On Board With IT?

While the approach to IT projects and business projects has changed in recent years, apparently the view of today's projects as being about the business has not caught up with members of the boards of directors of some of the world's largest companies. A recent survey of approximately 400 directors by Deloitte and Corporate Board Member magazine found, among other things, a disconnect between the directors' view of strategic planning and IT.

While the directors represented a variety of industries beyond financial services, Larry Danielson, principal and head of the insurance technology team at Deloitte, believes the insurance industry is worse than others when it comes to understanding the value of IT.

"[Insurance] is a complicated business, but when people say, 'Well, that's technology,' I don't think they appreciate what the project does for the business," says Danielson. When business leaders define technology-based projects, more than 50 percent of what is being addressed is really about changes to the business, contends Danielson. "The rest has to do with making the technology do what it's being asked to do," he adds. "Maybe it's the way the board is communicated to or the amount of time the members spend, but I'm not sure the boards are getting it. The risks and potential improvement are not fully appreciated. There are those that embrace [IT], but I think very few of them really do."

One area in which the directors "aren't getting it" deals with mergers and acquisitions. The survey found more than half the directors feel IT strategy and implementation is only "somewhat important" during M&As. Danielson was surprised by this attitude, since one focus for him involves due diligence work around insurance companies and merger integration. When businesses are shopping for a company or merging operations, Danielson points out they either are buying a book of business or a platform. "When buying a platform, you are buying technology, and if you don't bring the two [platforms] together and rationalize them, you look bad," he says.

If CIOs are wondering why they are unable to get that coveted "seat at the table" so many aspire to, the answer may be found in the responses to this survey. When asked who leads the board in IT strategy discussions, just more than one-third responded the CIO has that responsibility. Danielson reports the feedback he receives on this issue is CIOs don't always speak in business terms. "If you do have CIOs who speak business, they can have a huge impact and should be at the table," he asserts. IT leaders have an opportunity to do three things: contain spending, deliver on their promise, and also be a part of the growth of the organization. However, as Danielson explains, "a lot of that has to do with their ability to communicate what matters to the business."

The trend toward getting the CIO a seat at the leadership table was conducted in earnest three to five years ago, Danielson indicates, describing today's atmosphere as "alarming," with more CIOs reporting to the CFO or the COO. "They are taking a step back," he says.

Part of the issue is either the state of the industry or the condition of the particular company. "When times are good, people are saying even if they don't get some things done by a certain time, it's not important because growth and profitability are there," says Danielson. "But as soon as you see the tightening, there will be large scrutiny on the rate of return on investments. Is [IT] competitive and efficient? Those are the questions that will be highlighted dramatically in the next several years."

While the Deloitte survey focused on large companies (half the respondents have revenues between $1.1 billion and $5 billion), Danielson considers the problems worse for midtier carriers. "What you'll find is they have to raise the bar on what they expect people to do," he remarks.

– Robert Regis Hyle