5 Reasons Why Every Mid-Market Company Should Utilize a CIO
The position of a CIO has traditionally been thought of as only for larger companies. Indeed when the position first became popular in the 90’s only companies with fairly significant data centers and IT staffs hired a CIO. In recent years more companies with revenues of less than $1 billion have been hiring CIOs. However, in many of those situations the position becomes more of a title given to the person at the company that is responsible for IT, regardless of what their actual function. In many cases the CFO also carries the title of CIO.
A CIO is no longer just a title to be given as a reward or just to give to another executive as a place holder. As information technology (IT) has become ubiquitous and ever more important within companies of all sizes, the role of the CIO has become more critical and includes more expanded functionality. The following are 5 key functions a CIO should perform in all organizations.
1. CIO should be responsible for both the technical components of information technology and business process. As a company grows the systems it should use include more and more functionality and the company should use more of that functionality to improve the productivity in the company. Unfortunately, what generally happens is that the company invests in technology that has the capability to significantly improve productivity and controls. Or the company does not purchase the technology available to them because they do not understand the benefits of the available functionality. The result is that as the company grows of the ratio of expense to revenue increases and the company becomes less profitable as a percentage of revenue that translates into net income. A good CIO should understand the technology, the business and lean business processes. The CIO becomes the key person that guides the company to utilize information technology to the fullest extent and implementing lean business practices to maximize profitability.
2. IT is no longer just about processing accounting transactions and providing management reports. It is also no longer just about building and maintaining an internal data center at a single location. IT encompasses customer interface, product/service delivery, marketing and sales and ultimately can be the key to an important competitive advantage or major cost savings. A savvy CIO who is involved at the C-level executive ranks can help guide the company through technology decisions, educate management and employees regarding different technology options.
3. CIO should be part of strategic planning process. Often executive management plans are hampered and information systems are purchased in a crisis mode because no one with a technology background has been involved in the strategic planning process. I have worked with companies that are struggling with growth because they do not have the systems and processes needed to remain competitive and profitable as they grow. Having an experienced CIO involved with executive management at that strategic level will not only improve the chances that the company’s information systems and processes will be able to support their growth; they may also be able to provide solutions to competitive pressures. In addition, if a company is struggling and needs to reduce cost, an experienced CIO will be able to identify opportunities where information systems coupled with revised business process will enable staff reductions.
4. Information Technology today is much more complex and specialized than ever before. Also, new technology is coming on the market faster than ever. Traditionally, mid-market companies rely on vendors or non-technology executive’s previous experience to keep them informed on what enhancements they need. This is dangerous for 2 reasons – 1. vendors are primarily interested in making sure that their clients purchase products/services that fit in their experience. 2. Vendors are not involved in planning so are often unaware of all the factors that should impact a decision.
5. CIO should be involved in M&A transactions. Many companies grow by acquisition and as the economy recovers M&A activity will increase. The CIO needs to ensure that the parent company has the infrastructure and systems to support the acquisitions, perform due diligence on the acquisition targets and plan the transition of systems, infrastructure and processes. I have worked with several businesses that have grown by acquisition without addressing these areas and after a few years they have a major issue to address. They are supporting multiple systems and infrastructures, the companies cannot work together, customers are confused and they have not realized the expected ROI.
Hiring an experienced CIO is expensive and many mid-market companies do not have a need for a full time CIO. In these situations I recommend using an experienced CIO on a part-time consulting basis and/or adding an experienced CIO to the Board of Directors. Also, many CIOs are primarily experienced in managing the IT environment and have limited business knowledge. Utilizing an experienced CIO as a coach/mentor to the corporate CIO or on the Board will provide the needed support for the company CIO.
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