Information technology spending by units outside of the IT department is growing, with half of all spending expected to occur outside of the IT budget by 2005, up from about 37 percent today, reports Gartner Inc., a Stamford, Connecticut-based research firm.

This shift is providing new challenges to chief information officers, who are becoming less important in many companies. Organizations are losing confidence in the IT department's ability to deliver business benefits following the e-business hype, triggering an urgent need for CIOs to build credibility for themselves and their units, Gartner says.

"The challenge for CIOs is to define and deliver a sustainable value proposition from the IT organization to the enterprise in an environment with increasing turbulence in technology, business and the economy," says John Mahoney, Gartner vice president and research director. "That value will center more on leadership and service integration and less on creation of technology. That doesn't mean the end of the CIO as a distinct role, but it does mean that major changes lie ahead."

The most important CIO success criteria lies in developing leadership and soft skills, such as the right behaviors to influence and get buy-in from other partners of the business, Gartner notes. In addition, CIOs need to set realistic expectations and be in position to address changing business needs, the firm says.

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