CIO focus shifts from tech support to corporate strategy

01:00 AM EST on Sunday, February 25, 2007

By PUI-WING TAM, The Wall Street Journal

As the longtime chief information officer for Northrop Grumman Corp., Tom Shelman’s duties mainly consisted of managing the defense contractor’s vast network of computer systems. So he was shocked when the company suddenly changed his job description several years ago.

Shelman was asked to be more “strategic” and “transformational.” He was told he would be expected to meet with customers, use technology in new ways and help win new business — in short, to help the Los Angeles-based company grow.

“I had to sit down and do some soul-searching,” says Shelman, 48. “It was a significant change; it sounded exciting, but it also scared the hell out of me.”

Shelman, who has been Northrop’s CIO for the last decade, ultimately decided to stay in the job. Since then, a wireless network that Shelman started in late 2004 at one of Northrop’s shipyards in Pascagoula, Miss., has blossomed into a new source of revenue. Last September, New York City awarded a $500-million municipal contract to Northrop for a citywide wireless network for its police and fire departments, as well as other city agencies.

Other CIOs are going through similar transformations. The computing systems they manage have long been seen as an essential resource but also an operating cost to be controlled. Now, technology is increasingly being recognized as a vital tool in corporate strategy — and CIOs are helping to wield it. Web sites, for example, have evolved at many companies from the equivalent of corporate brochures to huge direct-sales channels that must be skillfully designed and tightly managed.

According to recent CIO polls from research firm Gartner Inc., 50 percent of CIOs surveyed said they now have duties outside of core technology, such as helping to craft corporate strategy. That is up from about 20 percent three years ago, says Mark McDonald, a Gartner analyst.

“Companies are requiring CIOs to be more thoughtful about strategy,” says Reynold Lewke, a partner in the Palo Alto, Calif., office of recruiting firm Egon Zehnder International who leads the firm’s CIO practice. “Many CIOs have become business partners.”

In recognition of this job shift, more CIOs are now reporting to top executives such as chief executives, chief financial officers and chief operating officers than to other parts of an organization. Last year, 74 percent of CIOs surveyed reported to a CEO, chief financial officer or operating chief, up from 69 percent in 2003, according to Gartner.

While CIOs now pull in an average total annual compensation of $185,240, up from $180,000 in 2004, according to CIO Magazine, some make far more. Randy Mott, who was hired from Dell Inc. to become Hewlett-Packard Co.’s CIO in mid-2005, is paid a base salary of $690,000 a year and obtained a hefty package of stock options and restricted stock, according to H-P’s public filings. Mott also got a $2.2-million signing bonus and will pocket at least another $5 million under a long-term-performance bonus plan.

Mott arrived when the role of technology chief became more important at the Palo Alto computer and printer maker. Immediately before Mott, the H-P CIO job wasn’t a stand-alone position and had been melded with the job of head of global operations.

That changed when Mark Hurd arrived as chief executive in early 2005 and decided the company needed to overhaul its tech systems to facilitate new sales and growth.

Now, Mott is in charge of whittling H-P’s 85 data centers world-wide down to just six in three years. By improving the efficiency of the internal systems, H-P hopes to free up Mott’s team to spend less time on tech support and more on helping H-P in other ways.

For example, Mott often meets with customers — sometimes 50 at a time — to describe his own experience in trying to deploy H-P technology efficiently, suggesting how the potential buyers also could use the company’s products to make large technology transitions quickly.

“It’s a case study in progress,” says Mott, 50. “What I’ve shown customers has helped them move forward and escalate the projects they’re thinking about taking on.”