In-Depth

Profiles in IT: Melding Business with IT

Becoming a top-notch CIO: Start in the trenches of IT, spend some time learning on the business side and then meld

• By Bob Mueller
• 11/01/2001

"Most CIOs are good at applications architecture—the technical side of applications," says Tom Nealon, partner and client CIO of The Feld Group, a Dallas IT management consulting firm. "The good ones know how to run the IT organization, structure the organization and work well with people. What most CIOs lack is alignment with the business. I think more and more what you're going to find is really smart, technology-savvy business guys going in and running IT organizations."

Nealon began his IT career as an "entry-level operations kid" at Frito-Lay in Dallas. The man who hired him, Charlie Feld, believed strongly that understanding how business works is crucial to making IT work, and after Nealon had spent eight years at the company, Feld asked him to spend some time on the business side with a Frito-Lay marketing group. "I was scared to death of washing out with these Harvard MBAs and Kellogg guys," Nealon recalls. "I found I was as smart as they were; I just didn't go to the same school." After two years on the business side, he returned to IT as an application director and eventually left to become Feld's CIO. Along the way, he earned an MBA of his own.

During Nealon's 16-year tenure at Frito-Lay, the company gained a reputation for innovative applications of technology. It became an early user of handheld technology when it supplied its route drivers—the men and women who deliver Frito-Lay products to stores—with portable devices that simplified invoicing customers and reporting on inventory. Though it's gone through several technological generations since it was first implemented, the program is still in place.

Growth expectations drove other enterprise-scale applications. Nealon says that PepsiCo, Frito-Lay's parent firm, seeks annual growth rates of 12 percent to 15 percent. The market for Frito-Lay's product category grows by 3 percent to 4 percent each year. To help make up the difference, the company's IT crew undertook a massive i2 supply chain implementation that dropped several hundred million dollars' worth of operating cost savings to the bottom line, Nealon says.

Another big project: an e-procurement system aimed at squeezing inefficiencies out of the supply chain. "The business case was based around driving a much more precise demand signal," Nealon says. "Once we knew what demand would be ahead of time, we could start to push those orders back to our suppliers with the appropriate lead times, they could take costs out of their systems, and we could all reduce our costs. This was not a margin squeeze; it was an efficiency squeeze, on our side as well as theirs."

A year ago, Nealon left Frito-Lay and joined his former boss and mentor Feld at the latter's consulting group. Feld Group consultants take over and manage troubled IT organizations for client companies. They work at the board level with those companies to set IT strategies that mesh with corporate strategies, then implement and manage the appropriate technologies. "About a third of it is IT, a third is business processes and a third is the way the organization is structured," Nealon says. "We get into all three areas, big time."

The job is immensely challenging and equally enjoyable, he says. "Part of the reason I left Frito-Lay was that at some point, the work all began to look the same. You get the application portfolio and the business strategy so well aligned that the work becomes all sandpaper work. I'm doing chainsaw work now. We're clearing the field. It's a totally different type of work, and it's just a lot of fun."

Nealon is currently acting as CIO of BMC Software, a Houston developer of systems management software. The firm has been wildly successful, he says, but its fast growth has created infrastructure gaps that he's been hired to fill. And Nealon expects sweeping changes in IT at BMC. "We don't come in to care-take," he comments. "We come in with the mandate to transform."

Nealon expects sweeping changes in the role of CIOs too. "I'm seeing the CIO role and the COO role converging very quickly," he says. "I don't know how CIOs can do their jobs well if they don't understand the process implications upstream and downstream from where they start." He suggests that in the future, organizations may want to develop IT leadership from within their business organizations, rather than their technology organizations.

"Invest a couple of years. Take one of your really good operational people, a process person who's creative, who has a good touch and good hands within the organization, someone who's a good leader. Put him into an IT role as a director or some higher-end job, but not the top job yet. Give him a couple of years to grow the skills, then put him in the CIO position. Find your best leaders and creative thinkers and groom them."

Finally, Nealon suggests, clear up the ambiguity surrounding IT's role, as reflected in the CIO function's reporting relationships. "CIOs have got to be on the senior team," he says. "They [need] to be there every time that group gets together, as opposed to being invited when there's an IT topic. Every topic is an IT topic, [and] any business strategy needs to be executed through an IT set of skills."