The majority of executives clearly understand the critical role of business technology in their success. Eager to infuse innovation into their operations, these executives often bypass internal IT functions when selecting technology suppliers.

With the current economic backdrop, many CIOs are currently re-evaluating their IT strategy as:

Smaller budgets mandate greater efficiency in operations: Recession, capital scarcity, and soaring energy costs force executives to innovate with smaller budgets. To do so, they will continuously scrutinise existing enterprise-wide IT capabilities for legacies, apply disciplined consolidations, and develop different funding and sourcing strategies, moving from the traditional model of buying and integrating IT resources into business capabilities to one of buying managed and shared services

Business demand for technology-enabled capabilities continues: The majority of executives clearly understand the critical role of business technology in their success. Eager to infuse innovation into their operations, these executives often bypass internal IT functions when selecting technology suppliers — because they perceive IT as not being particularly effective or innovative.

Successful strategy implementation is about a few best practices

At a first glance the goals of delivering operational efficiency (providing the services that the business runs on) and business enablement (helping them discover and leverage new ways to advance business strategy with technology) seem to be orthogonal. However, successful CIOs know how to optimise their resources and pursue both goals in parallel. Winning organisations consistently outperform their peers regardless of the economic conditions by employing a few best practices

Develop service-oriented strategies on deep knowledge of the business: Case studies from firms like Proctor & Gamble and Volkswagen show that successful CIOs have adopted shared services gradually and responded to varied business requirements with differentiated services. There are four service-model archetypes that IT executives can use to segment and manage services:

1) Utility services, such as running the network or the payroll process and performing corrective systems maintenance, keep the business running;

2) Productivity improvement services enhance existing business and IT capabilities (e.g., they perform component replacements and service enhancements on time and on budget);

3) Innovation services change the business through new processes, products, and interactions with customers and suppliers;

4) Orchestration services analyse the business' activity patterns holistically and develop and manage the optimal mix of services in all other categories — utility, productivity improvement, and innovation — for optimal business results at the enterprise level.

Streamline strategy execution through business driven demand and governance: Starting from the concept of service archetypes, CIOs need to align their operational processes to ensure that they meet – not exceed – customer expectations. CIOs also need to measure the performance of their staff using appropriate measures per service archetype and make sure that the staff remains motivated at all levels of the organisation. The business driven demand and governance processes should continuously monitor and review business activity patterns and ensure that services, processes, and resources are positioned according to business needs and reflect the archetype positioning. The continuous monitoring of the services and delivery capabilities and the chains of responsibilities should also trigger proactive consolidations and the elimination of duplicate and legacy services and structures.

Create a fast and flexible supply structure that right-sizes service delivery: A key prerequisite for the successful implementation of the IT strategy is a simple and flexible organisational structure, which allows working with the most appropriate internal and external suppliers. CIOs who assign an innovation project to a utility-minded function should not be surprised when business complains about IT's reluctance to change things. In today’s turbulent economy CIOs need to assess the ability of their internal IT functions and combine their strengths with those of external partners for optimal business results — like reinforcing the business intimacy of internal IT with the partners' ability to deliver reliable IT operations, projects that are on time and budget, or process innovation. Critical to the success of this model is the determination to make the partnership a success, as we recently learned from Heineken, whose innovation team is now rolling out Heineken’s new one-company finance management system with support from PWC.

Further Analysis reports from Forrester

CIO Leadership Analysis: Business’s expectations for technology can marginalise its role

CIO Leadership Analysis: Toward the business governance of IT