CIOs see benefits of business-focused IT

The IT director's understanding of the business is more important than ever.

Good chief information officers (CIOs) are providing technology that improves competitiveness, establishing stronger relationships with vendors, and are more confident making difficult decisions such as scrapping failing projects.

But IT is still struggling to gain proper representation in the boardroom, according to the annual CIO / IT Director Market Survey from recruitment consultancy Harvey Nash.

The study of 300 CIOs show that only 15 per cent sit on company boards - the same as last year, but down on the 2001 figure of 20 per cent.

More than three-quarters of IT directors believe they should report to the chief executive, and only one per cent think they should answer to the financial director, when 30 per cent actually do.

Harvey Nash director Simon La Fosse says CIOs should not be too concerned with company reporting lines.

'I don't think it's important that you sit on the main board. What is important is that you on the operating board,' he said.

'When it comes to reporting lines, 13 per cent of CIOs said it doesn't matter. They're the enlightened ones and most confident ones. As long as you're not reporting to the office cleaner and you are aligned to the business, it doesn't matter.'

David Roberts, chief executive of blue chip user group The Corporate IT Forum (Tif), says the need for CIOs to be a main board director is over-hyped.

'Boardrooms are becoming more about governance and strategy than operations,' he said.

But Phil Pavitt, CIO at cable company Ntl disagrees.

'Saying that reporting lines is not important is absolute rubbish,' he said.

'If you're going to be an effective CIO you need to be on the main board of the company. It's the single biggest authority you have to make things happen.'

According to the Harvey Nash research, business alignment is the biggest concern for 41 per cent of CIOs, followed by the perception of IT (40 per cent) and reducing costs (31 per cent).

Some 83 per cent of respondents say they are better aligned than in the past, although 56 per cent say there is room for improvement.

'Aligning with the business is an objective that lots of organisations have followed,' said Roberts.

'It's a bit like a cost - you have to keep finding ways of taking pieces out of the cost. You have to keep IT in the forefront of the business, and keep business in the forefront of IT.'

IT projects that fail to deliver value are increasingly seen as a drain on resources, and a source of strain between the IT department and the business.

But a quarter of CIOs say they are 'very proactive' in shutting down problem projects.

'The others are limping along using up time and resources on the business, and losing credibility wasting time on projects that will fail,' said La Fosse.

The successful CIO spends 20 per cent or more of their budget on systems that deliver competitive advantage. Two in five are more likely to have an excellent relationship with their directors and senior business executives, are twice as likely to rate relationships with vendors as excellent, and are better time managers.

The survey gives another indication that the health of the IT market is improving. The number of CIO's reporting an increase in IT budgets rose from 20 per cent of respondents last year to 43 per cent this year.

'In real terms the actual spend as a percentage of turnover is still reducing,' said La Fosse.

'But that said, this comes down to the fact that technology is cheaper and outsourcing is driving costs down. It means that we are getting more IT for less money.'

Outsourcing is playing a role in nearly all businesses, with just four per cent of CIOs reporting no outsourcing spend.

On average, one quarter of the IT budget is outsourced, up slightly on last year's figure of 23 per cent. But 46 per cent of CIOs believe outsourcing spend will increase in the next 12 months.

Meeting the needs of the business better is the primary reason to outsource, according to 46 per cent of CIOs, while 22 per cent say cost reduction is the main driver.

Mobile computing and convergence of internet technologies such as XML and web services were identified as having the most positive impact on business in the next five years.

'Over the next year or so there is going to be consolidation and stability with a little bit of growth thrown in,' said La Fosse.

'Everybody is asking what is the next big technology, but I'm not sure there is just one round the corner. Emerging technologies are never going to turn them on their heads. I don't expect any bombshells.'