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Reporting Relationship Can Influence CIO Role
The Five Essential Metrics For Managing IT
By Bobby Cameron with Alex Cullen, Brandy Worthington
Executive Summary
Forrester's 2007 IT governance survey yielded a broad set of data on how the CIO's reporting relationship does—or doesn't—impact the way IT works and is perceived. We surveyed 503 senior IT decision-makers about how IT runs, how it is structured, and how it is perceived. The bottom line: While there are some variations based on who the CIO has as a boss, most IT governance realities don't vary greatly based on the CIO's reporting relationship
CIO'S REPORTING RELATIONSHIP IMPACTS HOW IT BEHAVES AT THE MARGIN
Forrester's annual governance survey of 503 IT decision-makers reveals that a CIO's reporting relationship has some, but not a strong, influence on the IT organization.1 We looked at how the CIO's reporting relationship related to a variety of factors.
The reporting relationships in our survey varied a lot by industry but little by size. Sometimes this was significant, as when 46% of the responding CIOs in business services reported to the CEO or when one third in retail and wholesale trade reported to the CFO. But only the small and medium-size businesses (SMB) have a significant variation in reporting relationship based on the size of the firm.
IT centralization varied only slightly with the reporting relationship. This was in spite of a significant variation of centralization based on industry sector.
We found that although the reporting relationship didn't make a radical difference, it did make some difference. We found that CIOs reporting to the:
CEO focused on the customer first, using centralized management facilities. Thirty-four percent of our sample reported to their CEO—by far the largest single reporting relationship—and their approach to IT management reflects their reporting relationship. These CIOs were the most likely to have a centralized IT planning function, and this tendency resulted in their firms being among the strongest in most centralized IT capabilities—like vendor management or project/program management office (PMO). CIOs reporting to their CEO had the highest IT budget as a percentage of revenue but were only average in their mix of investments versus ongoing operations. These CIOs' companies were only in the middle of all the respondents in their philosophy that IT is a differentiator, and their opinion of IT has declined over the last year. These CIOs were slightly more likely than their peers to sacrifice infrastructure service for getting large projects in on time.
CFO spent more time reducing costs and focused the least on improving the business. These CIOs—18% of our respondents—fit the cliché for IT execs reporting to CFOs. They had the smallest budgets as a percentage of revenue and focused the least on improving business with new IT—with the largest chunk of their time spent on reducing costs. They were less likely to have centralized vendor management, performance management, and relationship management, but they were most likely to have demand management.
President had the least centralized IT planning and lowest view of IT as a differentiator. Sixteen percent of our sample had CIOs reporting to their president. Because they were least likely to have centralized IT planning, they end up with fewer centralized management capabilities like innovation/R&D or centralized architecture. These CIOs did manage their internal clients, however; they were the second-most likely to have IT marketing and were above average for demand management. While they were average in IT spend as a percentage of revenue, it was all about efficiency: Their companies were the least likely to have a philosophy of IT as a differentiator.
COO were most likely to be seen as a differentiator, focused on improving business. Only 9% of our respondents had CIOs reporting to their COO. They were the most centralized but the second-least likely to have centralized planning. As a result, they were among the least likely to have centralized functions like vendor management, IT service management, and relationship management. CIOs who reported to COOs came from companies most likely to see IT as a differentiator—and the opinion of IT at their firms has improved the most over the past year. These CIOs led the other reporting relationships in their focus on improving infrastructure execution quality and were one of top for improving their firms with new IT.
Business unit head focused on operational excellence and improving the business. Five percent of the respondents' CIOs reported to business unit (BU) heads. For them, reducing costs and improving operational excellence dominated IT's agenda. They had average levels of centralization but were among the least likely to have centralized IT functions like service management and performance management. However, in situations where centralized control is needed, these CIOs were among the top—for centralized PMO and IT demand management. They were second highest for seeing IT as a differentiator and among the highest for new investments as a percentage of overall IT spend. Finally, they were the strongest in spending their time on operational excellence and improving the company with new IT.
NEXT: HOW REPORT RELATIONSHIPS AFFECT IT MANAGEMENT, SPENDING AND BUSINESS PERCEPTION.
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