0

Few key roles in a company are as dynamic as the CIO has been over the past 20 years. CIOs have come a long way, from implementing hardware and software packages in the 1990s to managing outside contractors when economics pushed IT departments to outsource software development and data centers. Yet another shift is now redefining the role of CIO, driven by two key technologies: cloud and mobile.

Both offer unprecedented access to information, and the way CIOs approach these innovations can determine the competitiveness of their companies in the next few years. Cloud and mobile technologies are entirely new models for connecting to customers that produce previously unfathomable data, require new data management technologies, and offer a new economic model.

To keep their companies competitive, CIOs must be “intrepreneurs,” driving innovation and new business models within their companies. One part businessperson, one part Chief Technology Officer, today’s CIOs can capitalize on the consumerization of technology to connect with business partners, employees, and customers in the cloud-based, mobile world they inhabit—or face competitors that do.

The cloud has been thriving in the consumer space, led by products like Dropbox, Amazon, and Google Docs. Now the cloud is working its way into the enterprise. Gone are the days when a company needed RFPs to innovate. Proposals for adding in-house servers or building new software just aren’t necessary anymore. Cloud-based technologies and low-cost mobile devices, plus agile development methodologies in tandem with big data and in-memory technologies allow companies to innovate at a very low cost. CIOs shouldn’t fight this notion; they should embrace it as a philosophy for unlocking innovation.

ING Direct is a great example. They are the largest Internet-based bank. They don’t fear the cloud—they are the cloud. Their business couldn’t exist without these technologies. They adapt to customer demands faster than many traditional banks. Following its merger with Capital One, ING announced the coming of a remote deposit service. Customers will be able to deposit checks directly into their accounts from their computers or by simply taking a picture of a check with the ING Direct mobile app. As they think about the future of their transactional systems to support this instant imaging of checks, they are already looking beyond traditional batch systems in an effort to provide straight-through processing from their customers’ phones to their accounts.

Beyond the innovative possibilities, the cloud also has practical benefits. Businesses can quickly and seamlessly scale their capacity as projects become successful without large up-front capital costs. Proactive CIOs will create secure, cloud-based sandboxes where employees can build new business models. If and when the project is successful, the economics are there and the technology is there to support auto-scaling. This dramatically reduces the risk and friction of innovation and makes the CIO an enabler of competitiveness.

The cloud will be especially crucial as more companies embrace mobile devices. Processors, networking speeds, and memory capacity have all hit an inflection point, putting search, email, maps, and calendars in consumers’ hands. Phones and tablets have become so popular that experts predict that good old personal computers will make up less than 20 percent of the devices connected to the Internet by 2014. This proliferation of smart devices means a proliferation of data. A proliferation of data will require massive infrastructure and a re-consideration of the traditional technologies used to store and analyze this data. Simply put, there are more companies solving these problems outside of the firewall than inside the firewall, which makes the economics and the business model inevitable.

Businesses can’t assume that they are immune to this shift. Employees now expect access to both business data and personal data on their mobile devices. People barely blink when their business and private lives intermingle. The millennium generation hardly understands the concept of their employer owning their phone or tablet. Many companies will need to let employees bring their own devices in order to recruit the best and brightest of the newest generation of workers and provide environments that encourage innovation and connectivity.

Many of the big four accounting firms (the largest employer of recent college grads) have already instituted such a policy and are encouraging employees to bring their iPad or smartphone to work. The company occupies a small piece of real estate on those devices as opposed to the employee’s personal life occupying a small piece of real estate on a corporate device. The consumerization of the enterprise is upon us.

For the last 10 years, CIOs tried to consolidate and outsource as much as possible to gain the benefits of economies of scale. Today, however, the economies of scale outside the firewall dwarf most enterprises’ internal economies—with a fraction of the economic risk. At the same time, labor arbitrage can be accomplished without an RFP right over the Internet. Many CIOs have found themselves flat-footed without the necessary internal skills to harness a world where infrastructure, processing capacity, and labor are available in abundance.

The best CIOs are building small teams, partnering them with business units, and giving them a mandate to innovate with no barriers outside of the firewall. They are also building a serious enterprise technology team to build relationships to the major cloud vendors and evolve their offerings and relationships to support going live with these innovator teams. These are the CIOs that are intrepreneurs and the breed that will take their companies into the next generation of business.

Both cloud and mobile technology offer untold possibilities for CIOs who are willing to rethink their business environments. Those proactive enough to experiment with new business models, even if they only start with low-risk cloud-based applications, are the ones who will succeed.

This post originally appeared on the Fortune Brainstorm Tech Blog.