New Year's Resolutions for CIOs in 2006

By Courtney Macavinta

Everyone starts the new year with resolutions -- and CIOs are no exception. In 2005, analysts say CIOs were focused on helping their organizations bolster revenue while ratcheting up network security and complying with a growing patchwork of regulations. In 2006, those items will remain on the to-do list, but CIOs' top priorities will also include everything from some must-needed housekeeping to contributing to business innovation.

After prolonged cutbacks, 2005 did mark the beginning of a reinvestment cycle. Reacting to security threats and compliance with regulations like Sarbanes-Oxley and the Health Insurance Portability Accountability Act (HIPAA) triggered new IT spending for many enterprises this year. However, with IT spending expected to increase only slightly in 2006 -- from 5 to 7 percent, according to several leading analysts -- CIOs will still face spending scrutiny and tradeoffs. To help spur growth in 2006, CIO efforts will shift to being more proactive and prioritized based on quantified business benefits, says Laurie Orlov, vice president and research director for Forrester Research Inc.

"The biggest priority for CIOs will be maintaining credibility and relevance," Orlov says. "They are being pressured to help the company with top-line revenue growth. They'll need to show the value of their work and market IT's value."

Stay focused on security and risk management

Call it a headache or a veiled opportunity, but most firms will still need to prioritize protecting their networks while improving access for customers and business partners. "The priority is security, security, security," says Laura DiDio, application infrastructure and software platforms research fellow for the Yankee Group. "And when it comes to regulatory compliance, a lot of companies are still lax."

Orlov, however, says the strategy many leading IT organizations will adopt in 2006 is shifting "from information security to sustainable enterprise risk management." For example, she notes that companies like Goldman Sachs and Washington Mutual have named chief risk officers to proactively assess and mitigate risk -- rather than react to security breaches or regulations after the fact.

Take inventory and optimize your IT portfolio

This year, many IT organizations adopted project portfolio management tools in an effort to better prioritize requests based on business growth, return on investment, and the need to solve problems rather than basing criteria on which business units simply "yelled" the loudest. Analysts say in 2006 CIOs will need to go a step further. For starters, many organizations need to take inventory of their current portfolio and decide what goes, what stays, and what needs to be upgraded.

"In this climate, when business competition and margins are tight, you need to take a hard look at everything you're supporting," says Barbara Gomolski, research vice president at Gartner Inc.

DiDio adds that many companies haven't performed a total overhaul of their infrastructure since the Y2K scare in 1999, and have since cut staff and training budgets. The result is that those IT departments have been in survival mode. Case in point: in a recent Yankee Group annual survey of global companies, no one area dominated when it came to projected IT spending for next year.

With a bit more discretionary spending on the table in 2006, DiDio says smart companies are now planning to take care of housekeeping, spreading money around where it's needed -- which is everywhere.

"It's going to be a big transition year. When you haven't upgraded in six years, you have to bite the bullet," she says. "The upgrades mean the biggest issue CIOs should be looking at in 2006 is addressing staffing. The staff they do have [needs] adequate training and certification with the advent of virtualization, Linux, and integration and interoperability. If you can't afford to train your own people, you have to investigate external system integrators and consultants."

But 2006 is not just about taking stock; it's about optimizing what you have based on solid performance metrics. From consolidating data centers to improving service-level agreements when outsourcing, Orlov says the key is ranking IT investments based on what will result in a proven, substantial return for the business.  

Get back to investing and innovating

One of the biggest challenges in 2006 will be the transition from survival mode to expanding IT service -- internally and externally. For instance, analysts are seeing investment in wireless to support the growing mobile workforce as well as Voice over Internet Protocol (VoIP) to improve cost-effectiveness and flexibility.

To transform processes and boost profitability, CIOs at leading IT organizations will need to improve communication and relationships with other business units to foster more innovation, Orlov says. In line with focusing on innovation, "IT marketing" efforts will continue to emerge to promote IT's value and performance in business terms.

The bottom line, writes Orlov in her new report What's Important to IT Management in 2006, is that "the only way IT can contribute effectively is to free up funds for new work -- its innovation capacity."

Gomolski notes that mergers and acquisition activity is also predicted to pick up next year. That can directly impact investments in IT architecture planning and systems integration. For this reason, she says CIOs need to renew their focus on a goal they can stick to: the need to retain and grow their customer base. More CIOs will "invest in customer relationship management (CRM), for example, to maximize profitability and sales," she says.

Gomolski says that, even with this large list of priorities, leading organizations will have a renewed commitment to improving the overall excellence of IT.

"We're no longer in the mode of 'cut your budget and just demonstrate value based on efficiency and reduced spending,'" she says. "In 2006, there will be more of a focus on recognizing and exploiting the opportunities out there."

Courtney Macavinta is a Silicon Valley-based business and technology writer. Her articles have appeared in CNET News, Business 2.0, Red Herring, and The Washington Post.