EXCLUSIVE RESEARCH FROM

EXECUTIVE SUMMARY

2017
State of the CIO
2017 STATE OF THE CIO

2017 State of the CIO

AS COMPANIES ACCELERATE THE SHIFT INTO THE ERA OF
DIGITAL BUSINESS, CIOs are finally able to devote more time and energy
to strategic and transformational activities, despite the on-going requirement
to maintain oversight of IT operations, according to the 2017 State of the CIO
survey of 646 IT leaders.

Evolution of the CIO Role

Just like in 2016, the CIO role still covers a lot of ground, requiring IT leaders
to strike the right balance between crafting technology strategy and driving
business innovation while overseeing routine IT functional tasks such as cost
control, vendor negotiation, crisis management, and operational improve-
ments. As a result, 87% of CIOs think the role is more challenging than in the
past, down a percentage point from last year.

Looking out at the three- to five-year horizon, CIO respondents foresee spend-
ing less time on functional duties7% compared to 20% currentlyan in-
dication that improvements in automation and a growing dexterity with the
bi-modal role will afford CIOs the opportunity to concentrate more fully on
higher-value, high visibility activities. Nevertheless, it remains a challenge to
handle both sets of responsibilities, with 72% of respondents acknowledging the
struggle to juggle business innovation and operational excellence requirements.

The on-going shift has had a dramatic change on how CIOs view their role.
Only 20% of respondents to the 2017 State of the CIO survey self-described
as functional this year, down notably from the 27% in 2016. At the same time,

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2017 STATE OF THE CIO

CIOs INCREASINGLY SPENDING TIME ON STRATEGIC ACTIVITIES

Which of the following activities best characterize your focus and how you spend your time in your current role?

56%
TRANSFORMATIONAL 53% 52%
50%
46% 47%
45% 45%

34% 43% 34% STRATEGIC

31%
27% 27%
25%
23%
21% 27%
23% 22%
11% 19% 19% 20%
FUNCTIONAL
2010 2011 2012 2013 2014 2015 2016 2017

half of respondents to this years survey identified with the transformational

CIO role, up from 45% in 2016, and 31% of respondents classified their role as
strategic this year, up from 27% in the 2016 survey. CIOs are happily embrac-
ing their evolution from order taker and implementer to strategist and busi-
ness enabler: Sixty-three percent of transformational CIOs and 71% of stra-
tegic CIOs categorized the work as more rewarding compared to only 46% of
CIOs still saddled with mostly functional duties.

Cyber security, which was cast in the spotlight last year due to a spate of high-
profile data breaches, gained even more prominence this year, becoming one
of the top three CEO priorities for CIOs. Yet instead of adding to CIOs already
full plate of functional duties, security has morphed from a standalone set
of workflows and practices into a strategic initiative. Slightly more than half
(51%) of respondents to the 2017 State of the CIO survey said security and IT
strategy is tightly integrated today compared to only 37% in 2016. As a result,
even functional CIOs are spending less time on security management activi-
ties41% compared to 46% of respondents to the 2016 survey.

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2017 STATE OF THE CIO

While CIOs are making great strides securing a strategic place in the enter-
prise, there is lingering uncertainty from line of business (LOB) about the
scope of their role. LOB leans on CIOs to identify business needs, make rec-
ommendations, and perform risk assessments, with 41% of LOB respondents
to the 2017 State of the CIO survey referring to their CIO as a strategic advisor
and another 22% calling them a business consultant. At the same time, how-
ever, LOB seems less clear on ITs role in new business initiatives: Only 27%
of LOB respondents said IT is actively recommending technology solutions
(compared to 64% of CIOs), 24% felt IT is successfully col-
laborating with LOB on building a business case (compared

63%
to 59% of CIOs), and 31% acknowledged ITs hand in devel-
oping technical requirements (compared to 49% of CIOs).

Some of the ambiguity lies with the fact that LOB sees the
of LOB see CIO role as more diverse, split between innovation activi-
CIOs as ties, identifying emerging technologies to accelerate digital
strategic transformation, and project management. CIOs, on the
advisors/ other hand, see innovation as their primary charter, with
consultants 41% of CIO respondents focused on identifying business op-
portunities for digital transformation.

The Spotlight Pays Off

CIOs increased visibility, particularly among the C-suite and customers, is
starting to bear fruit. Nearly half (46%) of CIOs now report in to the CEO, the
same as last year and the highest since 2004. IT leaders in enterprise compa-
nies are more likely to have a diversified chain of command, with 16% report-
ing into the COO and 15% reporting into the Corporate CIO, compared to 8%
and 2% respectively in SMB organizations, the 2017 State of the CIO survey
found. Moreover, CIOs identifying as strategic are more likely to report to the
CEO 54% compared to 45% of transformational CIOs and 39% of their func-
tional counterparts. In fact, CIOs who identify as functional are more likely
to report into the CFO (29%) compared to their transformational (19%) and
strategic (9%) CIO peers.

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2017 STATE OF THE CIO

While the enterprise CIO pay grade took a hit $306,300 this year in total
compensation, including bonuses and stock options, compared to $400,000 in
2016SMB CIOs were paid more, $214,020 on average compared to $190,000
last year. Not surprisingly, CIOs in financial services companies were the
highest paid of any industry surveyed, earning $340,780 annually, on aver-
age, while government/non-profit CIOs took home the smallest pay checks,
at $170,650. Total compensation for strategic CIOs came in at $319,470, with
transformational CIOs earning $251,210, and functional CIOs taking home
$205,908, on average. Despite the wide range, CIO salaries were far higher
across the board than LOB respondents, which averaged $126,360.

CIOs are also getting much more face time with custom-

33%
ers and the board of directors. Sixty-one percent of CIOs
are communicating with the board, up from 58% last year,
and slightly higher among strategic and transformational
CIOs. On the customer front, 76% of CIO respondents
Spend time said they met frequently or occasionally with custom-
driving ers compared to 62% last year. Transformational (71%)
business and strategic (83%) CIOs were more likely to engage with
innovation customers compared to only 57% of functional CIOs. In
UP FROM 26% addition, CIOs in the manufacturing space were less likely
LAST YEAR to be customer-facing (56%) than any other industry sec-
tor, the survey found.

How They Spend Their Time

CIOs are spending more time on transformational activities such as aligning
IT initiatives with business goals (53%) and cultivating the IT/business part-
nership (38%), and at enterprise organizations, there is even greater emphasis
on these activities compared to SMB companies. At the same time, there is
a growing commitment to strategic endeavors like driving business innova-
tion (cited by 33% of CIOs this year compared to 26% in 2016) and identify-
ing opportunities for competitive differentiation, at 21% in 2017 compared to
16% last year. Functional duties account for less of the CIO agenda, including
security management, now at 41%, down from 46% last year, and managing IT
crises, at 19%, down from 27% in 2016.

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2017 STATE OF THE CIO

SECURITY INCREASINGLY INTEGRATED WITH IT STRATEGY

How tightly integrated are IT security strategy and IT strategy at your organization today?

Tightly integrated.
IT security strategy is an
Financial Services 64%
Healthcare 58% 51% Average
percentage of IT
37%
integral part of our overall
IT strategy and roadmaps budget devoted
to IT security
36%
12%
Somewhat integrated.
IT security strategy
is loosely incorporated
into overall IT strategy 47%
Not integrated.
IT security investments are typically 12%
16%
reactive in response to existing IT
security challenges or events n 2017 n 2016

Strategic activities are much more prevalent (78%) in the retail/wholesale/

distribution industry compared to the rest of the sectors, particularly those of
financial services (61%), government/non-profit (58%), and manufacturing
(46%). Those CIOs meeting frequently with external customers are also much
more likely to spend their time on strategic initiatives (69%) compared to
their counterparts that seldom have any customer interaction (52%).

Over the next year, CEOs top objectives for CIOs also play into their rising
stock as a strategic partner. Much like last year, CEOs are looking to CIOs to
help drive corporate revenue growth (32%), upgrade IT security infrastruc-
ture (32%), and to simplify IT (31%), the 2017 State of the CIO research found.
Enterprise CEOs are more likely to task CIOs with enabling global expan-
sion (22% vs. 16% of SMBs) and leading a merger or acquisition (19% vs. 12%
SMBs). Moreover, CEOs are also more likely to call on strategic CIOs to grow
corporate revenue (36% compared to only 23% of functional CIOs), lead prod-
uct innovations (37% vs. 18%) and acquire and retain customers (33% vs. 11%).

While security remains a top priority for IT, the day-to-day aspects of manag-
ing security have eased up as the discipline has become tightly integrated into
the overall IT strategy. Slightly more than half (51%) of respondents to 2017

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2017 STATE OF THE CIO

State of the CIO survey said security and IT strategy is tightly integrated today
compared to only 37% in 2016. Within the next three years, that number jumps
to 80%, and more executives are getting involved with security planning, in-
cluding LOB. In addition, IT security now represents an average of 12% of the
total IT budget, according to survey respondents. Of all the industry segments,
financial services (64%) and healthcare (68%) are most likely to have tightly
integrated IT and security strategies, in part because of the strict regulatory
climate governing both sectors.

Beyond the stepped up focus on security, IT investments

51%
are being directed toward business initiatives such as im-
proving customer experience (40%), transforming exist-
ing business processes (40%), increasing operational ef-
ficiency (35%), and growing the business (33%). Although
Security and IT and LOB are more closely aligned than in the past, there
IT strategy are variations in how they rank each of these top business
tightly objectives. For example, LOB ranked customer experience
integrated third, cited by 26% of LOB respondents while increasing
UP FROM 37% operational efficiency was its top priority, at 36%. While
LAST YEAR 26% of IT respondents were driven to bolster cybersecu-
rity protections, only 20% of LOB were onboard with that
priority, and LOB ranked improving profitability (24%)
fifth, while that driver didnt make it onto ITs list.

There are also slight differences in business drivers for tech investment
depending on the CIO role. Functional CIOs are much more likely to indicate
increasing operational efficiency (41%) and cybersecurity (33%) as a busi-
ness driver while strategic CIOs are more likely to cite improving customer
experience (45%), growing the business (42%), and introducing new revenue
streams (27%). Those CIOs getting face time with customers are more likely
to cite customer experience (43%) as a business driver compared to IT heads
who seldom or never (34%) meet with customers.

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 2017 STATE OF THE CIO

From a technology standpoint, IT leaders ranked big data/business analytics

(33%), cloud computing (28%), security/risk management (23%), and enter-
prise applications (23%) as top investment drivers. All of those were of more
significance for enterprise companies compared to SMBs, however, applica-
tion development ranked much higher on the list for SMBs (21%) compared
to enterprise companies (17%). In contrast to functional CIOs, strategic CIOs
were much more likely to identify big data/business analytics (40% vs. 24%),
customer experience technology (23% vs. 10%), and marketing technologies
(13% vs. 5%) as investment drivers.

Once again, LOB and IT were not exactly on the same page with technology
choices. Big data/business analytics was the top initiative for IT heads, cited
by 33% compared to only 16% of LOB, which ranked it fourth. Marketing
technologies (19%) and social media/collaboration (10%) were ranked sec-
ond and eighth on LOBs technology to-do list, while neither made the Top 10

CIOs SHOW STRONG INVOLVEMENT IN MARTECH PURCHASES

How are you involved in purchase decisions regarding the marketing technology stack?

Meeting with/evaluating
potential vendors 66%
Consulting with marketing team on
determining needs and requirements 65%

93% 60%
Approving the ENTERPRISE 65%
solution purchase SMB 57%

60%
Overseeing
INVOLVED implementation
IN SOME
57%
Negotiation terms
ASPECT of service and SOAs

52%
Making final
vendor selection

Not involved
7%

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2017 STATE OF THE CIO

ranking for CIOs.

Budgets and Partnerships Bloom, But Talent Is Tight

Tech budgets have been steadily rising for the last five years and this year saw
more of the same. Fifty-six percent of respondents to the CIO Tech Poll: Tech
Priorities 2017 survey expect their IT budgets to increase and 31% expect
them to stay the same. Enterprise organizations are projecting a 4.8% bump in
their 2017 IT budgets while SMB companies expect a meatier increase of 8%.
IT still retains direct control over the technology spend at 54% of responding
companies, although thats down three points from 2016. Over the next three
years, however, that number is expected to rebound to

93%
57%.

While other groups have budgets earmarked for technol-

ogy investments, the allocation remains fairly consistent
CIOs year over year according to the 2017 State of the CIO
involved in study. Operations (40%), marketing (38%), and finance/
MarTech accounting (29%) are the groups most likely to have their
purchases own IT budgets, although the number goes down slightly
for enterprise organizations. For example, 34% of mar-
keting departments in enterprise companies have an IT
budget compared to 42% in SMBs.

In most cases, CIOs are actively involved in making marketing technology

purchasing decisions66% meet and help evaluate vendors, 65% consult to
help determine needs and requirements, and 60% approve the solution pur-
chase. In addition, strategic CIOs are much more likely to have final say over
vendor selection on tech purchases64% compared to 49% of transforma-
tional CIOs and 43% of functional CIOs. Nevertheless, the process is mainly
collaborative with IT and marketing working together to determine business
needs (67%), identify technology requirements (58%), and meet and evaluate
potential vendors (59%). As a result of this tighter partnership, 46% of CIOs
say the CIO/CMO relationship has gotten much or somewhat closer, although
LOB has a slightly different interpretation with only 30% seeing such levels of

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2017 STATE OF THE CIO

improvement.

An area that remains a struggle for CIOs is the on-going skills shortage. Sixty
percent of responding CIOs said they are experiencing a skills crunch, a sig-
nificantly higher number than last year at 49%. Data science/analytics, securi-
ty/risk management, and enterprise software are the key areas where talent is
tight, with data science/analytics being a bigger gap for enterprise companies
(41% vs. 35% for SMBs) as well as security (34% vs. 27% for SMBs).

Despite Alignment, LOB Still Lacks a 360 Degree View

Despite their differences, LOB and CIOs have developed

CIO role is a strong partnership, with LOB routinely calling on CIOs

as a strategic advisor and consultant for evaluating busi-
becoming
ness needs and technology choices in addition to helping
more with risk assessment. But LOB also sees CIOs playing a
important more diverse role that encompasses innovation (24%) as

CIOs LOB 21%

well as project management (23%), technol-
ogy (20%), and security (14%). In comparison,

84% 59% UNSURE CIOs see their role more focused on innova-
tion (41%) with those other responsibilities
AGREE AGREE further down on their list of priorities.

There are also differences in how LOB and CIOs envision the CIO role with in-
dications that LOB is not fully aware of the scope of the CIOs responsibilities
and the on-going requirement to wear multiple hats. When it comes to new
business initiatives, CIOs see their role as recommending technology solu-
tions (64%), collaborating with LOB on the business case (59%), and develop-
ing technical requirements (49%), a perspective shared by 27%, 24%, and 31%
of LOB respectively.

Moreover, while 84% of CIOs say the role is becoming more important to the
business, only 59% of LOB agrees and 21% are unsure. Eighty-one percent of
CIOs acknowledge a greater involvement in security than in the past, a sce-

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 2017 STATE OF THE CIO

IT HELPING TO PRIORITIZE TECH PROJECTS

IMPROVES IT/BUSINESS RELATIONSHIP
What are the top 3 steps the IT organization has taken to improve its IT/Business working relationship in the past year?

IT works with the business units to develop 56%

consensus around prioritization of IT projects 33%
The IT leadership team spends the 40%
majority of its time with the business 20%
n Heads of IT
IT employs more agile development 29% n LOB
techniques to deliver projects faster 24%
IT has improved its IT governance 25%
framework process 13%
IT helps the business to source technology
outside the organization when appropriate
23%
27% 33% See CIOs as Roadblocks/
Rogue Players

None of the above

5%
22% 12% See CIOs as
Strategic Advisors

nario cited by 66% of LOB with another 22% unsure exactly of the CIOs role.
The challenges of the bi-modal CIO role are also less apparent to LOB87% of
CIOs pegged the role as more challenging compared to only 60% of LOB with
another 25% of LOB unsure about the growing complexity.

Specific CIO obstacles were also less likely to be on LOBs radar screen. Forty-
two percent of CIOs report having to fight turf battles with executive level
peers, an obstacle cited by 31% of LOB with another 29% unsure. The percep-
tion of IT as an obstacle was cited by 36% of CIOs, but only 31% of LOB with
another 15% unsure, and a significant 58% of CIOs feel their department is
scapegoated by others when they miss their own goals, a problem recognized
by only 13% of LOB with another 15% unsure. There is less of a gap of percep-
tion surrounding traditional IT functions like performing systems testing and
QA (44% of CIOs vs. 17% of LOB) and providing a short list of IT suppliers for
a solution (26% vs. 11%), indicating that CIOs need to do a better job conveying
their role in more strategic initiatives.

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2017 STATE OF THE CIO

To improve their working relationship, CIOs are helping LOB prioritize tech
projects (56%), immersing themselves in the business (40%), and honing in on
agile development techniques to deliver projects faster (29%). From LOBs per-
spective, prioritizing tech projects (33%), assisting in outside sourcing initiatives
(27%), and using agile techniques to accelerate project deliverables (24%) are the
top three steps the IT organization is taking to enhance their collaboration.

In the end, it is clear there is mutual respect between the heads of IT and LOB,
even though CIOs need to do a better job promoting the scope of their strategic
contributions. Even so, CIOs have come a long way from their roots as func-
tional order taker and are now firmly established as a critical partner to the
business and most significantly, as a key driver of digital transformation.

METHODOLOGY
CIOs 2017 State of the CIO Survey was conducted among the CIO brand audi-
ence. The 16th annual survey fielded online between September 7, 2016 and
October 17, 2016 with the objective of understanding the current parameters of
the CIO role and how it may be changing over time. To be considered qualified
respondents must have identified themselves as the head of IT for their compa-
ny or a division within it. Respondents were offered a PDF of the survey results
as an incentive for completing the survey.

Results are based on 646 qualified responses. The margin of error on a sample
size of 646 is +/- 3.8 percentage points. Percentages on single-select questions
may not sum to 100% due to rounding.

A broad range of industries are represented including government & non-profit

(17%), manufacturing (15%), financial services (12%), high-tech (11%), retail,
wholesale and distribution (9%), business services (9%) and healthcare (6%).

A version of CIOs 2017 State of the CIO Survey was conducted among Line of
Business (LOB) management in the U.S. This survey fielded online between
September 22, 2016 and September 24, 2016 with the objective of understand-
ing the LOB decision maker perspective regarding the CIO role and how it
may be changing over time. To be considered qualified respondents must have
identified themselves as employed in a Director or higher role in an executive or
non-IT line of business function.

Results are based on 200 qualified responses. The margin of error on a sample
size of 200 is +/- 6.9 percentage points.

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