The Chief Information Officer in Shipping
(by Charis Nassis)
Information and communication technology (ICT) is the most important technology for shipping companies. IT systems are complex and over the years the role of the Chief Information Officer (CIO) has evolved to the credible executive assigned to extract value from the use of technology. ICT in shipping is very much alike other industries but some notable differences exist.
Employing the best CIO makes a big difference in cost and returns and can accentuate IT to a strategic asset. The principal factor that impacts technology in a shipping company is the Chief Information Officer.
This article examines why IT is important for shipping companies, the evolving role of the CIO, why employing the best CIO makes the difference, how to go about information technology strategy, and how to distinguish the best shipping CIO.
IT is important for shipping companies
Information and communication technology is of prime importance for all shipping companies. Numerous systems support the operations of a shipping company onboard and ashore: Email and communications in general, planned maintenance, procurement, inventory, safety, navigational technology and electronic charts, document management, vessel reporting, vessel performance, crewing & administration, chartering, insurance & claims, financial, accounting and management information systems, etc. Many of these systems became nowadays mission critical and companies need several highly qualified professionals to select, install and keep these running.
Maritime technology related to shipbuilding is another high technology field of great interest for hipping companies but this is mostly exercised by shipyards and not by shipping companies per se.
We, shipping people, often feel that this is a unique industry and that information and communication technology in shipping is very much different from any other industry. I would generally disagree; tools, challenges and opportunities for ICT are very common across industries, including shipping. CIO’s in shipping can benefit a lot by observing other industries. Nevertheless some notable differences may be of great importance for a shipping company:
- Ships are in remote locations, on route. A great effort and money is required to keep in touch, to close the ship to shore gap.
- Safety is of paramount importance and several systems may be involved in supporting a company with this prime concern.
- Reporting requirements are increasing dramatically either because of international safety and regulatory requirements or because shipping companies found their
- way to international stock markets.
- Currently the level of IT investments is lower in shipping companies than in other sectors.
Although shipping is generally regarded as a conservative industry it recognized early enough that information and communication technology may be the definite source for a competitive advantage and embraced this technology sometimes by being the early adopter with the notable and relatively recent example of email networks (BIMCOM 1991).
Complex systems
ICT is currently the most complex technology in such wide use by businesses worldwide. This claim stands with any variation we may use in the definition of a complex system: ICT systems are by design and function difficult to understand and verify. There are multiple interactions between many components. ICT systems constantly evolve and unfold over time. The fact that vessels are spread around the world is adding up to the complexity. Especially in shipping the complexity of information technology systems is becoming a critical factor since more business areas and more people depend on such systems.
The evolving role of the CIO
Within a shipping company the key person that is assigned with the pivotal role to extract value form the use of information and communication technology is the Chief Information Officer.
Despite a somewhat embattled history, the role of the Chief Information Office has emerged as a critical executive position in most organizations. Increasingly CIO’s sit on firms’ executive teams and help them shape organizational strategy.
The main forces influencing the CIO role are: Applications portfolio that is ever expanding to more operations and people who are impacted by IT. The overall atttitude of business executives that agree on the strategic application of IT and increase the available resources (money and people). IT suppliers that are offering a rapidly expanding range of technological solutions and services in increasing quality levels.
The CIO role has evolved in tandem with the following major technological periods: Mainframe era, distributed (PC) era, Web-based era. Each of these phases armed the CIO with maturity and credibility.
The future of ‘the CIO role will be largely shaped by new business models of the IT industry changing the nature of computing to utility (i.e. on-demand computing). Under such models computing is seen as a "utility" that users pay to access on a pay-as-you-use basis, just as is the case with electricity, gas, telecommunications and water.
Employing the best CIO makes the difference
Some shipping companies, even today, are not decided whether Information Technology is something the want to have or just need to have. MIT researchers (Earl and Feeny 1994) argued that for all industries the CIO was personally instrumental in determining whether a company positioned IT as liability or strategic asset.
New research (the Hackett Group, 2005) surveyed over 200 large companies and benchmarked IT departments worldwide to conclude that employees in world-class IT organizations earn nearly one-third more than their counterparts in other technology shops do. IT shops defined as top performers are measured by efficiency (such as IT cost and productivity), and effectiveness (for instance, economic return).
Over the past three years, according to the survey, companies with world-class IT organizations have significantly increased their spending on outsourcing, farming out 14 percent of the cost of routine functions such as infrastructure and applications management. Everywhere else, outsourcing spending has remained fairly stable.
Top IT shops have retooled their workforces to focus on higher-value activities such as business process management and on the latest technologies such as Web services. Employees with such expertise typically command higher salaries.
Shipping is a cyclical industry with relatively high degree of risk that experiences the volatility of international trade. Currently information technology for shipping companies is in the ferment era with numerous offerings and companies investing increasingly more effort and money.
IT can be the enabling technology that will allow shipping companies to scale their services in good and bad times without giving up anything from their wisdom and products portfolio. During the trough the shipping CIO will be instrumental in safeguarding the company’s knowledgebase in technology, to keep things going and maintain readiness for the next peak.
Information Technology Strategy
A closer look to IT strategy (John F. Rockart 1999) will allow us to emphasize on the added value of IT and the broad tasks of the CIO.
The foundation of IT is the corporate strategy that defines the firm’s key competencies and how the company will deliver them to customers.
The development of IT architecture involves converting the corporate strategy into a technology plan. This will define the key capabilities required from technology, responsibilities, where data will be located and how it will be accessed; what is company wide and what local.
Infrastructure, such as equipment, network, data center.
Systems applications, such as enterprise resource planning (ERP) systems.
Organizational processes, such as supply chain integration, customer and company linkages, leveraging company learning and experience.
The 5 layers of IT strategy are glued together with partnerships of the IT department with the senior management, vendors, line management and vessels.
How to distinguish the best shipping CIO?
What are the qualities of a great shipping CIO? Certain qualities are specific to the shipping industry, some are generic to any industry and others are a must have for any executive. The following checklist is based on the top requirements from the viewpoint of an executive recruiter:
- Leadership: Visionary, stimulating ideas, get the best from and give recognition to all those around them.
- Leverage the technology for the advantage of the company: Expertise on how all the trendy acronyms (ERP, F77, CRM, Web, etc) can serve the business.
- Business savvy: The mental capacity to develop in-depth knowledge of the shipping industry and the company’s business strategy, operating model, value proposition, market position and competition
- Building effective relationships: Within the company, with suppliers, customers and partners.
- Management skills: Be on time and on budget, make good use of resources, prioritize, build and motivate teams.
- Communication: The ability to articulate in a clear and appropriate manner.
- Create and manage change: Information technology is frequently used as a lever for change and the CIO must be an effective change agent.
- International experience: Because shipping is a global industry.
- Ability to hire, develop and retain high quality IT professionals.
Charis Nassis