The Middle East and maybe more so the Gulf region is familiar with the concept of business groups or conglomerates, mostly very large and highly diversified family businesses operating in anything from manufacturing to tourism and from construction to retail. The examples are many, like Al Ghanim in Kuwait, Al Futtaim in the UAE or Bahwan in Oman.Historically, group companies tended to operate independently and share nothing but maybe the family name, but the last 10 years or so have seen a shift towards stronger group level management, control and resource sharing especially in the areas of finance, HR and IT. Many such groups now have group level CFOs and CIOs who are truly and fully responsible for their respective areas not only at the group level but also at the operating company level. This shift has been mainly driven by the need to establish better financial reporting and controls, stronger treasury management and bank relationships, more systematic sharing of standards and best practices as well as the desire to lower the cost and improve the efficiency of IT.
Having sad that, one can also find business groups that chose to operate more like portfolio managers leaving the controls to their operating companies. ADNOC and Mubadala come to mind as examples of this model. Obviously the purpose of the article is not to discuss which model is better or more suitable but rather to examine the role and the challenges facing the group CIO in the first model.
Here the role of the CIO revolves around developing the strategy, setting harmonized group-wide standards for the technologies to be used, partner and negotiate preferential commercial terms with key vendors and suppliers, possibly establishing and overseeing a single large data center for the entire group, and of course building a skilled and highly specialized IT team that takes control of all aspects of IT within the group and its operating companies. Additionally many groups choose to move to a single group-wide instance of ERP/CRM and therein lay the biggest challenge for the CIO.
Not only because unifying and harmonizing business processes across a diverse group of companies is quite difficult but also because the various companies in the group tend to prefer specific vertical solutions. Adapting ERP to cover every type of business in the group, from real estate development to an auto dealership, and from electronics retailing to road construction without making intrusive changes to the software often requires changing of business processes, and that is not usually welcomed by the operating companies. It must also be said that large ERP vendors have made significant progress in adding industry specific solutions to their horizontal suites and in enabling a single instance of the software to support multiple operating companies that operate in different industries.
In order for the group CIO to be able to negotiate his way though this painful process, he/she must develop a deep understanding of the various parts of the business as opposed to a CIO of a pure play manufacturer or retailer who needs to learn only one industry.
In many cases, the operating companies within the same group will also vary considerably in terms of size, revenue and number of employees. This creates an additional challenge for the CIO, how far do you go in order to serve the needs of the smaller operating companies who are often more entrepreneurial in spirit and consequently less interested in compliance with a rigid set of group standards or policies.
Most group CIOs who have successfully managed this type of transition think that it was possible at least in part because of strong sponsorship and support from the top, aligning with other group level officers like the CFO and CHRO, and in some cases because the group was undergoing a change from a bunch of disparate companies that share a name to a cohesive set of businesses that firmly operate under a holding company that sets standards and drives best practices.
In conclusion group CIOs share the same challenges with the rest of the CIOs but must also deal with a bunch of additional difficulties while having the added benefit of learning about a broader set of industries!