Financial Management: Outsourced CIOs: experience in challenging times

Tightening economic conditions in the U.S. have begun to take a toll on companies’ information technology project portfolios, as projects begin to get delayed or canceled. The tightening environment has led to a re-examination of the entire IT strategy at many companies, including the role of the chief information officer, or CIO.

Many organizations have a CIO, but the role is often limited due to lack of experience in leading technology for large organizations. Even more difficult to pin down is the rare insight into how technology can be used to achieve competitive advantage and which technologies might be brought to bear on solving particular problems.

Refocusing the role is essential to surviving tough economic times. Two methods can be employed to create a change of perspective in IT: bring in a new CIO, or hire a mentor to help the current CIO or director of IT develop faster.

Given the cost of hiring a new CIO (average base salary eclipses $184,000) and the related expenses of recruiters, lost opportunity and allowing time for the new hire to “come up to speed,” many organization have begun looking at a new approach. Hiring an interim or part-time CIO can help firms establish a baseline and bring a new perspective to their technology while providing significant relief for the short-term cost structure.

In some cases, organizations will precipitously lose a CIO, making it necessary to bring in a transitory IT head that can offer stability. Here, a placement or consulting organization can “parachute” in a very experienced CIO — perhaps someone who has previous experience in a similar industry — but in all cases the outsourced CIO will have held multiple IT leadership roles for a minimum of 15 years.

The technology organization will gain reliable guidance, and critical projects can continue with experience at the helm.

Other challenges

For organizations that simply need to reduce costs, a part-time or outsourced CIO can help navigate through a difficult period.

By providing one-, two- or three-day-per-week leadership, the virtual CIO can ensure that the technology of the organization operates without interruption and prioritized projects continue apace.

Companies also find that they periodically need high-level strategic IT guidance that would normally be difficult to attract as a full-time leader. Even though resources might be slim, the organization still needs help to rationalize their IT architecture or approach. In these cases, the organization can seek a partner with more than a simple consulting focus. They’ll want someone with real operating experience who knows the practical value that technology can bring to a company and is not interested in “technology for technology’s sake.”

An independent, impartial review of the company’s technology will validate that the right projects are being moved forward on the right cost and time schedule. This will typically save the company significant amounts, since IT budgets get refocused and trimmed to ensure that IT spending is being allocated most effectively.

Another challenge faced by smaller organizations is providing for the growth of the current IT management. Often companies will increase their staff as the company grows and will reach a point where the growth of the company has outstripped the capabilities of the current IT leader. The choice then becomes extremely difficult: replace someone who has helped the company grow and who has deep institutional knowledge of the current systems or continue to count on leadership from someone who may be in over his or her head.

Bringing in an outsourced CIO is a creative solution that allows the organization to leverage the experience of a vetted CIO while continuing to mentor the current IT leader. In addition to mentoring the person who helped the company achieve its current position, the part-time CIO can reach down into the IT organization to help create an organization focused on succession.

The hiring of a part-time or interim CIO need not be difficult — there are a number of firms that provide that type of service. Organizations seeking such services should be certain that the firm providing them is not a loose network of unemployed executives, but one at which the employees choose to make the firm their career. They should seek to find a company where the outsourced CIOs have served 15 years in similar roles at significant companies. The executive service firm should also have conducted significant background investigations of all of their employees prior to placing them with your company.

Dan Gingras, a member of the Financial Management Association of New Hampshire, is a partner in the Information Technology Leadership practice of Tatum LLC. For more information or to register for FMANH events, please visit www.fmanh.com.