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07/31/2014

Out of the Back Office

Ask Paul Scorza, CIO of Ahold USA, about his job, and some of what he says is typical for a technology executive. But just as much is about business and strategy.

"I spend a lot of time closely connected to business operations," says Scorza, who has been Ahold's CIO about a year, after a 32-year career at IBM. "My customers are the retail stores operated by our divisions–Stop & Shop New England, Stop & Shop New York Metro, Giant Landover, and Giant Carlisle. I want to be sure that my customers are able to utilize the technology to better serve their customers, our shoppers. I'm also very tuned into strategic planning and how IT ties back to the business."


"I'm very tuned into strategic planning and how IT ties back to the business."

–PAUL SCORZA,

Ahold USA


Scorza's dual role is not unusual for CIOs of major retailers today. They have one foot firmly planted in information technology–they must be IT experts to some extent–but since technology plays such a large role in retailing, the CIO is also expected to be part of the strategic planning team.


"Retail CIOs these days are concerned with the health of their company. That is different from their concern 10 years ago, which was the health of the IT system."

–Cathy Hotka,

Cathy Hotka & Associates


"Retail CIOs these days are concerned with the health of their company. That is different from their concern 10 years ago, which was the health of the IT system," says Cathy Hotka, principal of Cathy Hotka & Associates, a retail consultancy based in Washington, D.C. "Today's retail CIO is a key part of the executive team, and is crucial to the holistic running of the organization. I remember when CIOs didn't get a lot of respect. Those days are gone."

A ROLE IN STRATEGY

IT influences every corner of the grocery business these days. The supply chain is driven by data analysis, marketing is largely based in the Internet, and point of sale (POS) is nearly entirely computer-driven. It's no surprise then that the top technology executive gets more attention in the c-suite.

"Ahold USA views IT as a strategic partner in the business, and has elevated the CIO position to report directly to the CEO," Scorza says. "This is a good indicator of how the IT function is fully engaged in business decision making."

Indeed, helping the c-suite develop strategies is a key role of today's CIO. For example, the supply chain is highly data-driven now. The ability to take the megabytes of data coming from the POS, the store loyalty program, syndicated data suppliers, and other sources and turn it into actionable information is essential to success of a retailer, and that task falls to the CIO.

However, it's not likely today's CIO is getting her hands dirty actually mucking around in the data. Ken Morris, a partner with Boston Retail Partners, a retail management consulting firm, notes that CIOs typically are involved in strategy development, the selection and implementation of solutions, and maintenance.

"Almost every one of those items can be outsourced except for strategy," Morris says. "Now CIOs are concerned about what the business strategy is, and how they line up the technology in support of those strategies. Twenty years ago it was all about the hardware and software; today it's much more about strategy."

Amitabh Mudaliar, a senior client partner for global IT consultancy Infosys, concurs. "There is a marked improvement in the stature of the CIO in an organization," he says. "Technology today is an integral part of customer outreach and business strategy. The CIO has moved from being an executor/enabler to being a contributor/influencer of business strategy for the organization."

CUSTOMER FACING

A key characteristic of the "new" CIO is that he or she must be able to understand and work directly with customers. He can't hide in the back office anymore.

"The future of retail is real-time shopping in stores," Morris says. "What that means is sort of the Amazon experience in the store. You can tell someone is a frequent buyer through your loyalty program, and you can tell when they enter the store through their smartphone app. All of this requires a much higher level of service, and an investment in technology, that doesn't necessarily have the immediate ROI."

The bottom line: A CIO who understands customers and what they want is more likely to succeed with mobile apps and other such systems than a CIO who lives in the computer data center.

"Retail IT leaders are doing things they didn't do 20 years ago," Hotka says. "They spend time in stores, talking to line workers, talking with customers. They're getting input from a wide variety of experiences and people in other customer-facing businesses."

CIO AS PERSUADER

While the idea of a CIO that can stitch together the marketing software, loyalty program, supply chain operation and other systems seems highly desirable, some CIOs face turf battles when they try to accomplish that task.

For example, the marketing department at most retailers operates at a different pace and has a decidedly different culture from the IT department. The marketing executive, consequently, may not want the CIO intruding into her software decisions.

"If you look at the IT budget of a retailer, it might be 1 to 1.5 percent of sales. But if you're on the marketing side, the budgets are three, four or five times higher," says Morris. "And a lot of marketing technology is being purchased by people who don't have the discipline of the IT department. The marketers are open to the flavor of the month."

Thus, part of the CIO's job is wresting control of those systems from the marketing department and efficiently integrating them with the rest of the IT. That requires political savvy and persuasion skills, two talents that the CIOs of old were not known for.

The concept of the IT department working closely with the rest of the business was borne out by a 2013 study by Forrester Consulting for Tata Consultancy Services. One question in that survey of 192 senior business and IT executives at global retailers asked: "How important will each of the following IT priorities be for your firm in the next few years?" The second-highest ranked item on the list was, "Build trust and closer relationships with business units."

OLD CHALLENGES REMAIN

Despite the new respect from the c-suite many CIOs enjoy, they are still expected to handle traditional IT issues. This fact came into stark focus recently when hackers stole credit card information belonging to as many as 40 million Target customers. Target's CIO, Beth Jacob, resigned in early March.


"The CIO still has to run the IT business, the unsexy part of the business."

–LAURA GURSKI,

A.T. Kearney


"The CIO still has to run the IT business, the unsexy part of the business," says Laura Gurski, a partner at A.T. Kearney, based in Chicago. "They still need to keep the network running and security tight–we saw at Target how important security is."

Security and fraud prevention is a growing CIO challenge, according to the Forrester Consulting study. Forty-four percent of survey respondents said their store plans to implement fraud detection and management software in the next five years, including 21 percent who plan to do so in the next year. No other data analytics software category ranked higher in the survey.

Another essential, and traditional, task of the CIO is helping save money. Sixty-four percent of respondents to the Forrester survey ranked "Reduce Costs" as the top IT priority in their organizations.

Another traditional challenge–understanding technology itself–is not quite as important as in previous decades. Today's CIO can often count on others to handle those details.

"Even 20 years ago technology was so new, and was evolving so quickly, that IT people really needed to concentrate on IT," Hotka says. "These days everyone is much savvier, including non-IT management, and that allows IT professionals to focus on the intersection of technology and business."

Pre-packaged software systems are far more prevalent than in the past, conceivably reducing the need for the programming and customization the CIO previously had to oversee. But Mudaliar argues that off-the-shelf software doesn't diminish the CIO's role.

"Even though the availability of packaged retail management software has improved, the role of the CIO is only further enhanced," Mudaliar says. He notes that CIOs must keep pace with an ever-changing technology landscape and be able to choose the best packages and stitch them together.

Indeed, integrating multiple software packages across multiple platforms has become an important new role for the CIO.

"I work with one big organization that did a fantastic job of laying out their value chain of IT apps and packages," Gurski says. "It blew my mind to see how they put that puzzle together."

DIFFERENT AT SMALL OPERATIONS

Not surprisingly, top technology executives at smaller retail operators have less flexibility to become involved in c-suite strategy planning than their large-retailer counterparts.

Michael Kohler, vice president of information systems at Oak Ridge Markets, a three-location grocer in Warren, Mich., has held that position for 30 years and says that the job hasn't changed much during his tenure.

"We've upgraded our technology, but that's about it," Kohler says.

When asked if he is more involved in business management these days, Kohler does not hesitate to say no, his role is clearly defined as IT.

"At smaller companies, the CIO is still a lot more focused on the core IT functions, like keeping the network up and making sure e-mail is running," Gurski confirms. "It's very interesting to talk to a $2 billion retailer versus a $50 billion retailer–it's night and day."

PATH TO C-SUITE

With the new prominence of CIOs, are different people ending up in that position? While CIOs still typically have a strong IT background, business training and experience plays a larger role today.

"CIOs have a much deeper business background now, and maybe came out of a different function," says Gurski. "Most of them have adjacent skill sets. So while they likely still have that mathematical, quantitative background, the strong CIOs really understand business."

Ed Avis is a freelance writer and editor in Chicago. He has written for Crain's Chicago Business, the Chicago Tribune, Specialty Coffee Retailer, Tea Magazine, and many other consumer and trade publications.