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Will CMOs Outspend CIOs? Wrong Question

Remember Thomas Friedman’s The World Is Flat? In four clever words, he gave us a catchphrase for all the fear and promise and complexity of globalization. Same with Nicholas Carr’s article “IT Doesn’t Matter”–a three-word summary of all the fear about IT becoming a commodity.

The 2012 phrase of fear has been “the CMO will spend more on IT than the CIO.” Not quite as catchy, and almost no one cites the source of that prediction: Gartner analyst Laura McLellan. McLellan staked out her claim in two webcasts this year, predicting that CMO spending will pass CIO spending on technology within five years.

So I called McLellan. Whether her prediction comes true isn’t that important for you. What is essential to any CIO’s career is to understand the trend she’s talking about. Here’s what I learned.

The Basis

McLellan’s core argument is that marketing’s role in the company is expanding as e-commerce sales grow and social and mobile rise as customer channels. Marketing budgets are rising overall, technology as a share of those budgets is rising, while conventional IT budgets are growing more slowly. Ergo, those lines will cross and marketing tech will pass IT spending, she predicts, by 2017. (Most of McLellan’s data pertains to high-tech companies, but she says it applies broadly.)

Of the three big areas of marketing tech spending, first is e-commerce. Marketing often owns the e-commerce site, so more and more CMOs McLellan talks with have P&L accountability because of e-commerce.

Second is social and mobile. This used to be trying to get people on Facebook to click through and buy something. That approach hasn’t worked so well. Now it’s about mining social networks for new product ideas, building loyalty through social interactions, and offering self-serve customer information for support. It means building mobile apps to enhance products. And that means spending big money on software development, analytics, data management platforms, and raw computing power. And CMOs are buying in all those areas, often without IT’s help.

The third spending area is around marketing effectiveness, i.e., campaign management and process management. Marketing hasn’t gone through the efficiency and automation wringer that other company areas have.

Marketing’s Role Is Expanding

The old outlook was that marketing was in charge of promotions to get and keep customers. The new outlook is that “marketing’s role is to drive growth,” McLellan says, and that mandate includes product development, strategic planning, and customer service and interaction. It seems to me that McLellan paints a picture where marketing owns just about everything about the customer.

The Tension

The reason “CMO will outspend CIO” strikes a chord is because 1) it rings true about rising marketing tech spending, and 2) many CIOs know they don’t have a good relationship with the CMO. InformationWeek research finds that more IT leaders give their relationship with marketing weak marks (29%) than for any other business area. With the CMO-CIO relationship, “my gut feel is it’s not working in more places than it is,” McLellan says.

My Takeaway

And yet, marketing desperately needs great technology if it’s going to succeed. Marketing is in a trial-and-error mode, McLellan says, trying out new techniques for tasks like analyzing customer sentiment on social networks or trying to create a two-way interaction via mobile and social channels. Whether to automate their operations or analyze data, marketing teams are buying cloud software, giving it a short run, and dumping it if it isn’t working. “Marketing has an internal innovation and R&D role that is brand new,” McLellan says, adding: “Marketing’s thinking might be 12-plus months ahead of where IT is.”

Do IT leaders understand where all of this is headed? Listen to Procter & Gamble CIO Filippo Passerini‘s remarks at the InformationWeek 500 conference in September: “There is nothing more important for us than to be able to predict [customer response] when we launch a new initiative, a new brand, a new product, a new packaging.” He thinks P&G can monitor online reaction to predict in-store sales well before sales data comes in. “We haven’t cracked this nut yet. I believe this is the next stage of breakthrough opportunity.”

Marketing is searching for answers. IT needs to be immersed in that search.

This isn’t just about marketing; it’s about digitizing more of our customer interactions. What used to be a phone call and a customer file now could include a customer’s mobile app activity, tweets, Web searches, and purchase history. It’s not about marketing winning and IT losing–it’s about creating a new function across marketing, tech, product development, and customer experience that doesn’t exist today. We haven’t cracked this nut.

Originally posted on October 02, 2012 by Chris Murphy, editor of InformationWeek Magazine and Global CIO columnist on IT strategy issues.

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