8. CIOs Will Have to Step Up.

CIOs who faultlessly deliver services of the traditional variety - infrastructure, application portfolio and support - should expect to be under pressure to do more, or soon they can expect to be looking for work. "IT organizations that focus on managing infrastructure and back-office applications may be good candidates for outsourcing," says Forrester's Laurie Orlov, VP and research director of the IT Management Team. "Those organizations are thought of as cost centres."

"The concept of providing a secure, stable infrastructure is merely the price of admission today," says Jeffrey Campbell, CIO of BNSF Railway. "[To survive], you have to be a transformational CIO."

SIDEBAR: 10 Steps to Innovation

It's what the business wants. Here's how to do it

1. Create a business/IT rotation program. Businesspeople often don't know what to ask for from IT, and IT people often don't know about business situations where IT could be applied. Move IT people into the business and vice versa and watch innovation bloom.

2. Move the focus from technology testing to simulation in a business context. Systems can work well and still fail because they don't meet a business need. Test your systems in a business context - with real people, data and customers.

3. Build an innovation team. Innovation during the course of projects or daily business is accidental. Make it purposeful by devoting a small group to ongoing pilot projects and meetings with businesspeople.

4. Mesh IT development with product development. Product engineers are often segregated from IT, but with increasing levels of technology built into products, IT people could help speed the development process or even collaborate on new products.

5. Look outside the enterprise to partner with others on ­innovation. A swarm of small, global companies has moved in to take the place of big, internal corporate R&D departments.

6. Squeeze savings out of the infrastructure and dedicate the money to innovation. A program to constantly reduce fixed costs means there will be more money for innovation . . . without budget increases.

7. Use process improvement methodologies (CMM, ITIL and so on) to decrease innovation cycle time. Using CMM to standardize and improve software development processes means new projects can be completed more quickly.

8. Conduct interviews with all levels of the business. These discussions don't have to be limited to specific projects. Interviewing businesspeople about what they do, what their problems are and what they'd like to do next is the first step toward innovation.

9. Create a joint IT and business capital spending plan. Many companies consider IT and business spending separately. It's time to merge them. Linking the IT budget to plans to build a new factory could make it a better factory.

10. Design contractual requirements for innovation spending and planning with outside vendors. You devote a portion of your spending to innovation, so why not make business-specific innovation a part of your contracts with your vendors?

Sources: Forrester Research, Gartner, CIO reporting

SIDEBAR: The Unexpected Rise of the "MULTI-SPECIALIST"

While CIOs increasingly demand that their programmers understand the business, they're also asking for a deeper knowledge of new technologies

While everyone agrees that IT needs generalists today, a more accurate term might be multi-specialists. Programmers who remain solely programmers will have to be highly specialized and extremely skilled to survive against international competition. Meanwhile, other jobs in IT will require at least a solid grounding in programming, along with a strong specialization in other skills, such as project management and business process (probably both). "You can't say, 'I can manage but I can't do'," says Verizon CIO Shaygan Kheradpir. Adds Dow Chemical CIO David Kepler: "[Programmers] need to maintain breadth, but they also need depth in one or two areas. Credibility comes from getting results and seeing the broader issues, but sometimes you need to be able to go into the detail. If you can't go into the detail, you won't be able to solve problems."

This helps explain why, in the era of outsourced application development, CIOs who responded to CIO's State of the CIO 06 survey said the two skills they wanted most in entry-level employees were project management and application development - by an almost equal measure. "My people are becoming more specialized every day because the amount of technology in the infrastructure is growing so fast," says New York Life CIO Judith Campbell.

"A generalist is often said to mean you don't know much about anything," says Peter Lowes, leader of Deloitte Consulting's Outsourcing Advisory Practice. "I think you have to be an incredible specialist in your slice. It is through this specialization that you will have the leadership and focus necessary to remain innovative."

The industrialization and compartmentalization of the IT supply chain for both products and services are driving the need for multi-specialization, he adds. "In the old days, the application designer had to think about every aspect of IT, from the CPU speed to the network to the GUI. As the supply chain develops, you are to a certain degree unburdened from those concerns. You are free to develop specialization in the areas that really matter to the end users."