The Role of the CIO

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The Role of the CIO

Debbie Jaeger

Ray Phariss

Yakun Liu

Farwah Gardezi

IS 6800: Management Information Systems, Fall 2005

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Presentation Overview

Introduction and Background of CIO - Debbie Jaeger

Presentation by CIO, Smurfit-Stone - Ray Phariss

Interview of CIO, FACRI Corp. (China): Yakun Liu

Interview of CIO, UMSL: Farwah Gardezi

Conclusions

3

Lessons Learned

Turnover Definition of Success IT Budgets Executive Relationships Dilemmas of CIOs

The CIO Position

Gender & Age Background Career Salary Compensation

4

Lessons Learned CIOs Face Similar Issues

Security Budget (Depends on company) Attract, retain, train IT staff

Similarities in Background Time in job (4 yrs., 4yrs., <1 yr.) Previous experience

Reporting Structure Has Improved 1997…5% reported to CEO; 2005…55% report to CEO/Pres.

Source: Alter, Allan. "The Role of the CIO; Meet the Hybrid CIO: Well-Paid & Powerful." CIO Insight, 5 April 2005, pp.65.

5

Gender & Age Demographics

91% male 9% women

Average age = 47 years old

Gender Demographics

MenWomen

* Out of 405 CIOs polled

Source: Alter, Allan. "The Role of the CIO; Meet the Hybride CIO: Well-Paid & Powerful." CIO Insight, 5 April 2005, pp.65.

6

Background Demographics

65% have IT background

9% have business background

26% have both IT and business background

IT

Business

IT &Business

Source: Alter, Allan. "The Role of the CIO; Meet the Hybrid CIO: Well-Paid & Powerful." CIO Insight, 5 April 2005, pp. 65.

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Career Demographics 26% spent ½ their career in IT and ½ outside of IT 55% say contributing to corporate strategy is one

of their 3 top responsibilities 34% manage another corporate function while

running IT 16% spend most of their time dealing with

emergencies 55% report to CEO or president of the company


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Salary Demographics

2003 average annual salary = $137,793

2004 average annual salary = $140,200

2003 average bonus = $28,283

2004 average bonus = $31,178

20

03

20

04

20

03

20

04

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000

Salary Bonus

Source: Brown, Patricia. "Defining the CIO: An Optimize Reserach Report - CIOs Shift to Playing Offense in 2005." Optimize, 1 June 2005, pp. 29.

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Compensation

Businesses want IT Departments to contribute to revenue growth, expand market share, and improve customer satisfaction

72% of CIOs are involved in revenue-boosting plansErnest & Julio Gallo Winery


10

Turnover Statistics

Average number of years as CIO of current company = 5.4 years Some companies have 3 CIOs within the last 5 years 35% of CIOs are actively looking to change jobs

within a year

Average number of years as CIO of any company = 9.7 years

Average hours of work per week = 53 hours


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What is Success?

71% say success is measured by increased customer satisfaction

64% say success is measured by innovation and new development

58% say success is measured by increased worker productivity


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IT Budgets

2005 IT budgets have increased 5% since 2004 to fulfill CIO priorities Provides greater business flexibility “…with lousy architecture, security is very expensive. With good

architecture, you can beef up your security at a much more reasonable price.” - June Drewey

63% is spent on maintenance 37% is used for new technology plans For 2006, 55% of CIOs say they need to improve security

& risk management 48% say they should improve internal control processes &

procedures

Source: Romanczuk, Jeffrey, and Pemberton, Michael. "The Chief Information Officer: Rise & Fall?" ARMA Records Management Quarterly, Vol. 31, 2, April 1997, pp. 14-25.

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Executive Relationships

CIO’s main assurance of staying power is from the CEO

Main contacts are top management & business manager clients

Communication gap between IT department & business managers can damage the company even more than CIO’s lack of support

Source: Rubenstrunk, Karen. "What Your CEO Wants You to Know." Optimize, 1 June 2005, pp. 51.

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Executive Relationships

2 main barriers for consideration of CIO to be on same level as CFO Fear of one person “controlling the information” Increasing struggle from all departments about creating

another level of management CIOs bring a lower degree of uncertainty than

CEOs Completely conscious of need for technical standards More analytical & adjust more often than guide Resort to open & adaptive problem solving skills

Source: Rubensrunk, Karen. "What Your CEO Wants You to Know." Optimize, 1 June 2005, pp. 51.

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Suggestions to Secure Relationship with CEO

Hold your tongue Talk of only critical facts

Market Meet face to face with CEO

Bring toys Introduce new technology to support working style

Deliver Never make a promise you can’t keep

Share IT department has impact on relationships

Have fun Display validity in building relationships

Source: Romanczuk, Jeffrey, and Pemberton, Michael. "The Chief Information Officer: Rise & Fall?" ARMA Records Managemetn Quarterly, Vol. 31, 2 April 1997, pp. 14-25.

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Dilemmas of CIOs

Money saved by CIOs is from “cost avoidance measures,” which are a one-time savings “CIOs do not bring in capital, they spend it!” Globally spend $54 billion/year on reengineering, of

which $40 billion goes to IT

Unfamiliar in declaring the value of information management to those who do not give it much thought

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James E. BurdissChief Information Officer

(Ray Phariss)

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James E. Burdiss, CIO

• Very personable; no-nonsense, frank communicator

• Enjoys high degree of credibility with other executives

• Focuses on strategic initiatives in partnership with business leaders

• Seeks to reduce costs while adopting new technologies

• SAP implementation - $140M• RFID – not yet, but coming

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Product CategoriesSmurfit-Stone (SSCC: NASDAQ)

2004 Sales: US$8.3 billion

CONTAINERBOARD MILL

& FOREST RESOURCES

74% 22% 4%

RECYCLING ANDOTHER ACTIVITIES

CONSUMER PACKAGING

CORRUGATED CONTAINERS

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2004 2003 2002

Annual Revenues

$8,291 million $7,722 million $7,483 million

Net Income1 $(54) million $(208) million $54 million

2005 Data:

Total Number of employees = 35,300Total Number of IT employees in IT headquarters: 300 in-house & 80 contractors IT Spend ~ $100 million (1.1% of revenues)

1 Losses due to increased global competition, rising input costs, and soaring employee benefits costs.

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Business Environment

Ongoing transformation of the manufacturing sector in North America

Emergence of new market realities

Local to national shift: 2001: 80% local / 20% national 2005: 60% local / 40% national

August 2005 Press Release: Closed 3 North American containerboard mills in Florida, Quebec,

& New Brunswick; 565 layoffs “One of the major long-term issues confronting Smurfit-Stone’s

packaging operations is the slowing demand for packaging in North America, as manufacturing is being shifted overseas.”

““A New Order is Taking Shape”A New Order is Taking Shape”

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IT Department Supports: 12,500 customers 11,917 desktops & laptops 246 Macintosh computers 4,143 printers 604 contracts with suppliers 1,920 IT orders processed 3,733 production system

changes 300 phone systems 1,700 cell phones 248 personal digital assistants

2 mainframes 2 data centers (Alton & Chicago) 187 midrange computers 589 routers & 1,778 switches

84 business applications 598 databases 72,000 EDI documents per month

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INFO

DATA

APPLICATIONS

INFRASTRUCTURE

TAC

TICA

L

STR

ATE

GIC

Network Hierarchy

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Top 3 Priorities

Partner with the Business

Reduce Total Cost of Ownership (TCO)80 applications down to 30 applications

Enhance technical/business acumen of IT professionals

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Transformation Goals Bring IT closer to the Business

Reorganize IT to be more aligned with the business Communicate with customers more Reengineer the Capital Submission Process Implement a Program Management Office (PMO) Measure and track customer satisfaction Provide proactive solutions

Reduce IT costs Understand and baseline current costs and efficiencies Leverage knowledge and resources better Better management of assets (leases/maintenance

agreements/support contracts) Enhance the skills of the IT staff

Understand business processes Enhance technical skills Develop better management skills

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Management / Maintenance / Technical Support of:

– Mainframe / Data Center– Server– LAN/WAN Network– Desktop Support– Security– Version control– Disaster Recovery

UserBoard of Advisors

CIO

InfrastructurePMO/

Change Management

Customer SupportAnd Finance

• Charter: Manage and ensure uptime of the data center and all information technology infrastructure

• Charter: Improve customer satisfaction through problem prevention and timely resolution. Ensure proper fiscal, procurement and human resource operations within ITD.

• Charter: Development of common project methodology and tools. Develop project performance metrics. Provide Coaching to projects

• Charter: Customer voice, strategy formulation, policy review

• Comprised of Senior Business Executives from Corporate and Divisions

– DBA– Data Management– Data Warehouse/

Architecture– Business Intelligence/

Decision Support– eBusiness– Web Development– EAI

– CAD Eng. (Product Config)– Business Apps Development & support:

•CRM•Finance•HR/Payroll•CPD Apps•Container Apps

– Business Process Group

– Methodology Dev.– Training; Planning,

Execution, Coordination– Communications– Performance management

and measurement– Project Governance

– Customer Advocate– Help Desk/Support Center– Finance– HR/Personnel– IT skills enhancement– Procurement/ Technical

Acquisition– Asset Management

BusinessProcess Automation

• Charter: Create Centers of Expertise in areas of knowledge to share across SSCC

Business Applications

• Charter: Working closely with customers, plan, lead and manage software application projects

Supply ChainOperations

• Charter: Working closely with the customers, plan, lead and manage mill software applications and projects

–SOM/SCORE–TMS–Panther–Majiq–CMS

IT ManagementCouncil

• Charter: Division IT and corporate IT management focused on cross sharing of ideas and experience. Will be used for issue resolution and enterprise IT strategy formulation.

Business Strategy

IT Strategy

New Organizational Structure

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Offshore Initiatives

7 plants in China

1 joint venture in Taiwan

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Customer Report

“Out of 37,000 total Smufit-Stone employees, nearly 19,200 (over half)chose to download a PDF version of last year’s report from the Web.”

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Sports Analogy

Players

Coaches/managers

Playbook High Level Plays

Teamwork

Employees

Execs/Mgrs/Leaders

Business Model Processes

Collaboration

“What it takes to be competitive”

Sports Business

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Mr. Hao Jun

CIO, FACRI Corp.China

(Yakun Liu)

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One of the largest flight automatic control corporations in China.

4,000 employees

Revenues: $1,900 million

Major product: -- Flight Control Systems

-- Inertial Navigation Systems

Major customers: Chinese Army, Air Force, Navy, Police, Aerospace industries

Company Overview

Flight Control Corp.


33

CIO Background

Hao Jun: CIO of Information Center Education -- B.S.: Electrical and Computer Engineering

-- Master: Computer Software Experience

-- 20 years at FACRI Corp.

-- 4 years as FACRI’s first CIO


34

Organization Chart

Vice President of Experiments & Testing

Vice president of Manufacture

Xinguo Zhang

CEO

Electronics

& Optics

Flight ControlSystems

Vice president of Financial department

Inertial Navigation Systems

Labor Union

Vice president of R&D

Administration

Human Resource

Customer service

Product development CIO of Information Center: Hao Jun


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Before CIO Position

-- Education

-- Work experience on

CAD/CAE in the

analysis of structural

strength and electrical

magnetic field


Experiences that help CIO

After CIO Position

-- The management philosophy included in large information systems, such as PDM

-- New knowledge acquisition through network

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Who Does CIO Report To ?

CEO: major projects (80%)

CFO: minor projects (20%)

What does this mean? -- IT is more like a partner


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Development of IT

Culture of company change: new CEO 2000: established the IT department -- 2001: 60 IT employees $50 million capital investment -- 2002: 80 IT employees $75 million capital investment -- 2003-2005: 100 IT employees $200 million capital investment


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CIO Role Perception

Improve and apply IT Strategy IT alignment with business strategy Organize a group of IT staff Software development to customize the

available software to meet the company’s needs


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Three Priorities

Product development platform construction

R&D management environment construction: PDM

Digitized product manufacturing systems: Computer aided manufacturing programming


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IT Governance

IT principles: CEO IT architecture & infrastructure:

-- CEO & CIO Business application needs: CEO, CIO &

business units (Federal) IT investment: CEO One of the top three performance patterns


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Value of IT

Improve the efficiency of information exchange

Standardize the flow of manufacturing processes, improve monitoring

Expand the R&D alternatives Sharing of information can assist the

decision-making process


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IT Budgets

Major investment funds: comes from special fund or technical upgrade fund

Minor improvement funds: comes from the department that uses it

To facilitate the cost control


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Attract IT Professionals

Employees’ work satisfaction

-- Provide enough opportunities for individuals

-- Assign work according to personnel specialties

-- Stable job

Financial incentives

-- Much higher salary than other companies

-- Pension plan and bonus


44

Relationship with CEO

Formal meeting: 3 months/year (quarterly)

Informal meetings: several times/month -- Occasionally meet at dining room and eat together -- CEO calls CIO to his office

CIO’s perception of CEO’s support -- “Yes!” Example: “The application of MIS can be easily

performed by cooperation with related departments under the coordination of the vice president.”


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The Biggest Challenge

“Customize management information systems to different departments.”

Leverage information systems to improve management functions


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Catch up to world trends

Technology: product R&D platform -- Has already caught up

IT standard: -- Gradually catch up

IT governance: -- Systematically: strengthen data accumulation -- Introducing new management ideas into MIS


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Situation in China

Most companies just view IT as support, not as a partner.

“Most CEOs (in China) don’t realize the importance of IT in improving efficiency and production procedures. IT in these companies is merely support part, only doing some maintenance job, not important.”


48

Situation in China

IT department is not well developed Only a few companies view IT as equal

partner or rules Very few companies see IT as a

necessary evil Most employers value employees who

understand and are able to use IT


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Dr. Jim Tom

Associate Vice Chancellor for Information Technology - UMSL

(Farwah Gardezi)

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Overview of The Responsibility And Expectations From CIO of Education

Students “Customers”

Internal Staff

Institution

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Dr. Glen H. Cope

Provost/VC for Academic Affairs

Dr. Jim Tom

Associate VC for Information

Technology

(CIO)

Dr. Jim Krueger

VC for Managerial & Technological

Services

UMSL Reporting Chain

Dr. Thomas George

Chancellor

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Corporate Vs. Education

In Corporate world CIO focuses on the kinds of activities and technology to bring in

Financial systems, HR systems

In Education focus is on kinds of activities and technology to bring in

Financial systems, HR systems

Charged for technology construction

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Three Areas of Organization (External Responsibilities)

Teaching (e.g. computers, MyGateway, etc.)

Research

Administration

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His Experiences

Varied experiences

Most recent one…Director in Education

More satisfaction; serving community

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Budgetary Challenges

Budget (higher expectations)

Salary

Compensation

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Lessons Learned

Softer side of management

Leadership, human resources

Applies to subordinates and peers Technological + Management skills

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Internal Responsibilities

To develop the organization

Develop customer service to help the organization

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Top Priorities

Try to get more technology used in the organization (school)

Need to get more and better integrated computer systems

The whole area of technology in Teaching and Learning…we are not there yet

e.g. Open Source course material

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Challenges

Organizational structures

Dealing with faculty members

Technological constraints

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What Is Different Than Corporate

Make the people aware of different types of technological ways to go forward

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How The Organization is Funded?

Teaching and Learning funded by Student Technology Fees

Also funded by the state and tuition Overall budget of $ 8.5 million Restricted requests

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What Keeps Him Up At Night?

SECURITY!

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Common Characteristics

CIO has to balance = IT+ management

Security

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Conclusions

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Summary Comparison of CIOs

ResearchSmurfit-Stone

FACRI Corp.

(China)UMSL

Gender91% male

9% female Male Male Male

AgeAverage age = 47 years old

54 years old

43 years old

Early 50 years old

IT budgets

Increase 5%

(2004-2005)

CEO: reduce

CIO: increase

Maintain Maintain

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Summary Comparison of CIOs

Smurfit-StoneFACRI Corp.

(China)UMSL

Biggest concerns

Align w/Business; reduce TCO

Align w/Business;

IT strategy

Security

IT Staff

BackgroundBusiness/IT; Nearly 4 yrs.

IT only;

4 yrs.

Business/IT;

< 1 yr.

Reporting Structure

CEO CEO/CFOVice

Chancellor; Provost

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Summary Comparison


(China)UMSL

Number of employees

35,300 4,000 3,319

Annual revenues

$8,291 million $1,900 million n/a

Number of IT employees

380 100 146

IT Spend$100 million

(1.1% of revenue)

$200 million(10.5% of revenue)

$8.5 million

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Summary Comparison of CIOsTop 3 Priorities


(China)UMSL

Partner with the Business

Product development platform construction

Try to get more technology used in the organization

Reduce Total Cost of Ownership

R&D management environment construction: PDM

Need to get more and better integrated computer systems

Enhance technical/business

acumen of IT professionals

Digitized product manufacturing systems

The whole area of technology in Teaching and Learning

69

Summary Comparison of CIOsChallenges to CIO


(China)UMSL

Bring IT close to the business

Prepare for the performance of MIS

Organizational structures

Reduce IT costs

Leverage information systems to improve

management functions

Dealing with faculty members

Adapt to changing market trends

n/aTechnological

constraints

70

Lessons Learned

Turnover Define of Success IT Budgets Executive Relationships Dilemmas of CIOs

The CIO Position

Gender & Age Background Career Salary Compensation

71

Lessons Learned CIOs Face Similar Issues

Security Budget (Depends on company) Attract, retain, train IT staff

Similarities in Background Time in job (4 yrs., 4yrs., <1 yr.) Previous experience

Reporting Structure Has Improved 1997…5% reported to CEO; 2005…55% report to CEO/Pres.

72

QUESTIONS?

Thank you!

Documents

The Role of the CIO