The evolving role of IT managers and CIOs

IBM Global Business Services Risk Management
Executive Report

IBM Institute for Business Value

The evolving role
of IT managers and CIOs
Findings from the 2010 IBM Global IT Risk Study

IBM Institute for Business Value
IBM Global Business Services, through the IBM Institute for Business Value, develops
fact-based strategic insights for senior executives around critical public and private
sector issues. This executive report is based on an in-depth study by the Institute’s
research team. It is part of an ongoing commitment by IBM Global Business Services
to provide analysis and viewpoints that help companies realize business value.
You may contact the authors or send an e-mail to iibv@us.ibm.com for more information.
Additional studies from the IBM Institute for Business Value can be found at
ibm.com/iibv

Introduction

By Linda B. Ban, Richard Cocchiara, Kristin Lovejoy, Ric Telford and Mark Ernest

Mounting regulatory demands, the growth
of 24x7 online business and the constant shadow of an uncertain economy underscore
the importance of managing risk in all its forms – whether related to business, data or
events. The 2010 IBM Global IT Risk Study uncovers the challenges associated with
IT risk, and the steps IT managers and CIOs are taking to better understand, confront
and resolve this concern. Of the IT managers surveyed, most expect their risk-related
responsibilities to increase. Clearly, IT risk management is far-reaching, and can
directly influence a company’s competitive position, as well as its reputation with
customers, partners, regulators and other stakeholders.

From a business perspective, the IT infrastructure plays an examine this subject. The survey, which was conducted in May
increasingly critical role in not only supporting and safe- and June of 2010 in cooperation with the Economist Intelli-
guarding a company’s key assets and assuring proper gover- gence Unit (EIU), seeks to better understand the areas that IT
nance and compliance, but also in driving business growth. managers are focusing on today, and where they see opportuni-
Consequently, IT risk management is no longer viewed as a ties and challenges in the short term. Future research will
strictly technical function, but a crucial management task that explore these issues in depth, and examine the options and
can provide direct business benefits to the entire organization. decisions that confront all risk management teams.

To better understand how companies are working to manage
and mitigate risk throughout their business – particularly as it
applies to IT – IBM initiated the 2010 IBM Global IT Risk
Study, part of the ongoing research IBM conducts in the area “During the period where IT has become core
of IT risk, and the first in a series of research surveys that to more businesses’ operations, the
management of IT risk has not gained
commensurate prominence.”
Respondent, Travel and Tourism industry, Western Europe

2 The evolving role of IT managers and CIOs

In general, the findings of the survey were consistent across
regions, company size, industry and roles. (All regions repre-
“Although some say that technology has sented in the study acknowledged the importance of IT risk
matured and become commoditized in management, and are working on making improvements in
business, we see the technological ‘revolution’ that regard). By and large, study participants expressed
as just beginning. Our reading of the evidence confidence about their risk management and compliance
efforts (see Figure 1).
suggests that the strategic value of technology
to business is still increasing.” Still, although more than 50 percent of respondents reported
Brynjolfsson, Erik and Adam Saunders. “Wired for Innovation: How Information that their budgets have remained the same or been enhanced,
Technology is Reshaping the Economy.” Massachusetts Institute of Technology. 36 percent still struggle with securing enough funding to
2010.
address risk-related challenges. And in spite of the recognition
that IT risk management can provide real business benefits,
securing senior leadership support remains a real concern.
The results of this study are based on a comprehensive online
survey of 556 IT managers and others primarily involved in
their business’s IT function (including 131 CIOs). Repre- Overall approach to mitigating IT risk
senting regions that include North America, Western Europe,
Expert 12%
Asia-Pacific, the Middle East and Africa, Eastern Europe and
Latin America, the study crosses industries – from IT, financial Good 54%
services, healthcare and pharmaceuticals, to biotechnology, Average 31%
manufacturing and government. Companies surveyed reported
Poor 3%
revenues ranging from US$500 million to more than US$10
billion. Overall approach has improved in previous 12 months

Strongly agree 19%
The primary goals of the study were to:
Agree 53%

Survey a cross-section of enterprises to accurately gauge the Neither agree
• 23%
nor disagree
current state of IT risk management.
Disagree 4%
• Identify factors that can advance (or impede) an organization’s
risk management strategies.
Figure 1: Organizations give their approach to mitigating IT risk high
• Discover to what extent enterprises are implementing new marks.
risk strategies, programs and policies.
• Understand how IT advancements such as cloud computing
align with companies’ overall risk strategies.
• Examine the evolving role of IT managers, including the CIO.

IBM Global Business Services 3

Respondents’ feedback seems to indicate a disconnect between When asked to describe their organization’s overall approach
how senior management views the cost of improved IT Risk to mitigating IT risk, 66 percent of respondents rated it as
management and the value that can be derived from it. good to expert. While this represents the majority of
companies, more than 30 percent regard their business as
Making room for improvement average to poor in this area. However, 72 percent of respon-
Recognizing the potential business returns of effective IT risk dents report that their company’s approach to risk has
management, many of those surveyed envision extending their improved over the last 12 months.
risk-related initiatives over the next three to five years. None-
theless, there were some notable discrepancies. Only about half Not surprisingly, 47 percent of respondents indicated that IT
of the companies surveyed have a formal risk management risk planning is for the most part a discrete function conducted
department (46 percent) or a well-crafted business continuity in business silos. Consequently, getting areas of the organiza-
strategy (54 percent) in place. Also, line of business and other tion to work together is a significant challenge. Also telling:
operational risk concerns (financial/business strategy, for Many of those surveyed revealed that although they are very
example), are not primary focus areas. involved in a number of risk management and compliance
activities, they would like to participate more. (While approxi-
mately half of survey respondents stated that their company
has a risk management department, many believe that the
business falls short in terms of educating and communicating
“IT organizations traditionally go through to employees the organization’s risk management policies and
concerns).
extensive testing before introducing new IT
enabled business services, with the primary On a positive note: In a tough economic environment, IT risk
aim to avoid an outage. But modern IT execu- management and compliance has remained largely immune
from budget cuts or cost reductions. When asked about their
tives need to understand the true cost to the
organization’s 2010 budget for risk management, 14 percent
business of such tests. It’s not just the IT costs, (80 survey respondents) expected a significant increase in funds,
it’s the lost opportunity cost due to a delayed and 39 percent saw somewhat of an increase. Thirty-six
business service. Each day spent testing is one percent indicated that risk management funding would remain
the same.
less day generating revenue and profit. What’s
the risk if the service fails balanced against the Survey respondents agree that investing in IT risk manage-
benefit of getting the service up and ment can provide significant business benefits, most particu-
larly in the areas of business continuity (74 percent) and
running?” safeguarding the company’s reputation (32 percent, see
Mark Ernest, IBM Distinguished Engineer
Figure 2). According to respondents, managing IT risk should
be viewed as more than a defensive tactic; it can increase a
company’s agility (19 percent) and create growth opportunities
(12 percent) while reducing costs (18 percent). Yet most IT
managers (57 percent) spend their time focusing on infrastruc-
ture-related risk.


It ensures business 74%
continuity
“Business continuity encompasses far more
It improves brand
reputation
32%
than planning for natural or planned
It increases agility 19%
disasters. It is really about building a
It cuts operating costs 18% risk-aware culture – making sure that the
It creates new
17% necessary tools, processes and methodologies are
opportunities for growth

It reduces complexity 16%
in place, and that every individual in the
organization is aware of their responsibility in
Figure 2: Benefits of improving IT risk management regard to the safety and integrity of data.
Finally, when implementing tools and
At the top of the chart: IT security processes, it is critical to balance speed to
Although IT risk applies across processes, activities and market and acceptable risk.”
systems, IT security (vulnerability to hackers and unauthorized Jessica Carroll, Managing Director Information Technologies,
access/use of company systems) is the number-one concern United States Golf Association

among 78 percent of the IT professionals surveyed. Hardware
and system malfunction was next – cited by 63 percent of
survey respondents. Power failure and physical security (40
percent) was not far behind, followed by theft, product quality, Twenty-three percent of survey respondents feel the same way
compliance, natural disasters, e-discovery requests, supply about their company’s preparedness for hardware and system
chain failures and terrorism, in that order. failures. Protection against power failures garnered more
support – with 32 percent of survey respondents indicating
IT managers have clear opinions about the importance of risk their business was well prepared in that area. However, there is
management, as well as specific focus areas. Nonetheless, there a clear disconnect between respondents’ recognition of the
are significant gaps when it comes to the confidence they have importance of addressing overall IT risk and the confidence
in their organization’s ability to appropriately address and react they have in their company’s ability to properly manage and
to risk. For example, only 22 percent of those surveyed believe mitigate it.
their organizations are well prepared in terms of IT security.


The communications challenge
Case Study There is no doubt that IT risk management can provide
genuine business advantages. Yet in spite of the various
In the first half of 2010, the IBM X-Force Research and methods companies can use to distribute risk-related informa-
Development team documented 4,396 new vulnerabili- tion, communication emerged as a real barrier. Securing the
ties – a 36 percent increase over the same time period support of senior leadership is still a challenge, according to 25
last year. According to the report, Web application percent of survey respondents. Communicating risk policies
vulnerabilities continue to be the leading threat – ac- and procedures to employees was also a problem for 30
counting for more than half of all public disclosures. percent of those surveyed.
Nonetheless, the report noted that organizations were
doing more to identify and disclose security vulner- Many organizations take a passive, rather than a proactive,
abilities than ever before. This in turn is having positive approach to managing and mitigating IT risk. In many cases,
effects on the industry by driving more open collabora- information is consigned to the business’s intranet, where
tion to identify and eliminate vulnerabilities before cyber employees must spend time searching for it. Some organiza-
criminals can exploit them. 1 tions incorporate risk management policies into training
materials for new employees – not taking into account the
need to make it available to all. (Only 22 percent of IT
managers indicated that risk management policies are part of
every employee’s formal training). Perhaps most surprising:
Less than 15 percent have incorporated an integrated risk
management plan into the physical and technical infrastructure
of their enterprise.

“We struggle with getting management and
staff to accept that their behavior must be
modified in order to improve security
practices.”
Respondent, Manufacturing industry, Western Europe


Evaluating emerging technologies
Respondents to the survey were asked how their organization
“It is increasingly difficult to secure funding to is positioned to acquire and deploy five emerging technologies
address IT risks, even when the costs of NOT (see Figure 3):
addressing the risks are clearly outlined to
Social networking tools (intra- and Internet forums, instant
executives. There is often a general •

messaging, libraries, blogs and wikis, for example)
unwillingness to invest.” • Mobile platforms (Windows® Mobile, BlackBerry OS and
Respondent, Aerospace and Defense industry, North America Google Android OS, to name three)
• Cloud computing
• Virtualization
Given the variety of communication and education channels • Service-oriented architecture (SOA)
available to build awareness of risk, companies would be well
advised to take a more organized and detailed approach to
64%
staying on top of risk issues, communicating those concerns to
Social networking tools 21%
employees, and incorporating IT risk management into every
15%
area of their enterprise. In answer to the question, “How does
your company primarily keep abreast of risk?” the majority of 54%

survey respondents indicated that security threats were Mobile platforms 27%
handled by both internal and external resources (38 percent), a 19%
cross-functional team of executives (26 percent), or a desig-
42%
nated risk management department (19 percent).
Cloud computing 35%
24% Extremely risky/risky
Somewhat risky
26% Moderately/not at
all risky
Virtualization 31%

“Normally, users, management and partners 43%

look at risk from different perspectives. I need 25%

to make those ends meet in a sensible way.” Service-oriented
architecture
42%
34%
Respondent, Manufacturing industry, Western Europe

Figure 3: Social networking, mobile platforms and cloud computing
present the highest risk concern.


Of these five technologies, social networking, mobile platforms
and cloud computing presented the highest causes for concern. Handing over sensitive 61%
data to a third party
Social networking tools were the biggest worry in terms of risk
Threat of data breach 50%
for 64 percent of those surveyed, with mobile platforms and or loss
cloud computing not far behind (54 and 43 percent, respec- Weakening of corporate 23%
tively). Most of the risks have to do with the accessibility, use network security
and control of data, especially regarding social networking and Uptime/business 16%
continuity
the danger of having unauthorized access to confidential,
Financial strength of the
proprietary information. (Many organizations have not yet cloud computing provider
11%

established processes and methods to integrate social Inability to customize 10%
networking tools into their infrastructure and workflow). applications

When asked to cite the two highest risks they associate with Figure 4: Risks associated with cloud computing.
cloud computing, the majority of survey respondents pointed
to data protection and privacy (see Figure 4). Business conti-
Handing data over to a third party was also considered risky by
nuity was clearly on the minds of more than half of those
61 percent of respondents, while only 23 percent worried
surveyed, whereas 44 percent believe that private clouds are
about network breaches.
riskier than traditional IT services, and 77 percent expressed
concerns about privacy.
Only 26 percent of survey respondents indicated that virtual-
ization posed significant risk to their organization. Similarly,
service oriented architecture (SOA) was a concern for only 25
percent.
“Cloud is only an opportunity to solve a
problem when you can leverage the best
advantages of the cloud. So that is something
that has to be factored in.”
Respondent, Information Technology industry, North America


Implications for IT managers
Of the IT managers surveyed, most expect their responsibili-
Resting on the Cloud ties – from executing policies and procedures and providing
IT managers are feeling the pressure to lower input to risk mitigation strategies, to helping set and/or
infrastructure-related expenditures, heighten ef- oversee IT risk strategies for the organization – to increase
over the next three years (see Figure 5). More than 65 percent
ficiencies and improve service levels across the
of respondents concurred that risk mitigation is becoming a
business. Many are looking at cloud computing to
more integral part of their job, while 83 percent believe that
help them achieve these goals. Cloud computing
IT managers should be more involved in risk mitigation.
represents a major advancement in computing
models – much like its predecessors, client/server
When one considers the growing interdependency of business
and mainframe computing. Processing is handled
and IT, these responses are not surprising. Indeed, the IT
across a distributed, globally accessible network of
managers and CIOs surveyed believe their jobs will incorpo-
IT resources, which are dispensed on demand, as a rate support of the overall business strategy, as well as the
service. Cloud computing offers a highly automated, corporate brand (for example, in marketing and customer
dynamic alternative for the acquisition and delivery service). As more companies stabilize or “harden” their risk
of IT services – allowing users to tap into public, management strategies, processes and procedures, responsi-
private and hybrid clouds for computing resources bility for the infrastructure may move to a supplier or partner
and services without having to deal directly with – allowing IT managers to focus more on business security,
the underlying technology. Today, companies are resiliency and continuity.
leveraging the massive scalability and collaboration
capabilities of cloud computing to solve problems It is also interesting to note that when the data from the 131
in ways never before possible. And they are deploy- CIOs who responded to the survey was cross-referenced, the
ing new services faster – without additional capital answers did not vary significantly from the IT managers
investments. Nonetheless, organizations must be surveyed.
prudent and informed when choosing a provider,
especially given concerns related to risk. While the significance of IT risk management and compliance
is readily acknowledged by organizations across industries, and
many are working to improve these aspects of their business,
few are totally prepared for all of the risk and compliance
related situations that could occur.


0 50 100 150 200 250 300

Infrastructure (applications, networks, data)

Information

Business resilience and continuity

Compliance (reporting, auditing, etc.)

Security Today
In 3 years

Business strategy

Financial (revenue, credit, cash flow, etc.)

Brand (customer service, marketing, etc.)

Other

Figure 5: IT managers expect their areas of responsibility to shift over the next three years.

The findings of the 2010 IBM Global IT Risk Study revealed educating, communicating and supporting risk management
areas of focus that can help IT managers assess their risk and compliance initiatives across the enterprise.
maturity, pinpoint gaps, set priorities and develop strategies in • Data is a common concern in all aspects of IT risk
several areas: management – from security, business resilience and
continuity, to availability, disaster recovery, hackers,
• Within a business, risk awareness is everyone’s responsibility. compliance, infrastructure and data management. With this in
Yet unless risk-related policies and procedures are engrained in mind, companies should take a unified, holistic approach to
the corporate culture, many initiatives for managing and IT risk – taking into account all of its elements in order to aim
mitigating IT risk can fall short, or fail altogether. Results of for the overall goals of realizing more returns and higher
the study confirm that companies need to work harder at efficiencies.


• When adopting emerging technologies, architectures and Getting there from here
strategies, developing new applications or integrating existing Effectively managing IT risk is a multifaceted endeavor. When
systems, risk mitigation should be a primary point of approaching this task, IT managers should consider the
discussion. Taking into account both positive risk (that which following:
a company initiates because there is an opportunity that
comes with the risk) and negative risk (potential incidents that Examine and assess the organization’s IT risk capability
can bring harm to the business) can add more business value • Institute cross-enterprise planning for all risk categories (data,
and possibly increase revenues – but only if proper funding security, resilience and disaster recovery, and new technologies).
for IT risk management is included. • Consider the range of risk challenges and confirm that there
Not all emerging technologies are created equal, but some – is a plan in place to address each (prioritizing and mitigating
like virtualization and cloud computing – can offer many “downside” risk like system failures and security breaches, for
advantages in terms of support and options for risk mitigation. example), and verifying how to leverage “upside” risk (shorter
Although cloud computing requires attention to data security, time to market and new customer contact points, for instance).
if properly deployed it can help reduce the costs and alleviate
the risks associated with business resilience. However, it is vital Look for champions among senior leadership
to have processes in place to address risks related to any new • Become a trusted adviser and valued resource to the CIO;
technology. articulate the benefits that they and other leaders bring in
addressing IT risk.
“Sell” the benefits of risk mitigation, such as stronger business
•

growth, more agility and improved brand perception.

Determine how to heighten risk awareness at all levels, and
“We sometimes tend to consider a project plan within the organizational culture itself
rather simplistically in that we think we know • Incorporate risk awareness into everyday business and IT
where the risks exist, so we approach allocation processes. Make sure there are a variety of methods for
educating the entire company.
of resources on that basis.” • Create a strategy for regularly communicating the breadth of
Respondent, IT and Technology industry, Middle East and Africa
risk management, as well as compliance topics and issues –
emphasizing that it is more than just a “one-time” activity.


Look for innovative ways to implement risk mitigation
procedures Are you ready?
• Build risk-related procedures into the IT infrastructure, as
• How does your company assess its risk maturity
opposed to adding them to applications in a piecemeal
and manage risk, both in terms of the business, as
manner.
well as its IT infrastructure and assets?
• Examine business processes for potential risk issues, and
establish a specific IT risk governance plan that can be • What strategies does your organization have in
executed across the entire organization. place for following industry and IT best practices
for mitigating risk – starting with security, and
including resiliency and business continuity?
Make sure safeguards are in place to help prevent unauthor-
ized access to company data and systems • In what ways do your company’s risk-related
• Review business continuity plans. Business continuity involves initiatives help improve visibility and control, and
more than planning for a natural disaster; it encompasses a help assure compliance with contracts, industry
wide range of business interruption scenarios – from server standards, regulations and internal controls?
failures to pandemics. • How does your IT infrastructure support the
• Make everyone aware of their responsibility to keep data safe ongoing performance objectives of the business in
and protected – and how to execute that responsibility. terms of flexibility, security, availability, governance,
• Identify tools, processes and methodologies to keep data safe scalability, resiliency and governance?
and secure. Keep in mind that many already exist (identity • What type of plan does your organization have for
access and control; master data management; information assuring that human capital, processes and
lifecycle management; data ownership processes). systems are able to recover and respond to a
disruptive event?
It’s no longer a question of if new technologies will be intro-
duced into an organization, but when. As mentioned earlier, not
all emerging technologies are created equal, but some can
provide significant benefits in terms of managing IT risk.
Newer technologies, such as virtualization and cloud
computing, offer impressive options for mitigating risk and
reducing costs.


Vigorous, cyclical IT risk governance – from technology and Authors
business perspectives – continuously evaluates a business’s Linda Ban is the CxO Study Program Director and AIS Lead
vulnerability to IT risks, prioritizes those risks, and acts on for the IBM Institute for Business Value. In this role, she leads
them. Consequently, it is important to incorporate risk the global team responsible for the development, deployment
management protocols into new technologies as soon as they and support of IBM’s thought leadership around the CIO
are implemented. program as well as IBM’s Application Innovation Services
(AIS) organization. Linda’s diverse background includes
Finally, consider the needs of the business when implementing extensive experience in emerging and collaborative technolo-
tools and processes. Balance speed to market and acceptable gies, business and operations strategy, systems development,
risk. By taking a proactive approach to IT risk management, and operations management. In addition to her work with
companies can position themselves to stay a step ahead of clients, she has published extensively on a broad range of
vulnerabilities, and remain more secure and resilient in the business topics, challenges and solutions. Linda can be
face of planned or unplanned incidents. contacted at lban@us.ibm.com.
Richard Cocchiara is an IBM Distinguished Engineer and the
For more information Chief Technology Officer for Business Continuity and
To learn more about this IBM Institute for Business Value Resiliency Services in IBM Global Services. He has over 28
study, please contact us at iibv@us.ibm.com. For a full catalog years of I/S experience, and has performed consulting engage-
of our research, visit: ments at many fortune 500 companies, particularly in the
ibm.com/iibv finance and securities industry. Rich is currently responsible for
research and development of Business Continuity and Resil-
To access additional IT risk management resources, iency solutions and services within IBM Global Technology
please visit: Services. He can be reached at rmcocch@us.ibm.com.
ibm.com/smarterplanet/security Kristin Lovejoy is the Vice President responsible for IBM’s
Security Strategy. She was recognized as one of the Top 25
CTOs by InfoWorld in 2005 and as one of the Top 25 Most
Influential Security Executives by Security Magazine in 2006.
She holds a U.S. and EU patents for Object Oriented Risk
Management Model and Methodology. Kristin can be
contacted at klovejoy@us.ibm.com.


Ric Telford is Vice President of IBM Cloud Services and is The right partner for a changing world
responsible for defining new opportunities and services as part At IBM, we collaborate with our clients, bringing together
of IBM’s broad portfolio of cloud computing offerings. During business insight, advanced research and technology to give
his tenure at IBM, Telford has played a number of key roles in them a distinct advantage in today’s rapidly changing environ-
various software and service initiatives for the company, ment. Through our integrated approach to business design and
including document management, networking, systems execution, we help turn strategies into action. And with
management and IT infrastructure services. Previously, Ric expertise in 17 industries and global capabilities that span 170
served as VP of Autonomic Computing, leading the develop- countries, we can help clients anticipate change and profit
ment toward more self-managing systems. Ric can be reached from new opportunities.
at rtelford@us.ibm.com.
Mark Ernest is an IBM Distinguished Engineer and a member Reference
of the IBM Academy of Technology. He assists clients in the 1 The IBM X-Force 2010 Mid-Year Trend and Risk Report.
design and implementation of IT management systems to IBM Corporation, 2010.
maximize the value of their IT investment and improve the
efficiency and effectiveness of their use of information tech-
nology. Mark can be contacted at lernest@us.ibm.com.

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The evolving role of IT managers and CIOs

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