IT departments must stop focusing on cost control if they are to survive, according to new research from Gartner Group.

The role of the CIO and IT department will be transformed over the next three years, Gartner predicts, with one third of CIO roles disappearing entirely. To survive, IT executives must be able to manage partnerships and services rather than simply managing IT systems, it believes.

IT professionals in other roles will also be affected by the changes. By 2008, Gartner expects 60 percent of IT organisations to have reduced their workforce by at least half.

The effects of the changes will also be felt by businesses, says John Mahoney, Gartner’s managing vice-president of IT Services and Management. "Failure to understand this shift in the environment presents a tremendous risk to the health and possibly the survival of the business as a whole," he said. Companies that don’t make the necessary changes will underperform their rivals by up to 15 percent each year, he claimed.

Gartner believes that, over the next three years, businesses will face an increasingly consolidated and federalised environment. At the same time, IT will become increasingly widespread and important to businesses - but will be delivered largely by service providers or through partnerships.

The result will be an environment where the majority of enterprises don’t need IT management skills. By 2008, Gartner believes that 50 percent of IT organisations will focus on brokering services and shaping business demand, rather than technology. In this scenario, the most important skill for executives is managing business processes and relationships, not technical expertise.

In many cases, Gartner believes that the traditional IT department will disappear entirely, replaced by a new business transformation role. Rather than CIOs, companies will increasingly appoint business technology managers and business network leaders.

"The IT leadership role has been changing since it was created, and that process is accelerating," said Mahoney. "CIOs need to play an increasing role outside the organisation, and by 2008, will spend most of their time on relationships outside the enterprise, to ensure they deliver the expected business outcomes."

Businesses that are able to move from a technology focus to a broader business focus will reap the rewards: Gartner believes that agile companies will outperform those companies that don’t shift their focus by at least 15 per cent.

The survivors of this cull will be executives who are able to manage relationships appropriately and ensure their IT department is moving in the right direction to cope with future challenges. Gartner’s key recommendations for today’s IT executives include beefing up business process design and transformation capabilities; blend business and technology skills in the company; focus on business outcomes not technology outputs, and exploit business networks internally and externally.