Published on November 16, 2023, 5:11 pm

As the world becomes increasingly dependent on software, the role of CIOs is evolving to align with individuals who have extensive experience in selling and managing software. Jim Palermo, the CIO of Red Hat, an open-source solution provider, is a prime example of this trend. Regardless of the industry, products and services are becoming reliant on software and data for various aspects such as product development and customer support. This means that CIOs are essentially becoming software company CIOs.

In recent years, there has been a growing need for clear distinctions between IT and product engineering within software companies. Gerri Martin-Flickinger, former CIO of Adobe and now CTO of Starbucks, highlighted this distinction when she explained how certain functionalities within Adobe’s products were developed by the product engineering team while e-commerce functionality was delivered by an IT-run web service.

Fast forward to today, where the lines between software engineering and IT are becoming even more blurred. This presents an opportunity for all CIOs to learn from the experiences of software company CIOs. Jim Palermo’s tenure as the CIO of Red Hat provides valuable insights into this new paradigm.

At Red Hat, Palermo is leading a major transformation that involves supporting two business models: traditional subscription-based models and a newer consumption-based model. To succeed in this endeavor, Red Hat’s IT team plays a significant role in instantiating products in marketplaces within public clouds for easy consumption by customers. They also capture telemetry to understand customer usage patterns and drive sales opportunities.

The consumption-based model is particularly advantageous as it provides access to valuable data about customer behavior. For example, if a software engineer spins up an OpenShift cluster but doesn’t use it for weeks, Red Hat can glean insights from hyperscalers’ telemetry data to increase adoption.

Another crucial aspect of Red Hat’s transformation involves modernizing back-end processes to support both subscription and consumption-based models. These changes include updating systems such as ERP, CRM, and compensation to accommodate the shift to an as-a-service model.

While the challenges faced by software company CIOs may seem unique, there are valuable lessons that CIOs across industries can learn from their experiences. One such lesson is the role of IT as “customer zero.” Red Hat’s IT team acts as a user of their own products, identifying glitches and performance issues that can be resolved before releasing the software to market. This feedback loop benefits both engineering and product teams and helps drive product evolution based on actual demand.

In addition, software CIOs have expertise in recruiting full-stack engineers who possess a deep understanding of infrastructure, software development, and release management. This multidisciplinary knowledge is invaluable in today’s containerized application portfolios where each layer of the tech stack is interconnected.

Software company CIOs also approach vendor partnerships differently. These partnerships focus more on strategic co-approaches to go-to-market strategies rather than solely relying on another company’s software to run their businesses. The alignment of value propositions becomes crucial when working with vendors for CRMs, ERPs, and HCM solutions.

The experiences of software company CIOs offer valuable insights for CIOs across various industries. It is essential for all CIOs to evaluate vendor products from different perspectives, considering scalability and release management principles. They should also invest in recruiting individuals with technical aptitude and curiosity who can be developed into skilled professionals over time.

Ultimately, the shift towards software-centric business models requires a change in mindset for all CIOs. They must think beyond traditional IT leadership roles when evaluating vendors or partnering with other companies. By embracing this new approach, CIOs can successfully navigate the evolving landscape of technology-driven enterprises.

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