The Next Big Thing
Posts about next generation technologies and their effect on business.

The Changing Focus of the CIO in 2010

Information Week, Global CIO recently hosted a webinar on Global CIO Agenda 2010: Welcome to the CIO Revolution (slides available here).  The discussion focused on two dimensions of change for 2010: (1) a shift from maintenance and cost cutting to development and innovation, and (2) a shift from a focus on the technology and IT operations to the role of information technology in the extended enterprise.

Both these dimensions lead to a focus of the CIO on exploiting information technology to improve the business.  This is consistent with my blog from last May, describing The Next Generation CIO.

The webinar was hosted by Bob Evans of Global CIO with a presentation by Andy Mulholland, CTO of Capgemini, and panelists Manjit Singh, CIO of Chiquita Brands, Dan Drawbaugh, CIO of UPMC, and Peter Whatnell, CIO of Sunoco.

Andy Mulholland cited four activities as key to the focus of change:

  • IT -the continued operation of the data and computer centric applications that support the Back office

  • Virtualisation / Shared Services to provide the capability to continue to reduce the cost of IT provisioning

  • Web 2.0 based Collaboration to boost the expertise of People in the Front Office using Services

  • Cloud Computing for new business markets, and develop Business Network Transformation ecosystems

His presentation seemed to emphasize the adoption of cloud computing and loosely coupled services based on web technology.  I agree that these technologies are drivers of change, but so was the emergence of client-server technology, and personal computing, and the Internet, and so on.  I believe we are at the threshold of a more fundamental change to the role of the CIO.

The fundamental change is CIO participation at an executive level in the design and transformation of the business that will continue as a result of business and technological changes beyond cloud computing and web services.

Technology has significantly changed the speed, cost and reliability of business operations, but the pervasive integration of information technology and evolution of solutions has also increased complexity.  Exploitation of cloud computing and shared services will enable new ways of improving the speed, cost and quality of business operations as well as the agility of the business, but it also increases the risk of complexity.  A line of business that used to be self-contained will be integrated through the use of services shared with other lines of business and collaborative relationships with customers and suppliers, including outsourcing of commodity business functions.

The focus of the CIO must shift from management of the technical resources to the utilization of technical resources to ensure effective governance, efficient operation and rapid adaptation of a complex, extended enterprise. 

Key to this role will be business models for analytical support and management of complexity.  The Business Modeling and Integration Task Force of the OMG (Object Management Group) is engaged in development of business modeling industry standards.  Adopted specifications include the Business Motivation Model (strategic planning), Semantics of Business Vocabulary and Rules (capture of business concepts and terms with specification of business rules), and Business Process Modeling and Notation.  Work is in process to define Case Management Process Modeling (processes with ad hoc planning and decision-making), Organization Structure Metamodel (modeling of organizational relationships), and Value Delivery Metamodel (modeling of value chains and business capabilities).  In addition to these specific modeling capabilities, the OMG is examining both the business requirements for merging these models into an integrated business architecture (the design of the business) as well as the technical requirements of integration.  These models are for business people to manage the business and define the context and requirements for automation.  The CIO organization will play a key role in the development, evolution and implementation of business models and technical solutions using these standards.

Business architects and the CIO organization should consider participating in OMG activities, particularly the Business Architecture Special Interest Group to gain insights and contribute to the definition of modeling requirements.  The goal of this group is to provide a bridge from business concerns to technical solutions as we define the needed modeling languages.

CIOs need to understand that this change of focus is not just a change in budgets and management of some new technology, but it is the beginning of a fundamental change in the role of the CIO requiring the CIO to have new objectives, knowledge, skills and tools as a member of the enterprise executive team. 

BPM is the Beginning of the End of ERP

In a recent article, Jack Vaughan quoted Jan Baan as saying, "The successor of ERP is BPM....ERP is becoming the model of complexity.  It has become too complicated."  Baan is CEO of Cordys and former head of Baan Corporation, an ERP vendor.  BPM (Business Process Management) is the leading edge of a major change in enterprise systems.

Much has changed since the heyday of ERP.  The Internet and internet technology has changed communications and integration.  Businesses are on-line and accessible from anywhere, any time.  The marketplace has become global for all enterprises, not just large companies.  The pace of change has accelerated, and information technology is pervasive in the operation of the enterprise and in society in general.  Business services are accessible, ad hoc, over the Internet, and service oriented architecture is changing not only the design of computer systems, but the design of enterprises.

ERP systems are traditionally monolithic solutions for automation of business operations.  They provide a solution for a particular way of doing business and typically require a major investment in implementation and adaptation to align the solution and the business operation.

The future requires enterprises, as well as systems, designed for change.   BPM, supported by business process management systems (BPMS) enables flexible automation of business processes.  ERP systems traditionally embed business processes in the code so that changes to business processes become IT projects.  A BPMS provides the opportunity to model and automate business processes in a way that is visible and adaptable by business people.  The BPMN 2.0 standard from OMG (Object Management Group) defines BPMS notation and modeling elements for defining and automating repeatable business processes. 

Not all business processes can be pre-defined and repeatable.  Some processes require ad hoc planning and decision-making by humans where actions are driven by the state of a case and records related to the case.  We characterize such processes as case management processes.  Some ERP systems provide record-keeping for case management.  Many other case management processes remain paper-based and manual because they don't fit the definable, repeatable model supported by most BPMSs.  OMG has initiated development of a Case Management Process Modeling (CMPM) standard for design and automation support for these processes, thus moving beyond the automation capabilities of ERP systems.

BPM, including case management, will improve the effectiveness and agility of business processes, but it does not necessarily improve the agility and overall efficiency of the enterprise.  Enterprise agility and efficiency involves changes to the design of the enterprise.  It requires the ability to rapidly adapt or create business capabilities and the ability to engage existing capabilities in new ways.  ERP systems are a barrier to such changes.  This agility is enabled by exposing business capabilities as sharable services.

In Business Capability Mapping: Staying Ahead of the Joneses, Denise Cook describes how business capabilities, at an appropriate level of granularity, represent stable components of the enterprise.  As services, these capabilities can be engaged by different business processes to meet the needs of different lines of business and adapt to changing business strategies.  These services must be loosely coupled so that they are independent of the individual lines of business to which they contribute or may contribute to in the future.  In Why SOA is a Business Necessity, I describe the importance of this service oriented architecture (SOA).

The identification and management of business capabilities as services requires a specialized discipline beyond conventional BPM.  This need is addressed by value chain modeling.  Value chain modeling was introduced by Michael Porter in 1985.  For more on value chain modeling and its various incarnations, see Value Chains and Other Processes, by Paul Harmon.  Value chain modeling brings a focus on the delivery of customer value and the capabilities that are required.  This analysis has been used at the executive level in strategic planning, but it typically lacks the detail to identify the stable units of capability that should be engaged as services.  This more detailed analysis as well as the design and management of shared services require a modeling environment to manage the complexity. 

This need will be addressed by a specification for value chain modeling being developed at OMG in response to the Value Delivery Metamodel RFP.  A value chain model will define the network of activities that contribute to the delivery of customer value.  These activities represent uses of business capabilities.  Different lines of business may have different value chains that define the uses, or potential uses, of shared capabilities. In addition to consolidation of capabilities for economies of scale and agility, this perspective supports consideration of investments in improvement as well as outsourcing and configuration of joint ventures.  Optimization will shift to an enterprise perspective, to reflect the cross-enterprise impact of shared capabilities that serve the needs of multiple lines of business.

This architecture is quite different from conventional ERP systems.  The business processes will no longer be embedded in program code.  The functionality that supports the stable business capabilities may be much the same, but it will be carved out to support loosely coupled services.  BPM is the beginning of the end for ERP systems as we know them.

We are in a state of transition to a new business paradigm.  The full transformation of enterprise systems and the enterprise will involve BPM, loose coupling of business capabilities and additional modeling capabilities that together will provide an enterprise architecture model from a business perspective.  Cordys and Hewlett-Packard are at the forefront of defining the business modeling specifications discussed above and the development of future enterprise architecture modeling capabilities. 

Business Schools and Information Technology

I was sitting in on a meeting of the Information Technology and Operations Management (ITOM) curriculum committee at SMU the other day. One of the interesting things that has happened at business schools across the country is that they have reduced the number of core hours and increased the amount of classes students could specialize. This leads to many people having quite a bit of exposure to finance (for example) but significantly less in other broad ranging areas they may encounter after they graduate. Generally, the committee thought that this trend had gone too far and there was a need to strengthen the core, since many students were coming back to the professors after graduating and asking about how to do various business related activities that were outside their specialty.

One area we were discussing was: "What areas related to the use of information and computing techniques should everyone have more exposure?" What new areas of specialization are needed as well? Naturally, I hopped on the modeling and simulation bandwagon, since I believe all people in business are going to have significantly more exposure to it in the future. Not that I'd expect them to design the experiments... at a foundational level, but they should at least understand how to use the results. Now if it was an area they were going to specialize in, then they should have more hands on experience with industry models and making adjustments.  I still say this is the low hanging fruit for cloud computing usage, since it can take advantage of the highly parallel possibilities.

I was surprised by the significant decrease in the number of hours in the classroom at the same time as tuition increases. Those issues are not limited to SMU though.

Is Business-IT Alignment Suicide for the CIO?

Last week, Bob Evans published an article entitled, "Suicide Strategy For CIOs: Aligning IT With The Business."  In it he asserts that the CIO must abandon efforts to align IT to the business and instead align with customers.  This does not make business sense.  Information technology enables business capabilities to deliver value to the customer, but the CIO should support the business by ensuring that the business capabilities make effective use of information technology.  The enterprise and its business activities are the customers of the CIO.

The role of the CIO should be to optimize the enterprise information systems and their use of information technology to enable the enterprise to achieve competitive advantage in each of its lines-of-business.  That does not mean the CIO is a technology geek, but rather that the CIO must know about the design of the business to determine how technology can empower the business.

Alignment of IT to the business should be put in the context of delivering value to the enterprise customers.  Value chain analysis as introduced by Michael Porter in his 1985 book, Competitive Advantage: Creating and Sustaining Superior Performance, promotes  business alignment with the customer value.  A value chain identifies those capabilities that contribute directly to the value of a line-of-business product or service delivered to the customer.  The IT organization represents a supporting capability that is necessary for the effective performance of the enterprise value chains.

The CIO should focus not on the implementation of computer and communication systems, but on management of the technical capability, much of which may be outsourced.  This capability includes not only the development of applications and operation of computers and networks, but it includes support for the design of the enterprise.

The enterprise itself in a complex information system.  SOA is a design paradigm for enterprise optimization.  In SOA:A Matrix Architecture I described how SOA leads to a matrix organization where value chains are managed by line-of-business managers, and services are managed by shared capability managers.  The CIO provides the cross-enterprise perspective to develop value chain models, design shared services and provide the applications that support the implementation and integration of the capabilities.  Where shared capabilities are provided as services, Value Chain Modeling Is Essential for SOA Management. The value chain models, as well as other information services managed by the CIO, support management planning, decision-making and governance. By focusing on value chains, the CIO should help determine priorities for investment in technology and business systems design that will improve customer value.  This is alignment of IT with the business.

In The Next Generation CIO I describe this key business role of the CIO.  The CIO is responsible for a critical aspect of the business, just as the CFO is responsible for the financial aspect and the HR executive is responsible for the personnel aspect.  There is no discussion about how the CFO and HR executive align to customer values.  Their jobs are to serve the shared financial and personnel needs of the enterprise.  

The CIO should focus on optimizing the enterprise as an information system through managing the information technology capability.  That includes modeling, designing and transforming the business systems. In that context, the CIO will play in indispensable role in the future of the enterprise, and alignment of IT to the business is a measure of CIO success.

Tech is leading the way???

bull market

In an article stating that we should Look to tech to see the economy's future, it appears that demand for high tech items is on the upswing and that Tech will prosper in 2010. It's been stated before that HP is bullish on 2010.

There are numerous reasons to look at 2010 in a positive light, ranging from the aging technology infrastructure that some organizations have not replace since the end of the dot com era and now must, to the outstanding benefits of newer solutions that have come on the scene. System 7 and Office 2010 may also cause some organizations to think about getting new desktops. You can only fight Moore's law for so long before it becomes clear that you're missing something.

Hopefully with this spending organizations will move away from "paving the cow path" to looking at the new business possibilities from IT, and taking that new road. With cloud and SaaS options and various complex event processing options out there, having a Enterprise Architecture holistic perspective can't hurt.

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About the Author(s)
  • Steve Simske is an HP Fellow and Director in the Printing and Content Delivery Lab in Hewlett-Packard Labs, and is the Director and Chief Technologist for the HP Labs Security Printing and Imaging program.
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