Does Your Company Need a CIO?
Depending on the needs of your mid-market company, there may be better alternatives.
Recent articles have gone two ways: every company eventually needs a CIO; or, the age of the CIO is dead! Some are even advocating the total elimination of IT departments. Having been in the managed IT support business for 25 years, we have some pretty well-founded answers as to which companies do, and which companies don’t, need Chief Information Officers. And as in most cases like this, there is a fuzzy gray line in-between.
In researching this paper, we realized that most articles, blogs and other written pieces we came across were addressed to “enterprise level” companies. There is, however, no actual definition of “enterprise level”…a business of any size is an enterprise. In common usage, however, this term has come to mean a large company, typically more than 250 employees. We mention this because in the USA today, only .39% of companies actually employ 250 or more people, meaning that these written pieces ignore the other 99.31% of firms. Please note that this paper and the advice contained within has been designed for what we deem to be mid-market companies, those with between 50 and 250 employees.
Today, Every Company is a Technology Company
What makes a company a “technology company”? While only a small percentage of companies today may be involved in developing and/or selling technology, unless you’re a blacksmith or running a wagon wheel repair service, your company is almost certainly a technology company. Do you use email, search the Internet, keep your books on in-house or online software, use VoIP phone service, use industry specific software like CAD or construction estimating programs or any of thousands of others? If yes, then your company is a technology company.
(Correction: In today’s world, to be found and succeed, ALL businesses need websites and email. So, even seemingly antiquated businesses, like both the blacksmith and the wagon wheel repair service, are technology businesses.)
We’re willing to bet that one way or another, your company is deeply rooted in technology, so your business is a technology business. Let’s take a look at whether or not you need a CIO.
A small business*, which we will define here as less than 50 employees, almost certainly doesn’t need a full-time CIO. On the other hand, if you have several hundred employees, it’s worth considering. No, it’s not a definite requirement, but, yes, for many businesses that size, hiring a CIO would be a strong positive move. In this paper, we are going to examine what a CIO is supposed to do and what types of businesses can benefit from making this investment. And, yes, it’s an investment. Good CIOs are hard to come by and deservedly draw significant salaries.
*According to the federal government, depending on your industry, a small business may be defined as grossing as little as up to only $750,000 or as much as up to $40,000,000. Quite a range. For the purposes of this paper, a small business is less than 50 employees, mid-market 50-250 employees, and a large “enterprise-level” business more than 250. Of course, the nature of the business plays as much a part in determining the need for a CIO as does the company’s size.
How big an investment?
These two charts from Salaries.com show the salaries only, and salaries plus bonus, of the middle 50% of CIOs (shown as CITO – same thing) in the Atlanta Metro area. Note that these charts do not include payroll taxes, health insurance, 401k, stock options or other benefits.
A Chief Technology Officer (we will get to the distinctions in a minute) will cost a little less:
Not all “Chief ___ Officer” positions are created equal. A CIO and a CTO perform very different functions and the individuals who fill these seats will likely come from different backgrounds with different types of expertise.
What is a CIO?
A good CIO is a business leader who works closely with the other C-suite execs developing and implementing the firm’s IT strategy. Where appropriate, the CIO will work to constantly upgrade both internal and customer related processes through the use of technology.
A CIO will work with his colleagues in setting priorities for future IT investments both in existing units and planned units. The CIO will often have been educated in computer science or engineering, but their real value comes from their experience in business management and operations.
In many companies, a CFO will serve as de facto CIO, largely, we suppose, because A) the CFO is the one watching the dollars, and B) the cost of hiring an additional C-level executive is prohibitive…see the charts above! The reality we see is that very few CFOs have the training, technical expertise, experience or inclination to handle this responsibility properly. Even the brightest CFO may lack the insight to correctly gauge the impact of investing in, or not investing in, IT expenditures. This lack of insight can lead to decisions made on cost alone, not on future growth potential.
What is a CTO?
Simply put, the difference between the CIO and the CTO is that while the CIO is the technology strategist, the CTO is the tactician. The CTO’s responsibility is to implement the strategy set forth by the CIO and the other C-level executives. The CTO will probably be running the company’s IT infrastructure, and, particularly in tech start-ups, may, in fact, be the company’s founder. An IT education and experience running IT systems is likely. While that’s a pretty well-defined division between a CIO and CTO, in fact, in the real world, and most definitely depending on the industry and the size of the company, the lines may be a bit blurred…or a single individual, regardless of title, may effectively serve both functions.
How About an IT Director?
To complete the full Information Technology executive team, let’s examine the role of an IT Director. This individual is charged with managing the daily needs of the company’s IT department, including implementations. In other words, boots on the ground. Keep this in mind as it will become important a little later in this article. And to complete the picture, here are salary stats for this position:
So, if you take the 50% mark for salary and bonus of all three positions, you have a total of $795,395. Now add in payroll taxes, health insurance, 401k, stock options, etc. You’re darn close to a million dollars. We’ll give you some less costly options before we’re done, but for now, let’s move on to a discussion on how to determine if your company is ready for a CIO.
The Chicken or the Egg
There has been a lot of discussion about who gets hired first: the CIO, the CTO, or the IT Director, assuming your firm grows to the point where all three are needed. Some will tell you to start with the CIO because this is the guy (or gal) who will set you in the right direction. Others will tell you to work from the bottom up…bring in the IT Director to manage day to day affairs. The right choice depends on the type of company you are in terms of products and services, size, technology requirements, and where you are in your anticipated growth strategy. If your exec team isn’t sure, this may be a time to bring in an outside consultancy because, quite honestly, if your exec team members haven’t had to make this type of decision before, some good advice may prevent a very costly mistake.
The Determining Factors of “When”
Need for efficiency: When your processes and technology aren’t fully accomplishing what you need, it may be time to consider engaging a CIO, providing you are willing to vest that individual with the authority he/she needs to accomplish the goals set forth.
Unrelated or incongruent Systems: When your systems just aren’t working well together, or when Unit B is being held up by the dysfunction of Unit A, it’s probably that time.
Senior team disagreements: When your senior team members are fighting with each other over which department is in most need of the resources of the IT department, you need someone who can make these decisions without prejudice.
Separation of responsibilities: Sales should be focused on sales and production should be focused on production. When responsibilities that should be owned by IT seem to be moving to the individual line departments, again, it may be time.
It’s just not getting done: Your C-level and other senior execs have great ideas and concepts, but they remain on paper. Someone needs to move them forward and a CIO may be that person.
If some or all of these problems are plaguing your company, like your department heads all having vital programming they need accomplished and everyone is fighting to move to the head of what has become a year-long queue, it may be time to take the plunge. But just because your business is growing doesn’t mean you have these concerns. Many businesses grow by simply doing more of the same, or opening new facilities, which also do more of the same. They may need more people, more hardware, more support, but do not need new internally developed software. If your single office, 20-person financial services firm opens a second office, then a third and a fourth and so on until you have 100 employees, you will certainly need connectivity between them, and security and availability become critical. But will you be developing new complex applications that will be unique to your business? Is it likely that there will be a queue of IT requests that aren’t being met?
If your 30-person call center grows to 100, then 200, with new offices, you may need an in-house team to program requirements for new clients, or new campaigns for existing ones, but will your underlying technology be in a constant state of flux? Probably not.
A cost-effective and technologically effective alternative
There are hundreds, maybe thousands of different types of businesses out there. For those businesses that are highly dependent on sophisticated industry-specific software that is constantly changing and for which falling even a little behind the most up-to-date upgrades could prove detrimental, an in-house IT team that includes senior IT executives is likely the way to go. But if your concerns are more on the order of network availability, cyber security, employee mobility, employee productivity, adding equipment for a growing staff, and/or deciding if and when cloud business solutions are better options, then working with a highly qualified Managed IT Support provider that has a large well-trained and highly-experienced staff that can service your every need, 24 x 7 x 365, may be the better answer.
Understand this: we will never tell you that you shouldn’t have a very qualified IT person(s) on staff, especially once you reach a certain number of employees. That may be at 50 employees, maybe 100, maybe as few as 25, depending on your company. We will also tell you this: we have found that many mid-market companies are better served by augmenting a small in-house team of one to three people, with a highly qualified Managed IT Support company that can be overseen by your in-house IT Director, and that can provide a very wide range of services, including short and long term technical advisement / IT Strategy, helpdesk, installation and repairs, and the monitoring, managing and maintaining of your IT infrastructure. Properly done in-house, this would require an in-house team of ten or more, including those multi-six figure guys we mentioned earlier.
We believe that few mid-market companies can cost-effectively provide themselves with the same level of service as can a well-qualified managed IT support provider. One more important factor: when an IT support provider takes on an account, it is the support provider that assumes the financial risk of your IT infrastructure. They are committing to keeping your system safely up and running at all times, regardless of the cost to themselves. In fact, the more trouble-free they keep your entire IT infrastructure, the more profitable your account is to them. It’s a win-win relationship.
Part-time CIO vs full-time Managed IT Support with CIO/IT Strategy services.
There are individuals and services that provide part-time CIO services. This is not what we are suggesting. We find great value in having a single company provide both the managed services and the technical advisement services to a company. First of all, it is generally more cost-effective for you, the client. Secondly, the right IT support company will have significant resources, and the executive team of that provider, the ones who are providing technical advisement, will have additional highly skilled personnel upon whose knowledge and expertise they can draw in helping you determine your IT path. These are people who are in the “line of fire” every single day and who understand first-hand exactly what is going on in the technology world and can provide you with real-time, real-world, advice and support.
A little about DynaSis
We may be that ideal solution for your company. We have a team of 60 IT professionals assembled over our 25-year history. We have real people on duty in front of monitors 24 x 7 x 365. They find and fix small problems before they become large ones. Our helpdesk is also online 24 x 7 and can help with anything from onboarding new employees, to reattaching that printer that somehow got dropped, to helping with lost passwords, to installing new software. Our Pro Services team can repair failing equipment or install new equipment, one piece at a time, or in an entire new facility. Our Cloud Solution is housed in an Atlanta Tier 3 Facility with every protection imaginable and can co-locate to similar facilities in Minneapolis and/or Las Vegas.
If you would like to begin a discussion, please reach out to Chas Arnold, Principal & CIO at 678.373.0716.