CEOs, Not CIOs, Drive Data Center Decisions, Study Finds

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    Tensions Between IT and Business Leadership Force New Approach to Delivering Technology

    According to a study recently released by Forrester Consulting, data center related purchasing decisions in companies of all sizes are more likely to be made by the CEO than by the CIO, or by any other IT executive.

    I recently had the opportunity to discuss that finding with Matt Miszewski, senior vice president of sales and marketing at Digital Realty, a data center operations services provider in San Francisco, and the company that commissioned the survey. Don’t let that sales and marketing title put you off—Miszewski has solid CIO credentials as the former CIO of the state of Wisconsin. So you’ll be happy to know that he doesn’t talk like a sales and marketing guy.

    For starters, I asked Miszewski, based on his experience, whether the fact that CEOs most frequently call the data center shots is a relatively new phenomenon, or the way it’s always been. He responded wearing his former CIO hat:

    I used to give big, long speeches [to other CIOs] about how technology was a strategic asset for companies and governments, and that we needed to treat it as such. So you needed to be engaged with your CEO to have conversations about how technology can drive strategy. When I was saying that seven to nine years ago, the rest of the ecosystem wasn’t necessarily far enough along for the promise to be realized. Some CIOs and CEOs could see that and [work within those constraints], but the network ecosystem wasn’t far enough along, open standards weren’t far enough along—there was a bunch of stuff that wasn’t happening. I think that dynamic has changed as data, as a central strategic asset for companies, has become paramount. I was happy to see the data reinforce the idea that the entire C-suite, headed by the CEO, is now very involved with data-oriented decisions. And I was glad to see that, both in the midmarket and the large enterprise segment.

    I mentioned to Miszewski that in light of the fact that data center expenditures tend to be fairly high, I would have expected that the CEO would typically be the one to make the ultimate go/no go decision, presumably weighing the recommendations of the CIO or other senior IT leadership. Miszewski said that’s more typically the case now than it was in the past:

    The study that we just released was done by Forrester, so it’s difficult for me to go back to our previous studies, because they were done by a different research organization, with a different methodology. But we have seen, since our older research, a trend moving from the CIO being the decision-maker to the CEO being the decision-maker, with the CIO as a very strong influencer. Our average contract can be in the hundreds of millions of dollars, so since our inception, we’ve seen our leases go up the C-suite for signature. But that doesn’t mean they were sitting there for contemplation, debate, and discussion. Now, whether it’s good or bad for us, there’s a real interaction that we have with the chief executive and the chief strategy officer, to make sure we’re aligned with what they’re trying to accomplish.

    So is that good or bad for Digital Realty? Miszewski said it’s “fantastic” for them:

    It might not be intuitive for a lot of folks, but while it certainly takes a little bit more time for us to have a conversation across the entire C-suite, it allows for the decision to be so much more broad-based than just an IT decision. So the whole company is involved in making that decision—they’ve bought in to that decision, and then committed to it for the term of the contract. So if it’s a seven-year or 10-year deal, we don’t have to remind the C-suite what we did—we’ve been engaged with them from the beginning. So it’s a better outcome for us.

    I asked Miszewski if he thinks CEOs tend to be more tech-savvy than they used to be, or if we’re still seeing Airline Magazine Syndrome, where the CEO reads about some cool new technology on a flight, and when he gets back to the office he grills his CIO on why their company isn’t doing that. I seem to have struck a chord:

    I feel like you’ve been in some of my speeches, because I used to give that speech. The governor [of Wisconsin] was once on a flight to give a speech to the National Governors Association. He was not a technology guy, so he got on his flight and looked in the seatback pocket and opened up the airline magazine, and there was an article on voice over IP. He came back to me as if he was an expert in telecommunications, and wanted to understand why in the world we hadn’t invested in voice over IP, because it could reduce our cost per handset to $10 across the whole state. So I had to explain to the governor that my current contract price with STC and AT&T was $7.53 per handset, and that I would be happy to have that detailed conversation about voice over IP once it crossed that particular price point. So I’ve lived that airline magazine phenomenon.

    That said, Miszewski added that he does, indeed, believe CEOs are becoming more tech-savvy:

    In mid-market companies that have been in existence for 10 years or less, the CEOs are sort of born tech-savvy. They’re not born deeply embedded in technology—they don’t understand the details of what an Open Internet Exchange offers to a particular company. But they do understand that technology is very important, and that it’s a strategic asset to be invested in, instead of a cross to be borne and managed by the CFO. I don’t want to use age as a factor, but if the inception of the CEO’s company has been a little shorter-term, we certainly don’t have a lot of issues. We do business with some of the largest companies on the planet, and I would say even in those companies, the conversation now is something where every CEO, even if he’s the long-time CEO at an old, blue-chip company, understands that technology is no longer something to be managed as a cost. So even in those places where they’re not necessarily born digital, they’ve all come to the realization that they have to be deeply involved in those conversations, because digital drives their strategy.

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