Key Findings

Staff Levels

Sixty-six percent of CIOs describe their current environment as inadequately staffed (up from 59 percent in September 2005). Thirty-one percent say their department is adequately staffed, down slightly from the 35 percent reported in September 2005. Only two percent report they are overstaffed.

Concerns Regarding Staff

Over half (57 percent) of IT executives surveyed list demanding workloads as one of their top three concerns regarding their IT staff in 2006 followed by finding/hiring the needed skill sets (53 percent), and determining the optimal mix of IT skills needed in the next two to five years (43 percent). In an effort to motivate and retain IT staff, 63 percent of respondents offer IT training followed by flex time/flexible work hours (61 percent) and recognition programs/employee rewards (49 percent).

Skills in Demand

Business analysis (65 percent) and project management (64 percent) are most frequently cited by IT executives when asked which business skills are currently most in-demand at their organizations. These skills are also among the most frequently cited skills that will be in demand over the next two to five years with 60% of respondents selecting project/program management, followed by business process management (55 percent), and business analysis skills (53 percent). Technical skills currently most in demand include application development (59 percent), business process management (47 percent), database management and enterprise architect (tied at 43 percent).

Methodology

CIO’ 2006 Midyear Staffing Update was administered online in June, 2006. Visitors to CIO.com and readers of the CIO Insider electronic newsletter were invited to take the survey. Results are based on the 289 responses. Not all respondents answered all questions. Percents may not sum to 100 due to rounding.

Titles held by survey respondents include: CIO (27 percent), CTO (4 percent), vice president (10 percent), director (35 percent), manager/supervisor (20 percent), IT staff (1 percent) and consultant (2 percent).

Industries most frequently reported by the survey base include: finance/banking accounting (13 percent), non-computer manufacturing and process industries (13 percent), medical/dental/healthcare (10 percent), government (9 percent) and education (6 percent).

One third (32 percent) of respondents work in large companies with over 5,000 employees, 34 percent in companies with 500-4,999 employees and 25 percent are employed in companies with under 500 employees. Nine percent of the total sample base did not answer the question.

Thirty four percent (34 percent) of respondents are employed in organizations with $1 billion or more in annual revenue. Twenty seven percent (27 percent) report revenue between $100 million and $999.9 million and 30 percent work in companies with less than $100 million in annual revenue. Ten percent of respondents did not answer the question.

Results

How would you describe current staffing environment/condition?

Inadequately staffed - 66%
Adequately staffed - 31%
Overstaffed - 2%

The majority of the 101 CIOs surveyed said their offshore outsourcing contracts would increase in the coming year and that on average, offshore outsourcing contracts will increase by 18.7%. Currently, application development is far and away the most frequently outsourced activity. Other functions frequently sent offshore include call center, system administration/support and help desk.

The majority of IT executives surveyed cited lower IT costs as the main reason for outsourcing offshore, and further reported that the greatest savings were realized in the areas of labor costs and reduced project timelines/time to complete work.

While offshore outsourcing can lower some costs, it creates new expenses for the organization, including vendor selection costs, legal/contract costs and transition costs. Additionally, sending IT functions offshore creates challenges for CIOs like managing communication, cultural differences and a lack of internal processes for specifying work.

Key Findings

The Three Ws of Offshore Outsourcing ??? When, What and Where
The majority (67%) of respondents say their company began outsourcing offshore after 2000. Twenty-three percent said they started offshore in 2000 while 17% said 2001. Twenty-seven percent started outsourcing in 2002.

Eighty-six percent of IT executives surveyed said they currently outsource application development offshore and 26% outsource the call center offshore. Other applications frequently sent offshore include system administration/support (23%), help desk (17%) and business process (such as HR or financial applications) (17%). On average, the value of current offshore outsourcing contracts is $16.2 million in the 101 organizations included in this study.

When asked if there were processes or applications that their organization would not outsource offshore, IT professionals most frequently answered systems and architecture planning (45%), research and development (43%) and business process (38%).

India was the most frequently cited country for offshore outsourcing, with 89% of respondents saying they outsource in that country. Other countries listed included the Philippines (10%), China (8%), Ireland (7%) and Russia (6%).

Project Management

When asked how the offshore outsourcing relationship is managed, 38% said the relationship is managed by a dedicated manager within the IT department and 35% said it is managed by a project sponsor for the IT department. More than half (54%) of those surveyed said their organization has a steering committee of senior IT and business executives that governs offshore outsourcing decisions.

The Global State of Information Security 2006 by CIO, CSO and PricewaterhouseCoopers (PwC), with 7,791 respondents in 50 countries, indicates that an increasing number of executives (CEOs, CFOs, CIOs, CSOs, and VPs and directors of IT and information security) across all industries and in private- and public-sector organizations continue to make incremental improvements in deploying information security policies and technologies, although the rate of improvement is slower than in previous years. They’re becoming more financially independent, with some security budgets increasing at double-digit rates. And they say they’re more confident in their level of security, perhaps because their networks have not had a serious virus or worm in the past 12 months.

In the 1990s, Michael Hammer and James Champy’s blockbuster book, Reengineering the Corporation, set off a tidal wave of business process improvement initiatives throughout corporate America. The two management gurus showed that redesigning a company’s processes, structure and culture could lead to a dramatic increase in performance. But a lack of attention to change management and the impact of these initiatives on employees yielded counterproductive results in many companies that tried to put Hammer’s and Champy’s ideas into practice. The once golden notion of business process reengineering took on a tarnish and fell out of fashion. Today, business process improvement has a new name???business process management???and is in vogue again. Spurred by the pressures of global competition, commoditization and government regulation, American companies are reexamining their business processes in search of more efficient ways to execute them through automation or even outsourcing. Companies again see business process management (BPM)???the practice of continually optimizing business processes through analysis, modeling and monitoring???as a systematic approach for solving business problems and helping them meet their financial goals.

“Companies are realizing that a good, solid understanding of their processes is essential to achieving any of their performance objectives,” says Roger Burlton, founder of consultancy Process Renewal Group. “Most organizations, if they’re not already doing something [with BPM], are starting to get into it.”

The Political Tussle

As BPM takes root in corporations throughout America, a struggle for control between the business and IT is ensuing. Historically, the business has managed its own process improvements. But the arrival of sophisticated BPM tools and IT’s ability to operate across the enterprise have given rise to the belief that IT should lead the charge.

It’s an idea that naturally incites pushback from the business. Burlton notes that BPM projects dealing with CRM or supply chain management initiated by IT often get subsumed into the business when a senior line executive realizes that the very processes IT is automating are those that drive his segment’s revenue. The executive worries that if IT screws up and his unit doesn’t meet its financial goals as a result, his bonus???and maybe his job???could be on the line.

Many of them also view IT as a bottleneck that adds cost and complexity to projects, so they’re hesitant to cede BPM to the CIO, according to Burlton. Finally, territorial instincts fuel their desire to control process management initiatives that affect their turf. (For ideas on how to work effectively with line-of-business managers who own BPM initiatives, read “Keeping Your Hand In.”

Even some IT execs are leery of leading BPM: Farrukh Humayun, National City Bank’s vice president and portfolio architect in charge of business systems, says the business must own BPM to be successful. “BPM is a business discipline,” he says. “IT can be a powerful enabling force…but the IT folks will not understand business drivers, processes or metrics as well as the business.”

It’s no wonder IT executives like Humayun and others are loath to advocate for IT ownership of BPM: So many ERP and CRM projects led by IT failed when employees refused to adapt to changes driven by technology. CIOs have been told that the business needs to lead any big change management initiative and that technology initiatives must have a business sponsor to succeed. So why should BPM be any different?

Well, for a number of reasons. CIOs must make sure IT is a part of these initiatives because so much technology is involved in BPM and because IT will have a hand in automation. What’s more, says Karl Kaiser, CIO of the city of Minneapolis, since processes often cut across business silos and IT is the one organization that straddles and supports them all, IT has the best vantage point for leading BPM.

“Doing these things from within [a line of business] can be difficult because they can’t see the forest through the trees,” says Kaiser. “It’s better done by an outside, independent organization [such as IT] with no ax to grind.”

Many BPM practitioners believe that since the business owns the processes, it should drive BPM. However, Burlton says, you don’t have to own a particular process to lead the charge. “IT doesn’t own the data stored on its servers, but they do provide the service of assuring that the data has integrity, is managed well and is secure,” he says. Similarly, IT can guide the business through a process improvement initiative by offering process analysis, modeling, design and automation services.

“If anybody in an organization really understands the importance of process, it should be the people in IT because…they have more experience in building models, doing analysis and looking for optimal solutions,” says Burlton.

There’s no reason why IT can’t lead BPM, he adds. “The question is whether they’ll be allowed to by the rest of the organization.”

CIOs who seek an active leadership role in BPM have their work cut out for them. But if they can earn the trust of the business and take charge of BPM, the payoff is big. Doing so will boost their profile and that of their IT organization. It will also facilitate their SOA plans, says Burlton, because process management initiatives identify the business services common across the enterprise that IT can then program and package for reuse as part of its SOA strategy. “If companies do process management properly across the board, IT can do service-oriented architecture properly,” he says.

Finally, if IT can offer the business BPM services the same way it provides application development services, it will increase the department’s value inside the company and bring it closer to the business.

CIO talked to two IT executives who are successfully leading BPM inside their companies. They share their experiences below.