Is the CIO a dinosaur? Will it be an extinct position in a few short years? Merial, a large animal health care enterprise co-owned by Merck and sanofi-aventis, believes so; in fact, it's already buried the title. I spoke with Steve Lerner, IS director at Merial, about what led to its decision to eliminate the CIO position. The answer, in short, is Sarbanes-Oxley.
Because IT has a close relationship with all of a company's data stores, it provides everything the CFO wants to look at, including statutory reporting and analytical capabilities. At Merial, all senior IS directors now report to the CFO.
"Have information on a timely basis, with an audit trail, is what [Sarbanes-Oxley] required us to do. Everything must be traceable to the source," Lerner tells me. While IT is responsible for satisfying the needs for compliance, the CFO is the gatekeeper. So, in January, no more CIO.
There is a definite shift in business's attitude toward the CIO slot, due in large part to Sarb-Ox, according to David Waddington, principal at Tyson Consulting. On the other hand, Tyson calls the CFO a "hunted species" that will soon become the highest paid job in business.
"The CFO is taking control of IT like never before," says Bob Potter, CEO of Kalido, a maker of data warehousing software.
Because a CFO's signature goes on a company's Sarb-Ox 404 report, CFOs must have a deeper insight into the systems that were used to generate financial data, notes John Putnam, CTO at Capgemini. He says the center of gravity in decision-making for strategic IT solutions is shifting away from the CIO. As companies move back toward more centralized control, it is more often the case that the CIO reports to the CFO. Or, in cases where the CIO reports to the COO or CEO, the CFO will put his or her own people into the IT organization.
Kalido is part of a $33 million BI (business intelligence) project for a New England high-tech company where this is happening right now.
"The accountants that traditionally report to the CFO are taking a hands-on role in terms of systems. The CFOs want to know they are getting the right information," Potter says.
In the age of compliance, there's a heightened interest in data management, data cleansing, and data warehousing. "Data governance" appears to be the catchphrase of the day to describe this new emphasis.
Sarbanes-Oxley is also changing how companies aggregate data. In the past, everyone sent their spreadsheets to the CFO, who put them all together. The CFO relied on regional controllers to get the data out of IT systems. Now, however, CFOs want to dictate or mandate the business definitions and unify them across the country and globe. For example, if Unilever has 11 different margarine brands in Italy through acquisitions, there has to be a single definition for cost of goods sold.
Everyone I spoke with appears to believe that the need for a chief information officer that is a peer with the CFO has diminished. As far as I can tell, in the future IT landscape, the CTO will report directly to the CFO, rather than the CIO.
By the way, if you want to insure the future of your children, whisper in their ears, "Public accountancy, public accountancy." Thanks to Sarbanes-Oxley, Potter says, companies are hiring accountants in droves.