrigerator-sized computers in those days that many put them in glass-enclosed rooms so people could see them easily. Thus, early data centers were called “glass houses.” Around the same time, because IBM’s reputation for quality and service were so strong, a catch-phrase emerged that captured IBM’s eminent status in the minds of corporate computer purchasers: “You don’t get fired for buying IBM.” Rodgers didn’t like the saying. “I never bought that,” he said. “If you believed it, you got too casual in your approach.”
The emergence of the personal computer as a business tool in the 1980s enabled department heads and business managers throughout the company to choose PCs and software they wanted without involving the CIO. But the improvements in office productivity delivered by such PC-based applications as spreadsheets and word processing came with a price. Enterprise IT environments became increasingly chaotic. One response was the client/server model of the late 1980s and early ‘90s—and with it the role of the CIO actually increased in importance. For some, that continued to grow in the late 1990s, as the rise of the World Wide Web blew open the walls of the enterprise and pushed access to sophisticated information technology to employees throughout companies. Some CIOs became thought leaders who helped their companies embrace the Internet.
Then, as the dot-com bubble burst in the early 2000s, and as some areas of information technology commoditized, CIOs were confronted with new challenges. In the face of increasing expense pressures, some organizations began to see IT as a cost center and the CIO’s role primarily as that of a cost cutter. However, the reality is that with technology embedded in every facet of business, and data becoming the lifeblood of competitive advantage, the CIO’s role is more necessary to a business today than ever before.
Sam Palmisano and others argue that it’s essential for technology executives to step up and help their companies deal with the opportunities and stresses of globalization and the emergence of disruptive new technologies, including cloud computing, social networking, advanced analytics and mobile communications. IBM’s CIO studies reveal that CIOs are more closely aligned with the perspectives and goals of chief executives than ever before, and that they’re expected by CEOs not only to focus on efficiency, but to improve their companies’ competitive differentiation and enable them to radically change their product portfolios and approaches to doing business. In a 2010 survey by CIO magazine, 43 percent of the CIOs surveyed reported to the CEO, and 60 percent of the respondents listed “long-term strategic thinking and planning” as one of their critical leadership competencies.
At IBM itself, the corporate CIO has become even more crucial in recent years. Until 2005, each business unit within the company had its own IT leader (there were 128 of them), operating under one global corporate CIO, who set policy and coordinated their activities. But that year, the company began the process of further centralizing control of all IT employees and assets. Now, under CIO Patrick Toole, IBM’s IT function is operated as a shared service, which, along with other efficiency measures taken since 2003, has helped the company save more than US$2 billion in annual costs. But the change at IBM isn’t just about saving money. It’s Toole’s job to think through the implications of technology advances in mobility, collaboration and social networking. “Our mantra is to work with the business units to transform the company for growth and productivity,” said Toole.
Think of it this way: IBM has now completed the process that began more than half a century ago. Information technology is now thoroughly integrated into every single thing the company does. And the new role that evolved to manage the company’s information promises to become more strategic than ever before.
Selected team members who contributed to this Icon of Progress:
- Sam Palmisano IBM CEO, president and chairman of the board
- Pat Toole IBM CIO
- Francis G. “Buck” Rodgers IBM sales and marketing executive in the 1970s and early ‘80s
- Virginia L. Linkenhoker Organized the first IBM customer training school