From back-office to top-line sales: How CIOs are making money for their businesses

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From back-office to top-line sales: How CIOs are making money for their businesses

 

 

The CIO's role in the era of mobile apps

The digital age has forced businesses to increasingly lean on their IT department to analyse data, innovate technologies and maintain a competitive advantage. Jenny Williams looks at how the CIO's role fits in the money-making mobile apps business.

Figures from research firm Forrester show over half (52%) of businesses agree technology is fundamental to their business model.

But more than putting technology at the core of business strategies, CIOs are developing products to directly boost company sales, moving the IT department into an era of product development, away from simply providing back-office support.

Products developed by in-house IT teams - such as mobile applications - have generated significant business results.

London minicab firm Addison Lee is set to take £20m in bookings through its iPhone app in 2011, adding potentially 25% to the company's turnover from an app launched just six months.

Betfair had over £1bn worth of bets placed via the mobile products it developed in-house in its fiscal year 2011.

"We've seen 88% growth in mobile revenues in the past year and 122% growth in the number of customers betting through their mobiles with us," says Raj Vemulapalli, vice-president of mobile engineering at Betfair.

"Technology is an enabler to achieve business goals. To that end, IT departments and CIOs should choose the right technologies and build the right products for their users and customers in order to achieve the desired business results."

 

Shift towards measuring IT success as a business strategy

Analyst firm Forrester believes CIOs will move towards business technology (BT) strategies where measuring IT success will be judged on boosting business results.

However, at the end of 2010, a Forrester survey found only 13% of IT strategies use the same success measures as used to measure the effectiveness of business strategy.

"There is a significant gap between IT success metrics and the rest of the business," says Nigel Fenwick in Forrester's "Beyond Alignment: BT Strategic Planning" report.

While business-driving product development has entered into the CIO remit, some CIOs are still sceptical about tying IT strategy to business results.

Speaking at a recent Vodafone Enterprise Services panel session about the consumerisation of IT and the deployment of personal mobile devices, Paul Domnick, CIO at law firm Freshfields Bruckhaus Deringer, said his role has shifted to include responsibility for all product development and project management.

However, he added that CIOs should never make business value promises to the board - for example, increased productivity through the use of personal mobile devices - because the CEO will ask, "Who will be fired?" if targets are not met.

"IT doesn't drive growth so should never claim productivity," says Domnick.

But this attitude could change as in-house IT departments develop customer-facing, sales-focused products as well as supporting day-to-day operational tasks.

 

CIOs change perspective to creating consumer products

Kevin Gallagher, CIO at Channel 4, says: "We're developing all the business systems we've always done but we're also developing products. From a mindset point of view, that's a big change for us."

To deal with the shift, Gallagher says his IT team is adopting more product-centric roles to respond to demand for in-house IT to develop products directly for consumers.

Channel 4's Apple iPad application for on-demand video cost a "low six figure sum" to develop. But it has already made its money back, with sponsorship opportunities and over a million downloads so far.

As at Channel 4, the trend is increasing for businesses to bring development of products in-house to create innovative products to drive business and increase sales.

Tesco set up its own mobile development team in 2010 as an extension to its IT team. Using its new team, the retail giant recently launched a free mobile application for Google's Android operating system (OS) to provide shopping and delivery services.

The app adds to Tesco's portfolio of mobile apps. Tesco's store and product-finding iPhone application, Tesco Finder, reached one million downloads at the end of 2010.

Online fashion retailer Net-a-Porter recently announced plans to double its IT team to 200 to support increased in-house product development across e-commerce and mobile platforms and generate business. By the end of 2011, the IT department will equate to 20% of the firm's overall workforce of 1,000 employees.

 

The advent of the money-making CIO

Mobile products are being developed to deliver a direct return on investment (ROI).

Kevin Summers, global CIO at Whirlpool, believes focusing on the ROI of applications will help transform IT in organisations, allowing IT to move from a technical focus to a business consultant role.

Summers says IT should focus on applications with strong ROI figures and off-load anything else.

IT recruitment firm Harvey Nash has seen a recent surge in demand for CIOs. Harvey Nash believes the role of the CIO is becoming differentiated between those who see their job as driving innovation and those who focus on keeping the business running.

It is clear that the idea of the "money-making CIO" is coming to the forefront."It's a reflection that CIOs can no longer just be concerned with back-office and maintaining infrastructure," says Steve Prentice, research fellow for executive leadership and innovation at Gartner.

Prentice believes CIOs need to deliver revenues to organisations through the implementation of technology, which is integral to every aspect of business, or relegate themselves to a limited support role.

He says companies emerging from the recession are increasingly looking to sell more products, rather than reduce budgets to improve the health of the bottom line. But with IT budgets remaining tight, the challenge will be balancing day-to-day operational tasks with innovative product development.

Prentice says some CIOs have devolved day-to-day responsibilities to a deputy to allow them to focus on revenue-driving projects. But, ultimately, CIOs will have to accept the IT department's success will be directly measured against its ability to drive sales.

For instance, at General Motors, the CIO's role is now, simply, to sell more cars, says Prentice

Furthermore, an increasing number of CIOs are seeing a proportion of their bonuses being influenced by increasing revenues. Prentice says: "It comes down to, if you grab them by their wallets, their hearts and minds will follow."

CIOs are moving further and further away from just keeping the lights on. But if CIOs fail to strike a successful balance between supporting enterprise infrastructure and systems and generating sales, they could find themselves left in the dark by the business.

Examples of how CIOs are making money for businesses 

 
  • Addison Lee

London minicab firm Addison Lee is set to take £20m in bookings through its iPhone app in 2011, having received £1.4m through the app in June.

The company's stated turnover is £80m, meaning the iPhone app has potentially added 25% to the top line in just six months.

  • Debenhams

Similarly, Debenhams launched a second iPhone app, called Debenhams Beauty Club, in May 2011 after achieving over 400,000 downloads and sales of over £1m within five months of launching an initial Debenhams iPhone app.

  • Betfair

Betfair reports 122% year-on-year growth in the number of customers betting on Betfair via mobile phones, which equates to £1bn worth of bets placed in fiscal year 2011 and an 88% year-on-year increase in sales from Betfair's mobile app portfolio, which includes a HTML5 web-based Android app.

Third-party developers can build additional mobile products for Betfair customers using the company's open platform API.

 

Gartner's six different types of money-making CIOs

 

1. The entrepreneurial CIO

Responsible for generating sales including external sales as well as traditional IT planning, design, implementation and operations.

2. The cost-optimisation CIO

Helping businesses to meet earnings targets through IT procurement and decommissioning methods.

3. The revenue-creating CIO

Exploiting IT technologies, products and services to help increase enterprise revenue.

4. The business innovation CIO

Placing IT staff members within product development areas of the business.

5. The business development CIO

Transferring IT operational responsibilities to a senior enterprise executive and reporting directly to a head of business development, the CIO will still retain IT-business planning responsibilities.

6. The public-serving CIO

Public-sector money-making CIOs work to shorten tax receipt-related government process to save money.


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This was first published in September 2011

 

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