Calculating Risk

By David Haskin

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Nobody argues that the few years before the dot-com bubble burst were heady days for technology executives. The popular image was of the CIO leading the charge toward innovative strategic initiatives and e-commerce with little concern about budgets. By comparison, today, many would argue that technology executives have become risk averse.

"There was an idea there back then that there was a 'first-mover advantage', a phrase you don't hear much any more," said Mike McClaskey, CIO of Perot Systems. "That advantage would supposedly more than make up in the future for any up-front costs you are incurred. In retrospect, there was a lot of fairly careless spending that went on."

That being said, however, McClaskey and others agree that tighter purse strings found in most enterprises these days do not necessarily mean CIOs are taking fewer risks. It just means that the roles of CIOs are changing and they are making different types of choices in a more informed manner.

"I don't feel we're more risk averse," said Jim Harding, senior vice president and CIO of Henry Schein, a distributor of healthcare services. "The challenges are the same today as when money was flowing more freely. It's just that there were some unrealistic expectations then."

Changing Roles, New Focus

Not only are enterprises and the executives that lead them more hard-headed these days, but events have caused the role of CIOs and other technology executives to change significantly since those heady days of yore.

"The role of the CIO has changed dramatically in the last five years," said Phil Fersht, director of the business applications group of the Yankee Group. But that hardly means that new initiatives aren't being launched, he stressed.

"We have data to show three-quarters of companies are making significant investments in Web services in the next 12 months," Fersht said. "If you spoke to me six months ago, I'd probably have been in agreement that CIOs are more risk averse these days, but that attitude is obviously changing."

The role of CIO has also matured, according to McClaskey. That, in turn, has led to a different approach to strategic initiatives.

"Now that CIOs have a seat at the table with business leaders, they're starting to behave more like business leaders," McClaskey said. "If we say that they were once wildly speculative and now they're not, that's probably what's changed."

He noted that, during the late 90's, a lot of CIOs and CTOs were young and comparatively inexperienced. That, combined with the feeling that businesses would miss out if they didn't move quickly in certain areas led to a lack of caution that sometimes wasn't very business-like, McClaskey said.

Even at that, he stressed, "CIOs were being responsive (then) to a business driver that said 'Get us there faster or better and that the ends justify the means'," McClaskey said. "In retrospect, we've seen what's happened -- a lot of surplus equipment."Harding pointed to another major reason the role of technology executives has been changing: regulatory compliance.

"We are doing some acquisitions, so we have to decide on the timing of the acquisition," he noted. "If it's a private acquisition, the question is can be get them SOX (Sarbanes-Oxley) compliant in time. Before, we wouldn't worry about that sort of thing when merging IT functions of the acquisition."

Besides the focus on compliance Fersht said he's seeing a lot of technology executives get involved in major overhauls in the IT infrastructure that will greatly benefit enterprises.

"We're seeing a real move toward an IT architecture that decouples all the legacy, mainframe and inbred systems and sends them in business services that fulfill a business need," he said. "We're seeing real cases of service-oriented architecture (SOA). Ultimately, if your CRM system isn't intertwined fluidly with your HR and procurement systems, you're in trouble."

Such initiatives are not without their expenses and risks, Fersht said. And while they are not as glamorous as some of the "in" initiatives of five or six years ago, they will benefit enterprises more in the long run, he said.

All things considered, though, this is still a very good time to be a technology executive.

"It's not risk aversion but the role of the CIO continues to change plus there's a much stronger dollop of business savvy than was the case before," said McClaskey. "Plus, there's been more integration into the business leadership team, which has led to a tighter link to financial officers and a better understanding of payback and being committed to a return on investment (ROI)."