INTRODUCING THE EXPERTS
Kathy Harris: research director, Gartner Group
Bobby Cameron: principal analyst, Forrester Group
Brian Burke: VP Enterprise Strategies, Meta Group
Hugh Morris: global managing partner, Andersen Consulting
Chris Edwards: IS professor, Cranfield School of Business
Rolf Sackman: head of systems integration, PwC
Mike Dodd: director of IT, Giga Group
John Everett: senior partner, Deloitte Consulting
Kit Grindley: professor of systems, LSE
Strategic decisions will be made by business people, not technology people
“When it comes to creating IT strategy, matters will be taken out of the hands of technology people, says Kathy Harris, research director with Gartner Group. “Business units will make those decisions if they affect the business,” she says. “IT will still play a role, but business managers will certainly have the stronger hand.” Business units will be teams formed around business processes rather than product or service categories, predicts Bobby Cameron, principal analyst with the Forrester Group and author of the cheerily named report, The Death of IT. “These teams will be led by senior business people,” he says. Cameron points to the structure of IBM’s own internal departments, where technical positions have been cut by a third in recent months.
IT strategy will be controlled by corporate directors because it is so allied to business strategy, says Brian Burke, vice-president of enterprise strategies at Meta Group. “Any IT director who thinks he controls IT strategy should start looking for another career.” In 2005 successful companies won’t even have an IT strategy, Burke adds.
“Even today, leading organisations have business strategies which encapsulate the IT implications of change to the business,” he says.
“Asking who will control IT strategy is like asking where a circle starts,” adds Hugh Morris, global managing partner at Andersen Consulting.
The transfer of responsibility for strategic decision-making from IT to business is the biggest shift seen in 40 years of IT, says Chris Edwards, professor of Information Systems at Cranfield School of Business. “It’s far bigger than technology shifts like client/server,” he says. Edwards describes the historical role of the IT manager as a leader of strategy, and a persuader of business. “E-business has changed all that, business people are now interested in controlling and owning IT strategy.”
Because of the stealth with which the Internet entered most businesses, very few IT managers had control of early web decisions, says Rolf Sackman, head of systems integration in EMEA for PricewaterhouseCoopers. “By the time the Internet was seen as a strategic issue, it was out of the hands of IT and controlled by other departments,” he says. “The same will happen with areas like mobile computing, which is owned more by sales departments than IT.”
This is confirmed by the experiences of Hyperlink, an Internet and software consulting house. The company, which has created e-commerce solutions for the likes of Asda and Liberty, has noticed a shift in power away from the IT department in the e-commerce area. “When we pitch for business, we just don’t meet the IT director,” says David Barker, group account director. “We meet with the marketing people or the finance people, who are making those decisions.” Customers report that their IT departments do not have the expertise to deal with Internet issues competitively, Barker adds, and will opt for a combination of consulting houses and external service providers.
The removal of strategic decision-making from the IT manager is a problem of the profession’s own making, argues Mike Dodd, director of information technology with Giga Information Group. “One of the reasons we have the bad name is that we lost sight of the fact that IT supports the business,” he says. “We presented the business with solutions, and then asked if they had a problem to fit.”
For an IT manager to remain a part of the strategic decision-making process, he needs to think like a businessman, says Harris. “Learn the skills and knowledge of the business manager,” she advises. “The successful manager in five years’ time isn’t a technology provider, he’s a business enabler.”
IT departments will be dispersed throughout the business, working with business units
In addition to losing strategic decision-making powers, experts predict that IT managers will be scattered throughout the organisation. “IT managers will become technology strategists within business units,” says Harris.
“This means they are involved in some strategy decisions, but in a way that is totally fused with, and driven by, the business.” The rise of e-business – as distinct from e-commerce – has brought the first stages of this shift already. “E-business involves every element of the business, and it soon stops being an IT function,” says Harris. “At that point, it is just another way of doing business, and is no longer the IT manager’s domain.” The shift was accelerated by the extent to which business managers controlled early web efforts. “In the early days, marketing managers looked after the web, because it was seen as little more than a fancy brochure,” explains Edwards. “As web sites are getting more sophisticated, interacting with databases and multiple departments, those business departments are sequestering IT people to prevent fragmentation of data.”
But some users challenge this as an efficient way of working. Health care provider BUPA has partially dispersed its IT department through a business systems management program. “This places account managers in key business units,” explains group IS director Uwe Natho. “These are IT people who are fully integrated with business departments, and provide solutions for their business problems.”
Natho says he would be reluctant to extend this system completely and hand control of strategy to dispersed teams. He points to a recent re-use scheme at BUPA, which achieved 10 percent efficiency savings, as an example of something that could not have been achieved without a central IT strategist.
IT managers will support this by controlling infrastructure in a small central department
This dispersed network of technology workers will be supported by a central IT department that is far smaller than current teams. “Within two years management teams will be responsible for information strategy, with the central IT department responsible for implementing enterprise-wide infrastructure.”
IT directors and managers will maintain their influence in this small area of the enterprise, says Burke. “IT directors have, and will continue to have, control over implementation,” he says. “These are the nuts and bolts decisions about selecting a vendor and managing operations.”
“This is the fate of IT managers who are reactive and lack business sense,” says Cameron. “These people won’t be leaders or decision makers five years on, because the people they led and the decisions they made are in other people’s hands.”
Prediction 4Most IT managers will work for outsourcers, small central departments or business units, depending on their skills
So, what happens to the IT manager’s job in this brave new e-world?
That depends on what they can offer the business, says Harris. If they have no business expertise and poor communication skills, chances are that they will work for an outsourcing organisation, doing much the same job as they do today.
With strong infrastructure skills, and good communication, their future is in the central IT department looking after networks, data centres or mainframes. If their skills are more specific – for example, CRM or accounting packages – they could join a business department and apply technical expertise to business problems.
Procurement of competitive technology will be controlled by business units
The erosion of the IT manager’s responsibilities will extend to procurement, implementation and management, the experts agree. Business units will adopt responsibility for the procurement of competitive business-led products, says Harris.
The level of involvement of business in procurement will depend on the area concerned, says Harris. Gartner differentiates between two levels of technology – the infrastructure and the component part. This is the difference between the network and the routers sitting on that network.
While the HR and sales departments use the same network (infrastructure), they use different applications (components). These components provide the competitive edge, says Harris – and that will be controlled by business executives.
This applies to human assets as much as technology products, says John Everett, senior partner with Deloitte Consulting. “Skills and services will be procured by a combination of the HR director and the internal IT department, to ensure the best combination of value and organisational fit,” he says.Prediction 6
Procurement of the infrastructure will be controlled by the central IT department
While business units assume control of procurement for unique technology components, the IT manager will retain control of procurement, implementation and management of the infrastructure, says Harris. In this sense, the central IT department is insourcing – it is a service provider to the main body of the business.
This IT department will be staffed by highly skilled technologists with knowledge of the company’s legacy systems, says Sackman. “These people will look after those things that define you as a business, and that cannot be outsourced or controlled by non-technical people.”
These technologists will also be the eyes of the business filling two roles not suited to business units, Sackman believes. “They will be watching technology markets closely, looking for technology developments that can be translated into business opportunities,” he says. The second business function that will have to be controlled by central IT is monitoring of service providers. These hard-core techies will see straight through an outsourcer’s poor service levels or the product hype of consultants, Sackman argues. “These will be skilled, knowledgeable people with the expertise that the businessman doesn’t want or need,” he says.
Dodd agrees. “Internal technical expertise is necessary, if only as a security blanket. You need something to keep your suppliers honest.”
These IT staff will be responsible for sourcing consultants to procure enterprise-wide software and hardware, working with consultants to prepare briefs for third parties, says Everett. “The implementation and management will be carried out by a virtual team, networked across organisations and geographies.” Everett believes that this process will be controlled by the consulting organisations and the IT director, acting as guardians of the corporate vision.Prediction 7
Most of these functions will be implemented and managed by external providers
When vendors are clamouring for a consultant’s attention, you know that their prospects are looking good. Consultants, who are involved in the procurement process far before the IBM salesman gets his PowerPoint presentation out, play a strong role in evaluating technology purchases.
The cutback in IT departments and the move of many procurement responsibilities to business units will lead to a massive rise in the use of consultants and outsourcers. GartnerGroup predicts that 80 percent of business functions in the typical enterprise will be outsourced by 2002, with demand for outsourcing outstripping supply by 20 percent by 2005.
This increase will come about through increased business involvement in procurement and an allied change in the perception of IT procurement, says Cameron. “The procurement of IT today is different to other procurement processes in the business. In five years time it will be the same,” he predicts. This means that where it makes sense to do so, business departments will outsource IT procurement in the same way as logistics is often outsourced today. “Someone else will simply be better and cheaper,” says Cameron.
“So business departments will take over the function and treat it in the same way as other procurement processes.”
Functions that are most likely to be outsourced are at opposite ends of the innovation scale. Initially, outsourcing will grow in non-competitive areas such as desktop management and network monitoring, where there is little competitive advantage and outsourcing offers economies of scale.
These contracts will be between the central IT department and the external partner.
In this department, buying decisions will still be the domain of the IT manager, but the nature of procurement will evolve, says Burke. “Increasingly, IT decision-makers will view the problem from a service sourcing perspective,” he says. “The decisions made about platforms, operating systems and DBMSs will be made by the service provider whether it is the internal IT department, the ASP or the outsourcer.”
But the increase will be most pronounced in the business-led areas of competitive technology, such as e-business, says Harris. “By 2002, the ESP (enterprise service provider) will be the de-facto standard for most e-businesses,” she predicts.
The complexity of e-business networks, together with the need for scalability and reliability will require outside help, agrees Cameron. “In these areas, technical demand will outstrip the enterprise’s capabilities,” he says. These contracts will be formed between business units and the outsourcers.
It makes sense for these business units to turn to outsourcers, says Kit Grindley, professor of systems at the London School of Economics. “It’s rather like being a construction firm,” he says. “You own the finished house, but you used contractors to lay the bricks and put the roof on.”
There will be a role for a manager with technical and business expertise to oversee all of these departments and relationships
All this makes the IT function in 2005 very complex – with an internal core department, ASPs, ESPs, multiple outsourcers and consulting relationships, and IT personnel working in dispersed business units. It is at the heart of this maelstrom that the real opportunity for the ambitious IT manager lies.
Organisations will need a central manager responsible for sourcing and controlling the products and services. “This is an opportunity for a senior IT executive to become chief operations officer,” says Cameron.
This is the position the smart IT manager wants, says Harris. “This manager is responsible for co-ordinating, rather than implementing, all the IT in the organisation – a crucial, very powerful, position,”
The IT executive, with his knowledge of products and services, has a head start in the race for the position, says Harris. “To buy the right products and services requires a degree of expertise that typically lies more with the IT department than business professionals.”
This role is beginning to appear. “Our clients are increasingly using selective outsourcing and multiple providers,” says Sackman. “There is a need for a central service broker, someone whose IT role has been expanded.”
Hyperlink has noticed the appearance of the operations director or commercial director at sales meetings, says Barker. “The person making the decisions is someone who manages all the sourcing, and he is a businessman.”
An IT manager taking on this role will need new skills and knowledge
But to win the role the IT manager needs to become a businessman, says Cameron. Forrester advises IT managers to start repositioning themselves today to ensure their long-term survival. “Move technology to external providers and develop relationships with those people,” says Cameron.
“Plot your own demise.” Start by ripping up your mental picture of your organisation, says Harris.”Think of horizontal levels of skill and knowledge, not traditionally vertical corporate structures.” In addition, become the man who knows all about the capabilities of ASPs, ESPs, consultants and outsourcers.”Learn how to work with those people now and you’ll be indispensable later.”
IT managers must also master a multitude of new skills. “These people have to be able to negotiate contracts, understand the finances, communicate with the board and make sure the whole thing fits together,” says Harris.
This might hurt a little
The road to COO nirvana, though, is going to be rocky. Edwards predicts that businesses will seek to own increasing amounts of IT strategy until they learn better. “After a few big blunders and a lot of wasted money, there will be a slow-down in the decentralisation,” he predicts.
An IT manager’s expertise could help prevent some of these mistakes, says Nelson. Leaving procurement and strategic decision-making to business executives tends to lead to purchases more closely tailored to business needs, but Nelson warns: “Business executives run the risk of putting in solutions that don’t do any good or are needlessly expensive.”
Most business people also lack the ability to determine whether a new technology will fit into the business infrastructure. While compatibility is not usually high on the marketing director’s worry list, it can cause problems later.
Even in the Internet economy, some things remain constant. Businesses will still rely on technology to offer competitive advantage, and still need the expertise to achieve this. In the complex business landscape of the new century, this expertise is increasingly likely to lie outside the walls of the organisation.Sally Whittle is senior staff writer on Computing.