The Wide-Ranging CIO

The CIO's realm of responsibility and influence is expanding well beyond traditional IT boundaries.

When the CEO, chief financial officer and other members of Accenture Ltd.'s partner income board meet to decide how the $1.4 billion consulting firm's profits should be divvied up each year, CIO Frank Modruson has both a seat at the table and a vote on the final disbursement.

In February, before executives at Juniper Networks Inc. signed a $4 billion deal to buy out NetScreen Technologies Inc., they sought the counsel of Juniper CIO Kim Perdikou. The reason: Perdikou had led much of the company's preacquisition due-diligence efforts.

And when $13 billion Humana Inc. makes a sales pitch to corporate customers—potentially worth millions in revenue to the health care and benefits giant—Humana CIO Bruce Goodman is a lead presenter.

Sure, corporate IT budgets may be flat overall and technology expenditures more heavily scrutinized than ever, but the CIO's role and influence are expanding well beyond the traditional boundaries of IT. Recent interviews with more than two-dozen top IT executives suggest that the job of CIO is significantly increasing in difficulty and complexity, so much so that one veteran CIO believes it may be too much for a single person to handle.

"The reality is that to be successful, a CIO must be able to do six things at once, and that's just not realistic," says Darwin John, who has held the CIO post at the FBI, the Church of Jesus Christ of Latter-day Saints and the former Scott Paper Co. In all three cases, John set up an office of the CIO that included a team of executives who focused on technology implementation and integration, prioritizing business and technology initiatives and providing top-notch project management.

"I have a belief that to be successful as a CIO, you need to allocate your time in thirds: one-third to minding the store, a third to working with major customers within the enterprise and the other third focused externally," says John, who continues to advise the FBI as well as Chicago-based Blackwell Consulting Services Inc.

John Moon, CIO at Baxter International Inc.
John Moon, CIO at Baxter International Inc.

Image Credit: Andy Goodwin

"The role of CIO definitely isn't shrinking. It's changing," says Linda Pittenger, president of People3 Inc., a Gartner Inc. company in Bridgewater, N.J. More than ever before, the role is externally focused on suppliers, customers and relationships across other corporate functions and business processes.

Here's a closer look at three CIOs who are ahead of the curve, having already assumed several roles and responsibilities far from the hum of the data center.

CIO as Product Innovator

Baxter International Inc. in Deerfield, Ill., designs, develops, manufactures and sells medical devices. As the company's CIO, John Moon was once fully engaged in what he calls "the ERP extravaganza," but not anymore. Moon's primary responsibilities these days are directly tied to the bottom line. Among them is helping product engineers figure out how to best incorporate Internet-based intelligence and communications capabilities into Baxter's line of medication pumps, dialysis equipment and other medical devices, which represent 66% of the $8 billion company's business.

"You've seen commercials about refrigerators and microwaves being connected to the Web. We're doing the same thing with medical devices," says Moon. One recent example is Baxter's home renal-dialysis machine that electronically tracks a patient's treatment compliance and transmits the data back to a physician. The device is built around some of the same network technology Baxter uses internally for its own operations.

Once the devices are developed, Moon shifts into the role of negotiator and deal-maker. "I personally meet with clinical software vendors to talk about joint ventures. We're also involved with collaborating with customers in connecting to devices in their unique LAN environments," he says. This regularly places Moon in the boardroom with some of Baxter's biggest customers.

Moon is also one of the few CIOs who sits on the board of directors of Global Healthcare Exchange LLC, the health care industry's largest online business-to-business exchange . Baxter is an equity stakeholder, along with competitors Johnson & Johnson, Medtronic Inc. and GE Medical Systems. This year, the exchange is projected to process transactions valued at more than $3.5 billion. The exchange's key goal is to leverage the Internet and electronic ordering to reduce supply chain costs, which represent a hospital's second largest expense after personnel costs, Moon says.

As for how the CIO's role is changing, Moon sums it up this way: "We've lost the luxury of just focusing on a few things." Today's CIO is just as likely to be involved in merger and acquisition discussions and new-product development meetings as the chief financial officer or chief operating officer, he says.

"The old CIO would be responsible for connecting the systems of an acquired company," Moon says. "Today, CIOs are being asked to help govern those new organizations."

CIO as Efficiency Expert

In addition to 250 IT professionals, a $55 million annual IT budget and all technology and network operations at William Beaumont Hospital in Royal Oak, Mich., Paul Peabody is directly responsible for $1.5 billion per year in patient billings and 325 accounting workers who previously reported to the corporate controller of the 1,000-bed hospital. "We're going to make some very big changes as we implement new revenue systems, so it makes a lot of sense for me to have responsibility for both areas," says Peabody, who has held the hospital's CIO post for 24 years. "Most hospitals are 2% to 5% inefficient in realizing the full revenue due to them. Billing in health care is very difficult with so many rules. You really need good systems to do it right."

Hospital officials learned firsthand the value of tightly linking the CIO to business process changes in 1999, when the hospital implemented new financial systems with an eye toward reducing supply chain complexities and costs. Peabody, who led the project, hired several industrial engineers to work with IT to identify and streamline each step in the complicated supply chain process before configuring software the hospital had purchased from Oracle Corp.

Among other things, they had suppliers deliver goods directly to nursing stations, allowing the hospital to eliminate its warehouse. Beaumont also signed on with a group purchasing organization to electronically handle orders with smaller and specialty suppliers still using costly and time-consuming manual ordering processes. Together, these and other changes have so far yielded savings of close to $25 million; Peabody says he believes he can boost that figure to $20 million to $30 million annually. "That's the kind of reduction in expenses that can really improve your bottom line," he says.

Peabody has since added eight industrial engineers to the hospital's permanent IT staff and placed them on every IT project. "We look at our processes, best practices, then do a gap analysis before making any changes" to processes or systems, he says.

The role of IT and today's CIO is that of a "change agent," says Peabody, who reports to the hospital's COO. "Our job is to understand how something works and make it operate more efficiently, and our responsibility is directly to the bottom line."

CIO as Entrepreneur

Goodman joined Louisville, Ky.-based Humana in 1999 as senior vice president and CIO. In 2002, his title was changed to chief service and information officer and his responsibilities grew to include all of IT plus virtually all administrative operations, from billing and enrollment to provider affairs and quality management.

"One of the biggest opportunities for leveraging IT in a company like ours is to make the clerical operations more efficient," says Goodman, who reports directly to the CEO. "Having total responsibility for those dollars plus IT puts you on both ends of the equation."

In his expanded role, Goodman has been the driving force behind a unique joint venture with a direct competitor, Blue Cross and Blue Shield of Florida Inc. Together, the companies set up Availity LLC, which offers an Internet portal that enables health care providers to use a single online system—free of charge—to file for reimbursements from multiple insurers.

Since its launch in February 2002, the portal has registered more than 25,000 physicians at 9,500 health care practices and 208 hospitals in Florida. It processes about 3 million transactions a month. In the past two years, Availity has added Aetna Inc., Cigna Corp. and several local and regional insurers to its online claims-processing service.

One of Goodman's other nontraditional CIO roles is that of external salesman. Because of what he calls "a story of IT enablement around the changing model of health care," he is often the best person to explain Humana's unique offerings, which include a set of software wizards to help companies and employees choose the health plans that best suit them.

"I also present to investment analysts, covering what's happening with IT and our operations, and I get involved in government affairs, promoting legislation that will streamline costs to all stakeholders in health care," Goodman adds.

The bottom line: "Yes, the CIO role is definitely expanding," he says. "It has to because so much of our operating model depends on IT to enable it."

CIOs are assuming leading roles in the following areas:

Business process analysis and change

Regulatory compliance

New product development

Project management outside of IT

Billing, accounts receivable

Copyright © 2004 IDG Communications, Inc.

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