Category: Digital Transformation

CIO Pay Jumps With Demand For Digital Change

Original Article

Chief information officers are winning large gains in compensation as companies seek leaders to steer business-model changes that are built on digital technology.

CIO pay has jumped 37% in the last two years, according to executive recruiter Korn/Ferry International, in an exclusive analysis for the Wall Street Journal. Average compensation for a Fortune 500 CIO is $2.6 million, up from $1.9 million in 2015, the analysis shows.

An expanded role for CIOs means their performance is judged not only on the success of technology projects but also on the financial outcomes of that work. The at-risk portion of overall CIO compensation tied to corporate and technology goals has grown to 68% this year, up from 58% last year, said Craig Stephenson, managing director of Korn/Ferry’s North American CIO practice.

What was once a CIO’s aspiration — to be part of the public face of a company by wooing customers and generating revenue – is now, at many firms, the expectation.

Neal Sample, in a 24-year career that includes executive technology roles at American Express Co. and eBay Inc., traces the expansion of the chief information officer position from supporting role to strategic advisor to the CEO and board.

Mr. Sample, now senior vice president and CIO at pharmacy benefits manager Express Scripts Holding Co., must meet metrics for corporate financial performance, including earnings per share, in addition to technology-related goals.

Express Scripts, at Fortune 22 with $100.3 billion in revenues in 2016, is looking to artificial intelligence and an array of internet-connected sensors for future growth. Early next year, the company plans to ship an asthma inhaler outfitted with a sensor that tracks a patient’s usage against his medical history to offer suggestions about more effective use of medications.

“In the past, the technologist could have been like the real-estate team. They needed to be really good at building a secure building but they did not care what happened in it,” he said. “Now, technology strategy is part of the business. It’s part of what’s being sold to customers.”

The ability to create new business models is now a key measure of CIO performance, says Les Ottolenghi, CIO of Caesars Entertainment Corp., which runs Caesars Palace, Harrah’s and 12 other casino brands.

Caesars Entertainment CIO Les Ottolenghi

Caesars Entertainment CIO Les OttolenghiPHOTO: CAESARS ENTERTAINMENT CORP.

By mining data about the 50 million members in its Total Rewards loyalty program, Caesars found that a significant share of customers is curious about video-game tournaments and e-sports. That prompted Mr. Ottolenghi and his innovation team early this year to work with Microsoft Corp. to set up two Gears of War Xbox One tournaments at Caesars properties in Atlantic City and Las Vegas. About 1,000 people attended, with another 2 million viewing online.

As CIO, he still must cut costs and ensure the reliability of technology infrastructure. He’s in the midst of reducing Caesars’ portfolio of software applications to 80 from 600. But even that exercise is intertwined with the larger mission, which, he says, is “how fast are you going to enable your company to offer customers more of what they seem to be demanding?”

Fortune 500 CIO Pay Hits New HighsCIO average compensation has jumped 37% in the last two years, according to executive recruiterKorn/Ferry International.THE WALL STREET JOURNALSource: Korn Ferry
Annual CompensationLong Term IncentivesTotal Compensation2013’14’15’16’170500,0001,000,0001,500,0002,000,0002,500,000$3,000,000

The convergence of faster, more accessible computing power with troves of internal and external data is creating opportunity and risk for businesses, which often rely on CIOs to help make the most of the new environment.

“Ten years ago, it was easier to define the impact of the CIO: Does email work,” said Mr. Stephenson at Korn/Ferry. “Now the CIO is playing more of a role in strategy and engaging customers through experiences.”

As a result, a greater percentage of CIO pay is tied to business results. Angela Yochem, CIO of Rent-A-Center Inc., says company performance at the firm, which operates about 2,350 standalone rent-to-own stores, often has as much impact on compensation as individual or team performance. “This is very appropriate for anyone at the senior executive level,” she said.

At MetLife Inc., both technology and business achievements propelled Marty Lippert, executive vice president of global technology and operations, to total earnings of $16.5 million during the last three years. Mr. Lippert consolidated data facilities and expanded digital capabilities in MetLife’s U.S. auto insurance business, enabling self-service customer transactions on the web and mobile platforms.

Mr. Lippert worked with MetLife chairman and CEO Steven Kandarian to develop a plan to reduce IT costs and invest much of the savings in new projects. For every $3 saved in MetLife operations, $2 is put toward technology. The initiative has helped finance a sales system deployed in Japan and due to be rolled out in the U.S. and Latin America.

“It’s not only myself looking at IT [projects] from the perspective of business value they deliver,” Mr. Lippert said. “All business executives are.”

lots of tech to keep up with and a var will help you

More Chief Executives Look to Digital for Growth: Gartner

Original WSJ article

But many have no metric for digital progress

ORLANDO, Fla. — As digital tools and capabilities sweep through industries, chief information officers and other senior IT managers are finding a new and eager partner in business technology – chief executive officers.

According to Gartner Inc. researcher Mark Raskino, a growing number of CEOs are shifting their views on digital-enabled tools, such as cloud computing, artificial intelligence or machine learning.

Rather than seeing them simply as an overlay to existing systems, aimed at boosting internal efficiency, or cutting costs, many business leaders today are looking to digital capabilities to drive revenue growth and generate profits, he said.

“Digital business is deepening,” Mr. Raskino told CIOs gathered in Orlando last week at Gartner’s annual IT conference. “For a generation of CEOs, digital business is going to be a career defining issue for them,” he added.

In a Gartner survey earlier this year, of roughly 380 CEOs and senior business leaders, 58% identified growth as a top priority, up from 42% in a similar survey last year. At the same time, IT-related projects and initiatives also rose, to 31% from 18%, as well as product innovation, to 20% from 10%.

About half of the respondents led companies with more than $1 billion in annual revenue.

For Mr. Raskino, that reflects a new mode of thinking among business leaders, who are now saying, “I’ve got to grow. I’m going to grow with product innovation. And that product innovation, a chunk of it, is going to come from digital,” he said.

“To have CEOs this focused on technology as an area of opportunity is unnatural,” Mr. Raskino said: “It’s not normal for them, it’s not something they grew up with, they’re not necessarily comforted by it, but it’s true and they know they need to do stuff and they know they need to do more,” he said.

For their part, CIOs need to recognize that when most business leaders say ‘digital’, in their minds it is all about revenue, customers and products, Mr. Raskino said.

He said there’s often a temptation for CIOs to “backhaul the word digital” against the more traditional role played by IT departments, which sought out internal efficiency and smooth operations – or what is often dubbed “keeping the lights on.”

CIOs instead need to help business leaders define what “digital” means for a given company, he said, adding that a clearer definition allows companies to gauge success of a digital business initiative – among the CEOs surveyed this year, nearly half had no metric for digital progress.

Likewise, only 6% said they defined, measured and published digital revenue externally, compared to 21% who said they had a “rough estimate” but didn’t disclose digital revenue, and 46% who didn’t distinguish digital revenue in any way, the survey found.

Mr. Raskino said CIOs have to be a “catalyst and role model for this shift” to digital, while being more decisive about where spending needs to go.

All of this requires CIOs to take an active role in developing new ways to quantify and measure digital progress.

“You cannot scale what you do not quantify,” he said: “Digital cannot be fluff.”

IT jobs survive as delaying digital transformation gets riskier.

IT jobs survive as delaying digital transformation gets riskier. Not so long ago, IT jobs were the first to go as soon as a company had a reason to cut costs or slow spending. Now, IT job growth appears to be more resilient, according to the latest national jobs report and an analysis that drills into the IT sector.
Off-trend, in a good way. “Last month, the U.S. ended the longest stretch of job growth on record because of Hurricanes Harvey and Irma, but the information technology sector was spared amid strong business demand for digital transformation services, according to a report by IT trade group CompTIA,” CIO Journal’s Sara Castellanos says. The U.S. IT sector added an estimated 3,200 new jobs last month, compared to 10,300 new jobs in August, led by gains in IT software and services and computer and electronic products manufacturing.
Digital is core to competitiveness. Cutting IT jobs is now, it would seem, increasingly viewed as a compromise of digital capability, and that capability is core to the business. “Because postponing digital business transformation is becoming an increasingly risky proposition, businesses of all sizes seek the expertise and tools to modernize their legacy systems,” Tim Herbert, senior vice president for research and market intelligence at CompTIA, said in a statement. CompTIA also reported that cybersecurity jobs continue to be in high demand following major breaches. It cited job posting statistics and surveys of business leaders. The trade group estimates there are nearly 300,000 job postings for cybersecurity positions in the 12 month period spanning mid-2016 to mid-2017.