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© 2014 Dow Jones & Company. All Rights Reserved. THEWALL STREET JOURNAL. Tuesday, February 11, 2014 | R1

JOURNAL REPORT

WHO IS TODAY’S CHIEF INFORMATIONofficer?Still the techie in the windowless officebehind the mainframe?

Not by a long shot. Today most CIOs have amore expansive role—and a set of aspirations tomatch. Now that the CIO manages the ever morecomplex information flow that drives a com-pany’s internal decisions as well as its links tocustomers globally, the job has the look of a cor-porate steppingstone to higher ground.

That was the message from The Wall StreetJournal’s CIO Network, a group of executivesfrom companies around the world who gatheredin San Diego last week for their second annualmeeting. They heard from experts on artificial in-telligence, cybersecurity, the economy and man-agement, among other topics. But they also madesome statements of their own.

Asked “Do you see yourself as a chief execu-

tive officer,” 70% said yes. The vast majority saidthey now report to the CEO, a big increase fromjust a few years ago, when at least one and usu-ally several layers of corporate bureaucracy sepa-rated the information officer from the top gun.

Another sign that we’re in a new era: Thisgathering of CIOs from a diverse set of indus-tries—manufacturing, health care, technology andothers—included more women than any other C-suite conference the Journal has hosted.

One of those executives explained where she’dlike to take the job. “We don’t want to refine the

role of the CIO,” she told me. “We want to rede-fine it.”

That was made clear when the CIOs broke intofive task forces to address a range of public-pol-icy, management and industry issues. One groupexamined the future role of the CIO, and one ofits top recommendations was for CIOs to findways to extend their reach beyond their compa-nies’ walls. “CIOs who communicate effectivelyhave a positive impact on the company, internallyand externally,” the panel said.

The CIOs hope their bosses get the message:

View your information officer as an essential andversatile player, able to represent the companyand participate in the big decisions. And to lead.

The meeting wasn’t all chest-beating. Asked tograde their own companies on how effective theyare in fostering collaboration internally, 45%picked a middling “C.” Only 5% gave themselvesan “A.”

And when the CIOs proposed a series of ideasfor new, game-changing enterprise products thatthey believe deserve investment, they got afriendly reality check that any aspiring CEOmight appreciate. Ted Schlein, a partner with theventure-capital firm Kleiner Perkins Caufield &Byers, was asked to judge the ideas. “I’m veryglad,” he joked, “you all have other jobs.”

Mr. Bussey is an assistant managing editorand executive business editor of The WallStreet Journal. He can be reached atjohn.bussey@wsj.com or onTwitter @johncbussey.

BY JOHN BUSSEY

CIOs Eye the Corner OfficeAt The Wall Street Journal’s CIO Network conference, chief information officers

made it clear that they had left their narrow, geeky world behind

Ted Schlein on the lackof security in corporate

information networks, R4

Peter Sondergaard on howthe cloud is helping CIOs

achieve agility, R4

Sandy Pentland on whatsocial data businessesshould be using, R4

Mike McConnell on govern-ment and businesses sharing

more information, R5

PLUS: Paul Thomas onwhether the U.S. is in

a lost decade, R5

The CIO Task Forces’recommendations andCIOS’ top priorities, R2

INSIDE

MACHINES WILL soon be assmart as we are, says Ray Kurz-weil. But not to worry.

The engineering director ofGoogle Inc. and founder and CEOof Kurzweil Technologies Inc. ar-gues that as computers getsmaller and more powerful, wewon’t face a sci-fi nightmare. In-stead, these machines will helpus expand our capabilities.

Wall Street Journal Editor inChief Gerard Baker spoke withMr. Kurzweil about what the fu-ture holds. Here are edited ex-cerpts of the conversation.

The Singularity AwaitsMR. BAKER: Would you explainwhat the singularity is and howmachine intelligence is going toovertake human intelligence?MR. KURZWEIL: The underlyingtheme is what I call the law ofaccelerating returns, which is theexponential growth of the priceperformance and capacity of in-formation technology.

Both the hardware and thesoftware of human-level intelli-gence will be in place by 2029.

MR. BAKER: That means thatcomputers, machines, will makeall of the billions of computa-tions that the human brain canmake?MR. KURZWEIL: The best defini-tion was articulated by Alan Tu-ring in 1950 when he designatedhis eponymous test, the Turingtest. If a computer is indistin-guishable from a human basedon language, and if you can’t tellthe difference between the AIand a human foil, then we saythe AI has passed the Turingtest. No computer has done thatyet, although they’re getting bet-ter every year.

There’s actually a growinggroup of people that think I’m

too conservative in predicting2029. If you were to take Watsonand apply it to a Turing test, itprobably would do pretty well.But I’m maintaining my 2029projection. That’s one step interms of understanding the sin-gularity.

The other is that we’re inte-grating with this technology.When I was at MIT, the com-puter was across campus. It tookup a floor of a building. Now wecarry it in our pockets, on ourbelts. They’re moving onto oureyes and our ears. Some peoplehave them in their brains, likeParkinson’s patients. A Parkin-son’s patient can actually down-load new software to the com-puter connected into their brainfrom outside the patient. It’spea-sized, so it requires mini-mally invasive surgery.

Another exponential trend isthe shrinking of technology.We’ll have millions, billions ofblood-cell-sized computers inour bloodstream in the 2030s,

keeping us healthy, augmentingour immune system and also go-ing into the brain, putting ourneocortex on the cloud.

In 2035, if I see somebody ap-proaching me and want to im-press them, and I need to thinkof something clever, I’ve got twoseconds. The 300 million patternrecognizers in my neocortexaren’t going to cut it. Just theway today I can access 10,000computers in the cloud, I’ll beable to access additional neocor-tex and think of somethingclever.

And we will expand our neo-cortex. Two million years ago,humanoids came on the scene.We had this frontal cortex, whichis where we do our high-levelthinking. The frontal cortex isactually no different than theother parts of our neocortex; it’san additional quantity of neocor-tex. But that additional quantitywas the enabling factor for us toinvent language, art and science.

We’re going to expand the

quantity again by basically ex-panding our neocortex into thecloud. And that will be anotherquantitative expansion,whichwilllead to another qualitative leap.

If you go out to 2045, we willhave expanded our unenhancedintelligence a billionfold. That’ssuch a profound expansion thatwe borrow this metaphor fromphysics and call it a singularity.

An Enhanced WorldMR. BAKER: So what does the sin-gularity produce?MR. KURZWEIL: We’re smarter,more productive, more effectivebecause of the brain expanderswe have. My view is that this isnot creating machines and it’sgoing to be us versus them; weare expanding our own capabil-ity. That’s why we created thesetools. I couldn’t reach that fruitat that higher branch 2,000years ago, so we created a toolthat extended our physical reach.We can now create skyscrapers.We can command all of humanknowledge with a few key-strokes. We expand our reach,and we’re going to continue todo that. We’re going to integratewith these technologies.

MR. BAKER: Before we get to theyear 2045 or 2029, let’s look atsome of the advances that wecan expect to refine and developover the next 10 years or so.MR. KURZWEIL: One is that we’retransforming medicine from kindof a hit-or-miss affair where wefind something, hit something,lower his blood pressure, don’treally know why this works, towhere we can actually reprogramour biology as software. We have23,000 little software programsinside us called genes. That’s nota metaphor. They are strings ofdata. They evolved when condi-tions were very different.

Somewhere between 10 and 15years from now, we’re going tosee a very profound transforma-tion in our ability to reprogrambiology away from cancer, heartdisease and diseases in general,and aging.

The New, Improved YouRay Kurzweil on how much technology will expand our intelligence

Percentages may not total 100 because of rounding. The Wall Street Journal

What They're ThinkingCIOs who attended theWall Street Journal CIO Network conferencewere polled on various matters related to their work. Here's what theyhad to say on some of those topics:

Cloud ComputingHas cloud computing allowed you to:

CollaborationIf you had to give your company agrade for effective collaboration,with A being very collaborativeand F not at all, what grade wouldyou give?:

CybersecurityIn addressing the problems ofcybersecurity for companies, thegovernment should:

Technology SpendingIn 2014 I expect my company'sspending on internal technologyneeds will be:

Growth OpportunitiesOver the next two to three yearsthe biggest growth opportunitiesfor my company are in:

PrioritiesFrom a technology perspective, which of the following is your highestpriority?:

Cybersecurity

Enterprise Resource Planning | 8%

Mobile | 8%

Infrastructure and Data Center | 10%

Business Intelligence /Analytics

Leave itto business

Play abigger role

Both52%

Cut IT staff to reduce costs | 6%

Repurpose your traditional IT resourcesto other areas of IT

42%

Less thanlast year

More thanlast year

About thesame aslast year

U.S.67%

Latin America

Africa | 6%

A | 5%

B34%

C45%

D16%

F | 0%

Europe | 6%

Asia

14%

40%

25%

33%

13%54%

72% 28%

Cloud | 10%

8%

LindsayRosenberg/Dow

Jones(2)

‘This is not creatingmachines and it’s goingto be us versus them;we are expanding ourown capability.’

Ray Kurzweil

VOICES FROM THE CONFERENCE

‘When we think about this period that we’re in—thecombination of cloud, mobile, and big data disrupt-ing both consumer IT and enterprise IT—we are inthe period of the greatest tectonic shift in the ITindustry in the last 30 years. We think about theInternet wave, the mainframe, the minicomputer—this is the granddaddy of them all. And the compa-nies that we’ve seen fall so far, these are the minortremors of the things that are going to happen overthe course of the next few years.’

Pat Gelsinger, Chief Executive Officer, VMware Inc.

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R2 | Tuesday, February 11, 2014 THEWALL STREET JOURNAL.

(Chief information officers/chief technology officers, ex-cept as noted)

Richard I. Adduci Jr., BostonScientific Corp.

Robert Alexander, CapitalOne Financial Corp.

Steven B. Ambrose, DTEEnergy Co.

Subash Anbu,Manitowoc Co.

John Applegate, KPMG LLPRamón Baez,

Hewlett-PackardD. Michael Bennett, BAE

Systems Inc.Steve Betts, Aon PLCAnnabelle Bexiga,

TIAA-CREFKeyvan Bohlooli, Ryder

System Inc.Pascal Boillat, Senior Vice

President, Operations andTechnology, Fannie Mae

Michael S. Brown, Vice Pres-ident, Global InformationTechnology, ExxonMobil

Mike Capone, AutomaticData Processing Inc.

Robert Casale, Massachu-setts Mutual LifeInsurance Co.

Paul Cheesbrough,News Corp

Jack Clare, Dunkin’ BrandsGroup Inc.

Keith Collins,SAS Institute Inc.

Lee Congdon, Red Hat Inc.Julia Davis, Aflac Inc.Guus Dekkers, Airbus GroupRobert Dickie, Senior Vice

President and ChiefOperations and SystemsOfficer, AmericanInternational Group Inc.

Darren Dworkin, Cedars-Sinai Medical Center

Alan H. Farnsworth, Bausch& Lomb Inc.

Victor Fetter, LPL FinancialMarc Franciosa, Praxair Inc.Michael Gioja, Paychex Inc.Stephen Gold, CVS CaremarkG. Bruce Greer Jr., Vice Pres-

ident, Strategic Planningand Information Technol-ogy, Olin Corp.

Joy Grosser, UnityPointHealth

Celso Guiotoko, NissanMotor Co.

Suren Gupta, Executive VicePresident, Technology andOperations, AllstateInsurance

Elizabeth Hackenson, AESScott Hendrick, Scotts

Miracle-Gro Co.Donald Imholz,

Centene Corp.Rebecca Jacoby, Cisco

Systems Inc.Rob James, Novartis

International AG

Tammy Jeffery, GeneralGrowth Properties Inc.

Scott Joslyn, MemorialCareHealth System

Doug Junkins, NTT AmericaManish Kapoor, NuStar

Energy LPAdriana Karaboutis,

Dell Inc.Leni Kaufman, Newport

News ShipbuildingStuart Kippelman, Covanta

EnergyK Ananth Krishnan, Tata

Consultancy ServicesKris Kutchera, Vice Presi-

dent, Information Technol-ogy, Alaska Airlines Inc.

Madelyn Lankton,Travelers Cos. Inc.

Darryl Lemecha, VSP GlobalRobert Logan, LeidosEva Maglis, CGI Group Inc.Krish Mani, JELD-WEN Inc.Gerri Martin-Flickinger,

Adobe Systems Inc.Timothy C. McCabe, Delphi

Automotive LLPMeg McCarthy, Executive

Vice President, Operationsand Technology,Aetna Inc.

Mike McClaskey, DISHNetwork Corp.

James McGlennon, LibertyMutual Insurance Group

Jamie Miller, GeneralElectric Co.

Greg Morrison, CoxEnterprises Inc.

Cynthia Nash,Windstream Corp.

Stephen Orban,Dow Jones & Co.

Mike Parisi, Vice President,Information Technology,Illinois Tool Works Inc.

I.P. Park, Harman Interna-tional Industries Inc.

Marlee Perez, Vice President,Information Technology,Tesoro Cos. Inc.

James Powell, ThomsonReuters

Sanjeev Prasad, GenpactLarry Quinlan, Deloitte LLPDavid Ramsey, Diebold Inc.Joseph Reilly, Zions BancorpRebecca Rhoads,

Raytheon Co.Craig Richardville, Carolinas

HealthCare SystemRick Roy, CUNA Mutual

GroupJoseph Santamaria, Public

Service EnterpriseGroup Inc.

James Schinski, PPL Corp.Patrick Seals, Vice President,

Information TechnologyServices, Linn Energy LLC

Wayne Shurts, Sysco Corp.Sanjeev Singh,

Follett Corp.Sukhvinder Singh, Senior

Vice President,

Information Technology,Host Hotels & Resorts Inc.

Judy Snyder, KellyServices Inc.

Joseph Spagnoletti,Campbell Soup Co.

Steven C. Tarr, ExecutiveVice President, Informa-tion Technology,Emeritus Corp.

Luis Taveras, BarnabasHealth

Tim Theriault,Walgreen Co.

David Thompson, WesternUnion Co.

Michael L. Thompson,Senior Vice President,Cintas Corp.

Doug Tracy, ComputerSciences Corp.

Paul von Autenried, Bristol-Myers Squibb Co.

Jack Waters, Level 3Communications Inc.

Andrew Wilson, AccenturePhilip Wiser, Hearst Corp.Michael Wolfe,

Brightstar Corp.Nancy Wolk, Alcoa Inc.Mike Young, Dentsu Aegis

Network

PARTICIPATING GUESTSTom Eich, Partner, IDEOPat Gelsinger, Chief Execu-

tive Officer, VMware Inc.Peter High, President, Metis

Strategy LLCRay Kurzweil, Director of En-

gineering, Google Inc.;Chairman, Founder andChief Executive Officer,Kurzweil Technologies Inc.

Mike McConnell, Vice Chair-man, Booz Allen Hamilton;Former Director, NationalIntelligence, the WhiteHouse; Former Director,National Security Agency

Gerry McNamara, GlobalManaging Director, Infor-mation Officers Practice,Korn/Ferry International

Heidi Messer, Co-Founderand Chairman,Collective[i]

Jacob Olcott, Principal, GoodHarbor Security RiskManagement LLC

Sandy Pentland, ToshibaProfessor of Media Artsand Sciences, Massachu-setts Institute ofTechnology

Ted Schlein, General Partner,Kleiner Perkins Caufield &Byers

Peter Sondergaard, SeniorVice President, GlobalHead of Research,Gartner Inc.

Paul Thomas, Chief Econo-mist and Manager of Mar-ket Sizing and Forecast,Intel Corp.

The Task Forces’ PrioritiesThe technology executives at last week’s CIO Network conference divided into five task forces to debatetheir management and policy agendas in the following areas. Here are their top recommendations.

JOURNAL REPORT | CIO NETWORK

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REPRINTS AVAILABLE

TACKLING THE CYBERSECURITY THREAT

1 ADOPT NISTSTANDARDSU.S. companies and institu-tions should work with thegovernment to adopt thepending National Institute ofStandards and Technology cy-bersecurity framework.

2 BUILD PUBLIC-PRI-VATE PARTNERSHIPCreate a cross-industry orga-nization with government toshare information in a nonad-versarial, noncompetitive way.Build a fast-acting notification

system for institutions thatare hacked. No punitive mea-sures taken against those re-porting the breach.

3 TOUGHER PENALTIESAsk prosecutors to goaggressively after criminalsand create tougher penalties.

4 GLOBAL ALIGNMENTGovernments and inter-national businesses shouldwork together to establish in-ternational standards in cy-bersecurity.

CO-CHAIRS:Michael S. Brown, VicePresident, Global Informa-tion Technology, ExxonMobilG. Bruce Greer Jr., VicePresident, Strategic Planningand IT, Olin Corp.Suren Gupta, Executive VicePresident, Technology andOperations, AllstateInsurance Co.

SUBJECT EXPERT:Jacob Olcott, Principal,Good Harbor Security RiskManagement LLC

THE DATA DILEMMA

1 BUILD DATA-DRIVENCULTURECreate data culture at all lev-els of the business. Createdata strategy that can bedriven back into businessunits. Have data that is easilyaccessible and consumable.

2 INVEST INDATA TALENTInvest in specialized talentand fund educational pro-grams to build the requiredskills. Leverage open collabo-ration models.

3 MAKE DATAACTIONABLEUse insight-driven strategy todrive customer and opera-tional outcomes. Generatereal-time insights that are ac-cessible to business users atevery level to guide opera-tional decisions and improvecustomer interactions.

4 ITERATE AND BUILDON SUCCESSIterate to build out data strat-egies. Avoid “build it and theywill come.” Be hypothesis-

driven to establish baselinecapability, then build value.

CO-CHAIRS:Steve Betts, CIO, Aon PLCJamie Miller, Senior VicePresident and CIO, GeneralElectric Co.

SUBJECT EXPERT:Heidi Messer, Co-Founderand Chairman, Collective[i]

BUILDING A GLOBAL TALENT POOL

1 BECOME ANEMPLOYER OF CHOICEIn the war for talent, compa-nies must distinguish them-selves by delighting employ-ees from initial recruitmentoutreach and beyond.

2 MAINTAIN A PIPELINEOF TALENTHire outstanding talent evenwhere there’s no specific roleto fill. Having a stockpile oftalent will ensure that compa-nies are armed to respond tochanges in market conditionsand customer needs driven byrapid technological change.

3 INSTILL A SENSE OFMISSIONAppeal to the heart. Turn thedialogue to why are we here,instead of focusing on tradi-tional metrics. Establish a cul-ture where executives knowthat to advance they must betied to the company’s values.

4 DEVELOP CAREERROAD MAPSDevelop career road maps foremployees that provide inter-esting professional growthand developmental paths. In-clude stretch assignments andinternational assignments not

only within information tech-nology but also in businessand/or functional areas new tothe employees.

CO-CHAIRS:Julia Davis, Senior VicePresident and CIO, Aflac Inc.Manish Kapoor, Senior VicePresident and CIO, NuStar En-ergy LPNancy Wolk, CIO, Alcoa Inc.

SUBJECT EXPERT:Gerard McNamara, GlobalManaging Director, Informa-tion Officers Practice, Korn/Ferry International

REFINING THE ROLE OF THE CIO

1 MAKE WORK EASYWhat we do at workshould be no harder than whatwe do at home. Drive user-centric design and drive outprocess friction.

2 FACILITATEINNOVATIONFacilitate and lead businesstransformation through theuse of disruptive technologyto anticipate business needsand drive growth.

3 BE EXTERNALLYFOCUSEDEnsure that the IT team iscloser to the company’s trueend customer. CIOs who com-municate effectively have apositive impact on the com-pany, internally and externally.

4 PASSION FOR THEPRODUCTBe passionate about yourcompany and its products. Bea catalyst for product evolu-tion. Leverage analytics andthe integration of business

processes and capabilities.

CO-CHAIRS:Ramón Baez, Senior VicePresident and CIO, Hewlett-PackardRebecca Jacoby, CIO andSenior Vice President, CiscoSystems Inc.Gerri Martin-Flickinger, Se-nior Vice President and CIO,Adobe Systems Inc.

SUBJECT EXPERT:Peter High, President, MetisStrategy LLC

SPARKING INNOVATION

1 KNOW YOUR USERSDEEPLYNow more than ever, CIOsmust have a deep understand-ing of their users and custom-ers so they can help pinpoint,frame and prioritize the prob-lems, propose the most rele-vant potential solutions, andfoster dialogue across the or-ganization. This dialogue willengage them in not just pro-viding feedback but in startingwith insights about what theyreally feel and need.

2 COLLABORATE ONBEST PRACTICESAvoid operating in a technol-ogy-centric bubble. Work withinternal stakeholders and cus-tomers to cocreate best prac-tices for key service and userexperiences. This will help en-sure better outcomes, as wellas shared responsibility andreciprocity in achieving them.

3 NIMBLE RISK-TAKINGBudget for possible needto drill “dry holes.” Establish asafe zone for skunk works.

4 ENCOURAGE SEREN-DIPITY, CREATIVITYFacilitate structured chaos.Structure processes for ran-dom connections to occur.

CO-CHAIRS:Lee Congdon, CIO, Red HatAdriana Karaboutis, VicePresident, Global CIO, DellMeg McCarthy, ExecutiveVice President, Operationsand Technology, Aetna

SUBJECT EXPERT:Tom Eich, Partner, IDEO

The five task forces at theCIO Network conference pre-sented their recommenda-tions to the full conference,which voted these as the topfive overall priorities:

1 BUILD DATA-DRIVENCULTURECreate data culture at all lev-els of the business. Createdata strategy that can bedriven back into businessunits. Have data that is easilyaccessible and consumable.

2 KNOW YOUR USERSDEEPLYNow more than ever, CIOsmust have a deep understand-ing of their users and custom-

ers so they can help pinpoint,frame and prioritize the prob-lems, propose the most rele-vant potential solutions, andgenerally foster dialogueacross the organization. Thisdialogue will engage them innot just providing feedbackbut in starting with insightsabout what they really feeland need.

3 FACILITATEINNOVATIONFacilitate and lead businesstransformation through theuse of disruptive technologyto anticipate business needsand drive growth.

4 MAKE WORK EASYWhat we do at workshould be no harder thanwhat we do at home. Driveuser-centric design and driveout process friction.

5 INSTILL A SENSE OFMISSIONConsider how to change yourvalue proposition. Instead ofappealing to their analyticalside, figure out how to appealto the heart. Turn the dialogueto why are we here, instead offocusing on traditional met-rics. Establish a culture whereexecutives know that to ad-vance they must be tied tothe company’s values.

THE CIOS’ TOP PRIORITIES

CIO NETWORK MEMBERS

The Wall Street Journal would like to thankthe 2014 sponsors for their generous support

of the CIO Network annual meeting.

For more information please visitCIONetwork.wsj.com

© 2014 Dow Jones & Company, Inc. All rights reserved. 3C716

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THEWALL STREET JOURNAL. Tuesday, February 11, 2014 | R3

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Every C-level role has grown more challenging, but the CIO role stands apart for itscomplexity and ability to impact business performance. CIOs have to prepare thebusiness for what’s next, in the face of relentless technological change and ever-

changing market conditions. They must be the bridge between today’s capabilities andtomorrow’s demands. Let us help you tackle what’s next – through insights, connections,career support, and services that are custom designed for CIOs – and their companies.

Connect with us at www.deloitte.com/us/cioforum.

What’s next?

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R4 | Tuesday, February 11, 2014 THEWALL STREET JOURNAL.

JOURNAL REPORT | CIO NETWORK

AS HEAD OF research at GartnerInc., Senior Vice President PeterSondergaard sees the big pic-ture: where global technology isheading, and how trends such ascloud computing and businessanalytics are revolutionizingbusiness. Mr. Sondergaard dis-cussed how companies are re-sponding to these trends in aconversation with Michael Hick-ins, editor of The Wall StreetJournal’s CIO Journal. Edited ex-cerpts of their discussion follow.

Applications ShiftMR. HICKINS: In a Gartner surveylate last year, one priority thatglobal CIOs ranked very high fortheir companies was enterpriseresource planning [the suite ofsystems used to store and usethe data necessary to run a busi-ness]. But here at the conference,CIOs ranked ERP much lower.Why is that?MR. SONDERGAARD: I think weare early in a phase of revisitingour applications, in particularour ERP infrastructure. We’vespent 20 years building a plat-form that has consolidated itselfaround virtually two players:SAP and Oracle. But I believe

cloud is going to drive a revisit-ing of our ERP platform. I thinkwe will move to a federated,more loosely coupled ERP envi-ronment that enables us to se-lect applications that are not on-premise but that end up beingcloud-based.

MR. HICKINS: Why now? Cloudhas been around and maturingfor a number of years.MR. SONDERGAARD: There’s amaturity in organizations. Ev-erything goes back to peopleskills. Do we have the right peo-ple and experience to manageexternal providers from a cloudperspective, to understand howyou do the integration inter-nally? And it takes time for orga-nizations to build that experi-

ence up. That’s there now. OurCIO survey showed that about25% of organizations are seri-ously invested in cloud.

It’s a question of maturity, onthe buyer’s side but also on theprovider’s side. We are underpressure, all of us, to act faster.The word agility appears in ev-ery CIO conversation.

When you ask people whythey are buying cloud-based ap-plications, 51% say it’s because ofagility. Only 17% will say it’s be-cause of cost.

MR. HICKINS: As IT tries to be-come more agile, how can thatbe reflected in the larger organi-zation? Or can the two work atdifferent speeds?MR. SONDERGAARD: It doesn’tmatter whether I’m in the musicindustry or the mining industry.I am under pressure to digitizewhat I do as an organization. I’munder pressure to show agility.The response to that right nowis a couple of things. First, busi-ness executives are asking tohave somebody that looks at dig-itization across the enterprise.It’s a strategy role, but increas-ingly a strategy role with teeth.An increasing number of thesenew chief digital officers actuallyhave larger organizations report-ing to them. They’re not singleindividuals. About 40% of thosechief digital officers report di-rectly to the CEO.

The other thing organizationsare looking at is, how do I put inplace what we in Gartner wouldcall a bimodal, or two-speed, ITfunction: systems that pay ev-erybody’s bills and sell the stuffthat we sell, but that also dem-onstrate agility and innovation.

Need for ‘Agility’MR. HICKINS: In your survey andhere, CIOs reported that the No.

1 initiative for their companieswas business intelligence andanalytics. How does that tie intothe need for greater agility?MR. SONDERGAARD: It ties in be-cause the value of information inyour enterprise is what differen-tiates you. And in terms of agil-ity, what differentiates us is thecapability of using that informa-tion. Information is a strategicasset.

We are now struggling withwhat the response to that is.And the response has to be,first, the organization—the totalorganization—has to makesomeone responsible for whatthe corporate strategy aroundinformation is, because you can-not afford to ignore it. Wal-Martcannot afford to ignore that itcompetes on information, andits biggest competitor is Google.Same goes with everybody inthis room. Your competitor isGoogle or other providers thathave information about yourcustomers.

The second thing is thereneeds to be someone in chargeof collecting and managing thatinformation. This is causingsome organizations to create yetanother role: a chief data officerthat integrates the responsibilityof information management, ofbusiness intelligence or analyt-ics, and information as it per-tains to product strategy. Some-body needs to be responsible forpulling it together.

We sit in a unique time ofchange, which is why we appointindividuals that sit outside, per-haps, the defined structures, butare responsible for this.

I’m convinced five years fromnow, there will be very few chiefdigital officers left because I be-lieve it has to be a business-skillset that pervades every businessindividual in an organization.

The Cloud Grows UpPeter Sondergaard of Gartner on the pressure to be more agile

INVESTORS MAY not always likewhat they hear from venturecapitalist Ted Schlein. For exam-ple, the general partner atKleiner Perkins Caufield & Byerssays companies are foolingthemselves if they think they cankeep hackers out of their net-works. He and Scott Thurm, WallStreet Journal senior deputytechnology editor, discussedWeb security and other topics.Edited excerpts follow.

Taming Big DataMR. THURM: The entrepreneursyou’re seeing who are interestedin the enterprise space, what arethey bringing to you these days?MR. SCHLEIN: I’d say there arefour big areas going on in enter-prise software right now.

Everybody loves to talk aboutbig data this, big data that. Idon’t think big data is all thatinteresting. I think importantdata is very interesting. How doyou take the fact that 90% of thedata created in the world todayis completely unstructured, thatwe can gather gobs and gobs of

it, more so than we’ve ever beenable to do before. We’ve builtlayers of infrastructure to handleit. But how would we make itpertinent to you, to you, to you,to you, to do your job? Andthat’s going to spawn a wholenew set of apps.

Another area being worked ona lot is the re-architecture ofpretty much all your work flows.The mundane tasks going on inyour organizations today are be-ing redone, and that’s going tobe done in this brand new SaaSarchitecture. [Software as a ser-vice is industry shorthand forcorporate software deliveredfrom shared computers over theInternet, rather than on a com-pany’s own computers.]

That, by the way, is being en-abled by the third main area,which is the re-architecture ofyour data centers. And this is myway of saying the cloud, I sup-pose. It will be the virtualizationand re-architecture of your datacenters so you can modernizethem, i.e., make them more flexi-ble, more cost-efficient, turn

them into your own clouds.Then finally, kind of my pet

project, which is to make yourorganization safe, and new tech-nologies in the world of security.We’re seeing innovation forthose areas at a very rapid scale,quite honestly, faster than I’veseen it in my previous 17 years.

MR. THURM: Can you foresee atime where we think we have se-cure online enterprises?MR. SCHLEIN: I don’t think it’s abattle you necessarily win. It’sone you try and just get to adraw on. Your best days arewhen the bad guys go elsewhere.

MR. THURM: So every big retailerbut Target succeeded overChristmas because the hackersgot Target?MR. SCHLEIN: No, no. Look, I’m afirm believer there are only twokinds of companies—those thathave been breached and know it,and those that have beenbreached and don’t know it.Most of what we do in securityis around prevention, preven-tion, prevention. Great. Justknow it won’t work. Know thatthey’re going to get in. Youought to be thinking, “Hey, Iwant to find out where they areas fast as humanly possible, con-tain it and remediate it.”

MR. THURM: What do you thinkof valuations in the Valley now?MR. SCHLEIN: I guess I have tobelieve in efficient capital mar-kets at some point or another.And look, there are times wherethe valuations favor the entre-preneurs, and times where theyfavor the investor. Private valua-

tions trail public stock marketsby usually about six months. Soyou’re not going to see privatevaluations go down until thepublic stock market comes waydown.

When you see a companythat’s doing $500,000 in revenuevalued at over $200 million,don’t ask me to come up withsome discounted cash-flowmodel to prove that one out.There’s no proving it. But it’swhat the market demands today.

Echoes of 2000?MR. THURM: How does this envi-ronment feel to you compared to1999-2000?MR. SCHLEIN: First of all, we callthat a boom. There were lots ofgreat companies created out ofthose times. But there are somestark differences. The companiesthat are able to reach the capitalmarkets [today] actually havepretty significant businesseswhere there’s a profit and lossyou can look at. If you go back to

’98 and ’99, there were compa-nies putting way too much riskon the public markets with noreal discernible business.

The other thing is, a decadeand a half ago, companies werenot able to grow anywhere nearas fast as they can today.

If you just look at the numberof devices that you can now ac-cess the Internet from, you’reable to grow these companies ina much more rapid fashion, havea much larger addressable mar-ketplace, thus leading to whyyou’re also seeing valuation in-flation.

Information Security? What Security?Ted Schlein on how corporate networks are not nearly as secure as companies think they are

Lind

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‘I don’t think it’s abattle you necessarilywin. It’s one you tryand just get to a drawon.’

Ted Schlein

*Beats Electronics had two deals among the year’s largest. Source: Dow Jones VentureSource The Wall Street Journal

COMPANY

Beats Electronics LLC

Palantir Technologies Inc.

Pure Storage Inc.

SevOne Inc.

Anaqua Inc.

A10 Networks Inc.

Twilio Inc.

TOA Technologies Inc.

Roku Inc.

Domo Inc.

Beats Electronics LLC*

Consumer electronics

Business applications software

Data storage

Network/systems management software

Business applications software

Wired communications equipment

Communications software

Business applications software

Consumer electronics

Business applications software

Consumer electronics

Where the Big Money Is GoingThe biggest investment deals for U.S.-based, venture-backed information-technology companies in 2013

BUSINESS AMOUNT INVESTED (in millions)

$500

374

150

150

125

80

70

66

60

60

60

‘It’s a question ofmaturity, on thebuyer’s side but alsoon the provider’s side.’

Peter Sondergaard

Source: Gartner report “Taming the Digital Dragon: The 2014 CIO Agenda,” based on survey responsesfrom 2,339 CIOs, and Gartner 2013 CIO Survey, with more than 1,200 respondents

The Wall Street Journal

Ready or NotThe digitalization of business is a stiff challenge for CIOs—one that many saytheir firms aren’t adequately prepared to handle. Changes are looming in howbusinesses address that challenge, according to research firm Gartner Inc.,including a greater dependence on smaller tech companies for innovation.

A bigger role for smaller companies is one aspect of the shifts expectedby CIOs in the sources of innovation in the next 10 years:Which technology company has been most influential over the past 10years? Which will be in the next 10 years?

PAST 10 YEARS NEXT 10 YEARS

of CIOs surveyed by Gartner agreed with this statement: Mybusiness and IT organization are being engulfed by a torrent of

digital opportunities. We cannot respond in a timely fashion. This threatensthe success of the business and the credibility of the IT organization.

51%

of CIOs said they planned to change their technology andservice providers over the next two to three years.70%said they planned to include more small organizations amongtheir business partners.29%

37% 20%

15%

28%

4%

3%

2%

2%

1%

3%

1%

32%

23%

15%

5%

5%

5%

5%

3%

1%

1%

14%

Apple

Microsoft

Google

IBM

Cisco

Oracle

SAP

VMware

Amazon

Intel

Other

said their IT organizations don’t have the right skills andcapabilities in place to get ready for the future.42%

Note: Percentages totalmore than 100 becausesome respondentsnamed more than onecompany.

BUSINESSES KNOW more abouttheir customers and employeesthan ever. Making sense of thatdata and using it productively issomething else entirely.

To find out the best strategiesfor leveraging social data, SteveRosenbush, deputy editor of TheWall Street Journal’s CIO Jour-nal, spoke with Sandy Pentland,director of the Massachusetts In-stitute of Technology’s HumanDynamics Laboratory and MITMedia Lab EntrepreneurshipProgram. Here are edited ex-cerpts of their conversation.

Beyond Status UpdatesMR. ROSENBUSH: For most of us,social data is Twitter, it’s Face-book. What do you mean by it?MR. PENTLAND: Those sorts ofthings are people’s public face.On the other hand, for instance,there’s badge data. Every corpo-ration has name badges. Many ofthese record where people comeand go, door swipes and thingslike that. That’s a different typeof social media. Or if I look atcellphone data, I can tell whenpeople get together, what theysearch for, who they talk to. Youcan look at connections betweenpeople in ways you never couldbefore. The way most people ap-proach this is incorrect, becausethey’re asking questions aboutindividuals. A better way to ap-proach is asking questions aboutinteractions between people.

MR. ROSENBUSH: How do compa-nies make use of tools and tech-nology to get it right?MR. PENTLAND: Make sure youhave diverse enough interactionswith people and diverse enoughsources of information. In mylab, we have data from over1,000 companies that have de-ployed a well-known social net-work intended to increase pro-ductivity. There are a couple ofthings we’ve discovered aboutthis sort of deployment and useof social media. One is that itgrows along existing social ties,so face-to-face connections, peo-ple who work together. Theother thing is that people are

busy and forgetful. If you get lotsof invites from people you don’tparticularly know or from theCEO or CIO, it does nothing. Peo-ple don’t sign up. On the otherhand, if the people you workwith immediately invite you, al-most everybody does.

Privacy and BusinessMR. ROSENBUSH: Do you think theaverage person in a corporationis going to be receptive to carry-ing around a badge that recordstheir movement?MR. PENTLAND: We have a spinoffcompany that does that and wefind almost universal adoption,but you have to give people in-formed consent, tell them whatyou’re doing. The other thing isyou typically only need aggre-gate data. Here’s the pattern ofcommunication between yourgroup and the other group, pe-riod. You can’t see when the guywent to the bathroom or snuckoff to take a smoke.

MR. ROSENBUSH: How do youcapture data about a market?How do you analyze it?MR. PENTLAND: The fundamentalthing almost everybody does islook at the individual. If you lookat them in a social context, thatlets you know so much more.

We had a company where wehave location data. We ask, “Ifyou’re on this street aroundnoon, which types of restaurantsdo you go to?” That tells mewhat you’re interested in, so Ican send you a coupon for thattype of restaurant at that time.That has five to 16 times theclick-through rates of normal lo-cation-based advertising.

If I know what your buddiesare doing, I know what you’redoing. You need to think abouthow to get that data. Sometimesit looks like Big Brother, and youhave to engage your customer.“Do you want to know what yourbuddies are doing? Let’s sharethis in a safe way, and you canbe there before your other bud-dies, and you’ll feel good about itand I’m going to make it supersafe.” People will do it.

The Social Data ThatBusiness Should Use

CIO Network Videos>>Scan this code for the full lineupof CIO Network video interviewswith top technology executives

about thechallenges oftoday’s techworld, or go toWSJ.com/LeadershipReport.

SANDY PENTLAND ‘The way most people approach this is incorrect.’

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THEWALL STREET JOURNAL. Tuesday, February 11, 2014 | R5

JOURNAL REPORT | CIO NETWORK

WASHINGTON and the privatesector are both scrambling toprotect their critical systemsfrom cyberattacks. Can the twoof them cooperate to stay safe?

John Bussey, assistant manag-ing editor and executive busi-ness editor of The Wall StreetJournal, spoke about cybersecu-rity with Mike McConnell, vicechairman of Booz Allen Hamiltonand former White House na-tional intelligence director anddirector of the National SecurityAgency.

Here are edited excerpts oftheir conversation.

Working as OneMR. BUSSEY: Government is try-ing to decide what to do aboutthe security of critical infra-structures. Business similarlyputs it at the top of their list. Butwhen business asks for help orlooks to the government to say,“Here are new perpetrators,”that information isn’t as forth-coming. What’s the status ofthis, and what’s the fix?MR. MCCONNELL: We have laws,policy and a framework for clas-sifying information. It served uswell in World War II and theCold War. It is not serving uswell today.

It’s anathema to a govern-ment organization to have sensi-tive or classified informationand to share it freely. What weneed to do going forward is apublic/private partnership,which means information mustbe shared between businesses,from businesses to governmentand from government to busi-nesses.

There’s only one place inAmerica where we have an orga-nization that’s chartered tobreak codes and read the otherguy’s mail. Much of the threat toAmerican business and others isnation-state derived.

So if we’re going to have aneffective system for addressingthis issue for corporate Americaand for our international part-ners, it’s absolutely required thatwe have legislation that’s passedby the Congress and signed bythe president as a forcing func-tion to require those in govern-

ment with sensitive informationto share it with the private sec-tor.

And to create an environmentwhere not only the private sec-tor is encouraged to shareamong yourselves but that youare granted liability protectionfor sharing back with the gov-ernment.

Economic EspionageMR. BUSSEY: What kind of infor-mation is the government sittingon that might benefit businessthat could be shared?MR. MCCONNELL: For example,the Chinese are breaking into ev-ery corporation in America. TheChinese are very prolific. Theirintent is to capture source code,research and development, intel-lectual property, business plans,innovation ideas, anything ofthat nature.

They want to use it for theirown benefit. It’s economic espio-nage.

Just to contrast that, the U.S.,the U.K., a few others, by policywe do not engage in economicespionage.

We engage in espionage forgovernment secrets and militarycapabilities and war plans andthe usual kind of things that youwould expect. But we do not doeconomic espionage. The Chi-nese do, the Russians do, theFrench do, the Israelis do. Othersdo. The most prolific are theChinese.

MR. BUSSEY: If you’re dealingwith an international agreement,how do you get the biggest per-petrators to sign on, the Chinasand the Russias and even theFrench?MR. MCCONNELL: I think it’d be along, difficult negotiation. You’dstart with something small andwork through it over time, justlike we did with arms control fornuclear weapons.

Fighting BackMR. BUSSEY: There’s the notionof hacking back. You saw that inthe Dennis Blair/Jon Huntsmancommission’s report, where theysuggested that maybe lawsshould be modified to make it le-

gal to pursue hackers and iden-tify where they have stored yourstolen material and make it in-operative. Do you buy that?MR. MCCONNELL: No, I don’t. It’svigilantism.

I believe in self-defense. I be-lieve corporations could be mademore dynamic. You can havepredictive intelligence and bemore dynamic in how you de-fend yourself.

But when you go back, moreoften than not you’re going tohack into something that hasnothing to do with your penetra-tion.

If I’m a nation-state and Iwant to go into corporation X,

I’ll probably go to eight differentcountries and four different uni-versities before I would pene-trate corporation X.

So, now corporation X is go-ing to get angry. It wants topoke back. Well, you might getthe University of Texas or Uni-versity of Minnesota, not the

perpetrator. So this is very, verycomplex.

What I would argue is if youare penetrated, do things dy-namically to defend yourself andthen make decisions veryquickly. And then let the law-en-forcement community deal withit.

How CybersecurityLaws Are OutdatedMike McConnell on why the government andbusiness need to be sharing more information

VOICES FROM THE CIO NETWORK

‘People talk about the lost decade that Japan wentthrough in the ‘90s? Well, that decade lasted 22years, and the question is, in the U.S. and WesternEurope, are they sort of halfway through a lostdecade?’

Paul Thomas,Chief Economist and Manager of Market

Sizing and Forecast, Intel Corp.

Lind

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‘The Chinese arebreaking into everycorporation in America.’

MikeMcConnell

6%

Better Worse The same

Increase Decrease The same

n Expectations for their organizations’ spending on three elements ofsecurity in the next 12 months:

6%6%

41%53% 40%54% 39%55%

30%

12%59%32%

11%57%

Source: Global Internet survey of 12,396 information-security professionals in the fourth quarter of2012 by (ISC)2 in partnership with Booz Allen Hamilton with the assistance of Frost & Sullivan.

Percentages may not total 100 because of rounding. The Wall Street Journal

Plenty to Worry AboutIn a survey of information-security professionals, more wereconcerned about software vulnerabilities than any other security issue.Many thought their defenses had improved and expected theirorganizations to increase spending on security.

n The threats and vulnerabilities most often cited as high concerns:

n Assessment of their organizations’ capabilities compared with12 months earlier:

69%Application vulnerabilities

Being prepared for asecurity incident

Discovering asecurity breach

Recovering from asecurity incident

Training andeducation

Information-securitypersonnel

Hardware andsoftware

67%Malware

Mobile devices 66%

Internal employees 56%

Hackers 56%

Cloud-based services 49%

28%

13%60%

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R6 | Tuesday, February 11, 2014 THEWALL STREET JOURNAL.

© 2014 Brocade Communications Systems, Inc. All Rights Reserved.

The network transformed how we work, live, learn, and play.But then everything changed. Billions of devices joined the network.Businesses virtualized and moved to the cloud. Yet networks laggedbehind the software-driven revolution. Brocade innovations—fromFabrics to Software-Defined Networking to Network FunctionsVirtualization—enable you to increase performance and reduce cost.Build the network of tomorrow. Today.It’s time to start a new conversation on the network.Get the facts at brocade.com/networkfacts#networkfacts

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