AI Transforms CIO From Cost Center to Catalyst: Prof Pankaj Setia, IIM-A

As we shift from conventional forms of AI to more advanced agentic systems, the role of CIOs is transforming from mere IT administrators to strategic catalysts. In a discussion with Prof Pankaj Setia, Professor of Information Systems and Strategy (secondary area), and Founding Chair, Centre for Digital Transformation at IIM-A, FE CIO analyses what changes need to be made for CIOs to harness the full potential of AI and drive transformation, create value, and futurise their organisations.

We have seen the transformation of AI starting from traditional to generative and now we are discussing Agentic AI. With all these changes what do you think will change in an organization and how will it affect the responsibilities of CIO?

The term AI is not all that new. Applications like Google Translate, which is a form of generative AI, have existed for many years. The shift in availability of data along with advancements in computing has been driving the power of AI, thereby bringing into existence older forms of AIs and newer, more capable types.

For the enterprise technologies at hand, value needs to be placed on business use cases rather than looking at the said technology's capabilities and features. Technology decision makers must demonstrate the transformational role that AI can play not only in IT but all functions of an organisation. It is important for CIOs now more than ever to bring an alignment between organisational goals and AI initiatives and ensure that this new technology leads to true business transformation.

Most CIOs have no idea how to clearly measure and articulate the value of AI solutions. How can IT leaders show the impact of AI on revenue and cost savings?

The true opportunity and challenge lie in transforming organisations. Depending on how an organisation chooses to use AI, the technology can be applied in a multitude of ways, with outcomes just as varied. If AI is implemented piecemeal, the results will be piecemeal. But if an organisation uses it as a fundamental driver of transformation — unlocking new products, business models, or even industries through it — enormous value can be realised.  

For enterprise technology decision makers, the key lies in measuring the success of AI initiatives not just in terms of efficiency or cost savings but by the extent of AI's impact on enabling aspects such as customer experience, business models and new revenue streams.

Eventually, AI's value is determined by how well it is integrated into an organisation's DNA. CIOs should look at AI as an enabler of tangible and meaningful business outcomes rather than just a technological upgrade.

What is the importance of governance in unlocking the full potential of AI?

A strong basis of governance is unavoidable for any entity wanting to unleash AI optimally. This is especially true responsibly and profitably. As one new development in Hollywood attests, screenwriters in Hollywood once went on strike when studios began creating scripts utilizing gen AI tools. AI innovation should support literary creators, not usurp them. 

Thus the whole debate has been on governance: who governs the development and deployment of AI; by what kind of principles and frameworks is it applied; whose priorities and interests are, in the end, to be reflected in its outcomes.

Governance is more than compliance. It comprises bringing an alignment between the use of AI and the company values, stakeholder interests, and societal expectations. The challenge arises out of the fact that different groups (studies, writers of regulators) may define purpose differently; hence governance becomes a complex balancing act.

This complexity is made worse by the different rules in different countries. This means that IT leaders have to see governance as multi-dimensional and think about not just business goals but also ethical, legal, and social implications.

An ideal governance framework should comprise defined policies, transparency, accountability, and proactive risk management. And finally, the technology decision makers need to remember that the AI strategy is not narrowly focused on just profits but also in sync with the organisational purpose and broader societal good.

How is AI reshaping IT and larger organisations' structure and jobs, and what should CIOs pay attention to as technology increasingly automates more traditional work?

The current AI revolution is actually rewiring how organisations function, and especially the world of technology. What used to demand huge, specialised teams can now frequently be achieved speedily by one AI-enabled system. This change is reminiscent of the advent of calculators in the corporate world: prior to calculators, many of an employee's hours were consumed in manual computation; after calculators became ubiquitous, employees could shift their attention to activities of greater value, such as customer relationship management and strategic planning.

In the same way, AI today is already automating sophisticated, labor-intensive processes that once spanned months-long project periods. Indeed, Mark Zuckerberg has said that a great deal of Facebook's coding is already done by AI, forcing a rethink of how one constructs and operates an IT organization. As a consequence, tech teams are becoming more responsive and effective, and organisations are reconsidering conventional roles and structures.

This transformation isn’t limited to IT. We are seeing AI-driven changes in marketing, HR, and other business domains. In some cases, companies have even replaced HR managers with AI systems, especially in the U.S., signaling a broader trend toward automation across functions.

For CIOs, this is both a challenge and an opportunity. On the one hand, as more routine technical work is taken on by AI, CIOs have more time to devote to strategic initiatives, organizational design, and innovation. On the other hand, society will have to come to terms with the employment and job-creation implications of accelerating automation.

Finally, CIOs need to go beyond technology management and become organizational transformation architects to ensure that their companies can evolve and thrive in the age of AI.

How do CIOs create new sources of revenue for their company in the years to come?

The value of a CIO driving new sources of revenue will continue to increase in the years ahead. Although the actual contribution will differ based on the organisation, the changing role of the CIO is moving away from being viewed strictly as a cost center and toward being a chief innovation driver and business growth facilitator. This is a natural and inevitable progression. To accomplish this with success, CIOs need to have a firm grasp of the larger role they play in their organisation—not only from the standpoint of technology, but with respect to value creation for customers, workers, shareholders, partners, and society as a whole. With AI and automation capable of performing much of the legacy work, CIOs will be free to concentrate on strategic projects, such as generating revenue.

This transformation means that CIOs must embrace a more organisational and mission-oriented mindset beyond the operations of IT to discover new business prospects and new services. By embracing this broader role, CIOs can influence the direction of their organisations' futures and keep them competitive in an ever-evolving world. My recommendation to CIOs is to act ahead of time—step ahead, own this moment, and drive both organisational and societal advancement.