Compass exec says CIOs losing direction

The father of Token-Ring computing says CIOs should stick to what they know.

Olof Soderblom’s history in the high-tech industry dates back to the 1950s when he worked in digital processor design. In a stint with IBM Sweden, Soderblom was the brains behind a Token Ring patent that took 13 years to be granted by the United States Patent Office. He went on to co-found Compass Analysis in 1979, where he specialized in the sort of data modelling and analysis that has since become a critical part of the modern corporate enterprise.

During a visit in Toronto Monday to meet with some Canadian Compass customers, Soderblom sat down with InfoSystems Executive to discuss the evolution of the CIO.

ISE: With the collapse of the dot-com market, how much of your time is spent consulting on e-business projects?

OS: We’re very much more now focused on IT impacts and what used to be called the value of IT. E-commerce is a reasonable service area of users, but it’s not huge. I mean, e-commerce isn’t really e-commerce, as you know. I saw the other day that one per cent of B2C transactions are done over the Internet.

ISE: What kind of return-on-investment demands are being placed on firms like yours now, given the current market conditions?

OS: Well, we tend to be kind of cyclical, because around 60 per cent of our work is performance improvement, which is to help your clients manage their costs and improve the quality and so on. Of course, when times are bad, our clients come to us for help.

ISE: Do the clients have clear understanding of what they need from you, or do you typically have to conduct a sort of “discovery” phase?

OS: It varies. In many cases, they know us; we have a large percentage of repeat clients who come back to us. So they know what we can do. Bu t in many cases, we have to start off and see what is doable.

ISE: Is the work you’re doing primarily with CIOs or does it involve other parts of the management team?

OS: It’s primarily CIOs. We’re trying to get ourselves more and more known with the CEOs to get this debate going about where does IT fit and who is responsible for achieving impact from the IT investment. Unfortunately, we don’t have that many CEOs.

ISE: How difficult is it to get into those other parts of the organization?

OS: It is indeed tough. You get branded. It’s a marketing task, really, to spread the word and get your talents recognized.

ISE: We’ve been hearing a lot about how CIOs need to turn from more of a tactical person to more of a strategic player. One of the things we’re exploring, though, is how do CIOs get that place at the decision-making table?

OS: I would argue the opposite. This debate about where the CIO belongs is taking the eye off the ball, from where the focus belongs. The basic fact is that corporate and line management is responsible for IT impact. They cannot just delegate that to the CIO. There are no IT measures for the business impact of IT; there are only business measures. How can a CIO be responsible for reengineering the business to fit the IT application? The CIO’s role is really to run the infrastructure at the lowest cost with aggregate quality.

ISE: I think this comes up most often in the customer relationship management area, where these projects are underway and one of the reasons they don’t work out is the lack of communication or cohesiveness among various departments. The implication is that it’s only the CIO that can bring them together.

OS: I don’t believe so. I don’t believe the CIO has the organizational clout to do it. It’s the CEO’s problem. For some reason, just because there’s technology involved, the CIO was assumed to be the driving force. But I don’t think they can do that.

ISE: How then should they respond to that pressure?

OS: By making the job descriptions very clear and making clear on what the CIO is measured and on what they’re not measured. Business impact, I don’t believe is one of his or her responsibilities.

ISE: But aren’t some of them looking for that responsibilities nevertheless?

OS: Oh, absolutely. Of course, it’s a career move, but I think from the company’s point of view, it is not appropriate.

ISE: What are some of the negative results we risk here?

OS: How many successful ERP implementations do you know? How many successful e-commerce implementations do you know? And both of those were assumed to IT projects, when they’re not. They’re business process projects.

ISE: Why are financial institutions so often the early drivers of these kinds of business process discussions?

OS: Primarily because they have a very simple supply chain. Their supply chain is very adaptable to e-commerce, which is why the only truly e-commerce applications that I can think of are in the financial services industry. They don’t have a supply chain to manage; their supply chain is sort of electronic anyway, in many cases.

ISE: Are there other vertical markets that might follow their lead?

OS: It is quite unique. Travel is another where you don’t need to move that many things between businesses or between the businesses and the consumer. And of course I believe airlines are being quite successful in their attempts.

ISE: Given the economic client we’re starting to see a lot of companies examine their core competencies. What’s the long-term outlook for the outsourcing of IT infrastructure?

OS: To my surprise, outsourcing is, as you know, growing, both on the IT side and also on the business process side. I’m not sure I understand the reasoning behind it. Has anybody really sat down and analyzed what the long-term benefit is? Focusing on core business, yes, but if you take IT, it’s certainly so all-pervasive now that I wonder why it’s not core business?

ISE: Do you think we’re going to start seeing a pull-back eventually where those sorts of functions are brought back in-house?

OS: We’re seeing that already. It’s extremely difficult to do. It’s almost impossible. Once you’ve outsourced, you can’t find the people, it’s difficult to reorganize. But I have many clients that wish they could.

ISE: What kind of advice can you offer them?

OS: To make the best of the relationship with the outsourcers. To ensure that you have service level agreements (SLAs) in place, to ensure that you do proper governance of the outsourcing contract. After all, the outsourcer has quite different priorities than the outsourcee. The outsorucee wants flexibility and growth and so on. The outsourcer wants a stable environment.

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