The Organization

The IT department you know today is continuing to evolve into a more user- and business-focused function. Here are 10 ways IT will change in the next five years

End-user departments will take more responsibility for IT work. David Foote foresees the demise of the information technology organization as we know it. The former Meta Group Inc. analyst, now a principal at Cromwell Foote Partners LLC in Stamford, Conn., says he sees a "whole clouding of what an IT worker is." IT functions — and even management — will become part of business units and other departments.

Many of the 26 IT leaders interviewed for this special report agree. "IT will no longer be a separate entity" in the organization, says Marvin W. Adams, chief information and technology officer at Bank One Corp. in Chicago. "There will be a deeper integration of IT into the mainstream business as opposed to it being a service function."

Some organizations — including The Chase Manhattan Corp. in New York — are already integrating IT functions and management. IT at Chase is governed by a "virtual CIO" called the Technology Governance Board, a group of business-unit CIOs and key technology and business managers. The board deals with all enterprisewide technology issues while bringing IT closer to each line of business. Each CIO reports directly to the head of his business unit.

"I think this model works, and I don't see us organized in a materially different way down the road," says Steven L. Sheinheit, Chase's executive vice president for systems and architecture. "CIOs will play an increasingly important role . . . as they work closer and closer with the business managers."

And Foote says he sees more such integration of IT and business units below the executive level during the next five years. For example, he says, more companies will pull line managers into big technology projects such as enterprise resource planning, working side by side with full-time technical specialists for months at a time to ensure that end users get what they need to do their jobs.

2

But the technology itself will be centrally managed. While Chase's business-unit executives call more of their own IT shots, the technology board provides overall guidance on IT. That covers standards, technology direction and even IT buying advice for the business units, Sheinheit says. And Chase still centrally manages its data centers, networks and midrange systems.

The IT shop "will need to be managed by an IT professional," adds Francis Dramis, executive vice president and CIO at BellSouth Corp. in Atlanta. Although the business units will direct the IT resources, or the "what" of technology, the IT organization will focus on the "how," or providing the technological means for what the company wants to accomplish, he says.

Dramis says for an IT organization to succeed, it will have to "look and act like a large consulting organization," providing advice to a client much like a lawyer. It will be "more like a guild than a delivery essence," guided strongly by its own professional standards, he says.

3

Business executives will force IT management to pay even greater attention to the value IT brings to the business. "The IT organization hasn't typically been good about relating [its] value in business terms to businesspeople," says Carl Wilson, CIO at hotel chain Marriott International Inc. in Washington. IT organizations, he adds, must "continually work [at showing] how IT can add value."

Little wonder then that Gartner Group Inc. drew about 700 attendees last month to New Orleans for a conference on justifying IT investments. Gartner, as well as Meta Group Inc., another IT research firm, believes IT organizations will have to more clearly demonstrate — in both quantitative and qualitative ways — how their investments impact both the organization and their companies' customers.

As IT spending has risen, the "intense spotlight" on year 2000, euro projects and the specter of litigation have given corporations good reason to take IT decisions away from the IT organization, Gartner Vice President Bill Kirwin said at the conference. CIOs need to do a better job identifying and realizing IT's benefits, including nonquantifiable benefits such as improving processes, facilitating team-based work and more quickly exploiting opportunities.

1pixclear.gif
1pixclear.gif
1pixclear.gif
990412sheinheit.jpg
"Whether outsourced or insourced, every dollar has to be looked at in terms of the value it will produce."

STEVEN L. SHEINHEIT

Executive VP

Corporate Systems and Architecture,

Chase Manhattan Corp.

 

"It will be incumbent for companies to create a renewable technology organization, meaning an organization that uses change as a way of constantly improving itself."

FRANCIS DRAMIS

Executive VP and CIO,

BellSouth Corp.

 

"Exploiting information for competitive advantage will help justify the money that companies must pump into information technology."

DENNIS BIEDERMAN

CIO,

Menasha Corporation

 

"Be willing to change and make change a core competency throughout the organization — from an individual through the work team to the total organization."

JODIE RAY

Senior VP and CIO,

Corporate Systems and Architecture,

Brinker International

1pixclear.gif

4

IT organizations will combat a continuing skills gap with more outsourcing. The outsourcing of IT functions among companies is rising and will continue to do so, say analysts and IT executives surveyed for this report. Gartner predicts that by 2003, three of every five large companies will farm out more than half of their IT activities. Business and IT management skills will make up 65% of the internal IT skills portfolio, while most technology-intensive skills will be bought from outside the company.

IT managers indicate that their in-house staffs will place more emphasis on user needs and business processes, and anything that the company regards as not being a core competency is likely to be farmed out.

At Menasha Corp. in Neenah, Wis., the IT organization is "not going to try to be all things to all people," says Dennis Biederman, CIO at the $1 billion paper products maker. Therefore, he won't hesitate to look outside his staff for help on projects, including a recent SAP implementation.

"We try not to say 'no' to good projects [that would] say 'no' to our customers," he says.

5

The demand for new systems draws attention to project management. After the year 2000 problem fades away, organizations will begin to dig into a pent-up demand for new systems to enhance competition, says Gopal Kapur (gkapur@center4pm.com), president of the Center for Project Management in San Ramon, Calif. But their big concern, he adds, is they don't have enough skilled project managers.

Wilson sees that as a critical area during the next few years. "The one most sought-after skill set is project management: People who know how to get things done through others when they don't have direct authority and know how to create harmonious relationships are the critical people to find and keep," he says.

But to develop project managers, Kapur says, organizations must develop a project culture and elevate the status of the project manager. Last year, Kapur conducted a seminar for senior project managers, listing for them seven questions they should ask a project sponsor to determine whether a project should go forward. Many felt they couldn't ask those questions at risk of angering the sponsor or an executive.

To keep projects running smoothly, Foote predicts more companies will create the role of enterprise project manager — a person who makes sure all projects have the resources they need and understands how projects affect one another. Besides strong people and technical skills, they'll need knowledge of the business' goals and the ability to persuade managers to share their best people with other projects, he says.

6

The CIO undergoes a status upgrade. A study conducted last year found more CIOs becoming part of their companies' senior management teams. The study, by the executive search firm Korn/Ferry International and Financial Times newspaper [and published there July 1, 1998], found the following:

— The CIO's role is moving from technical planning and implementation to strategic planning.

— The ideal qualifications for the CIO are changing. The "ideal resume" of a CIO will come to include both technical/engineering qualifications and a background in finance, marketing and strategic planning.

— The CIO will become increasingly involved with external as well as internal customer support.

As information continues to drive much of the economy, CIOs could also start to become "chief innovation officers." Peter Burris, senior vice president and co-research director at Meta Group, says the IT organization must facilitate innovation in the business and must also demonstrate the value of each IT investment to senior executives.

Burris says he sees more CIOs coming from outside the technical arena, helping to better integrate IT with the rest of the business. The Korn/Ferry study found that 36% of the 150 U.S.-based CIOs in the survey came from outside IT, and, according to Mark Polansky, managing director of the IT practice at Korn/Ferry, that's more than in previous years. But 79% of the U.S. CIOs found general business to be at least "somewhat important" in order to succeed.

7

The rise of relationship management. Dramis says relationship management, or the ability of IT professionals to relate to people in the business units, is missing today but will be critical tomorrow. IT managers must be able to understand users' business problems and articulate the technology options that can fix the problem.

A November report by Gartner, entitled "The Five Pillars of IS Organizational Effectiveness," highlights the reason for that shift: End users' frustration with their IT organizations will lead them to take on IT roles themselves and turn outside the company for IT help. The result, the report says, "is often an adversarial relationship between [IT] professionals and nontechnical business users."

IT professionals "need to become more aware that they are businesspeople with an IT speciality," says Kenneth A. Rose, senior distributed computing analyst at AmeriGas Propane in King of Prussia, Pa., a supplier of propane fuel. "Without this understanding and without taking responsibility for what that means, IT people will still be viewed as expendables."

To develop that awareness, Peter Dupre, CIO at office supply distributor W. B. Mason Inc. in Brockton, Mass., mandates that his IT people do stints in customer service functions, such as taking telephone orders. "They get a real look at what makes the company tick day in and day out," he says. "We want to be the people who know how everything works everywhere in the company."

8

IT learning expands scope outside technical training. When Dupre has to hire, he looks for intelligence and character. "If I can find a nice, smart person, I can teach him anything," he says. His staff of eight, who are "real generalists" within IT, support 500 users. "We don't need a lot of people because the people we have can do a lot of things," he says.

And Jodie Ray, CIO at Brinker International, a Dallas-based restaurant corporation, says his organization is "very aggressive about training and development." He uses that not only as a recruiting and retention tool, but also as a way to grow his staff's skills base. Brinker requires its IT staff to take at least 40 hours per year in technical training and team development skills. Ray says he wants people with a wide array of skills who can work with different teams.

The flip side of that? As companies sprinkle IT functions around the organization and focus more on the uses of technology, most technology-intensive skills will become of secondary importance. They could either be outsourced or, if not on the payroll already, contracted out when needed.

9

IT organizations develop rapid-response capabilities to react to changes in technology and within their companies' markets. Like an army division ready to mobilize on a moment's notice, the IT organization will need to be able to quickly respond to change.

To do that, says Burris, IT must understand the business in which it operates, simplify the IT infrastructure so that the business can implement a technology solution faster and have easy access to skills — inside and outside the organization — to accomplish the technological end of the business' goals.

A firm that does that well, Burris says, is BMG Entertainment in New York, the global music and entertainment giant with big-name artists such as Aretha Franklin, the Backstreet Boys and David Bowie. BMG deals with many different technologies because of constant change in the music industry, Burris says.

J. Scott Dinsdale, BMG's executive vice president, CIO and chief technology officer, says being able to respond to change quickly begins at the top. "All executives are engaged in strategic dialogue," he says, so "strategy changes don't come as a surprise."

A step down, a company needs the right people so it can accomplish anything, especially "clear, terrific project managers" who assume accountability, Dinsdale says. They will then know where to look for the right people to do the job, whether inside the company or contracted from outside.

10

The year 2000 problem will unleash a deeper understanding of IT by the rest of the business — for better or worse. Hero or scapegoat? Depending on the company, the IT organization could wind up with either label next January. Regardless, the year 2000 problem will raise IT's profile across the enterprise.

About half of the 340 CIOs in the Korn/Ferry study see the year 2000 problem as a "blessing in disguise" for their organizations, drawing attention to IT's importance to the company.

Sheinheit sees the year 2000 problem as an IT upgrade opportunity.

"What we want to have coming out of [year 2000] is not the same thing just fixed; we want to have something better," he says. "That gives us a stronger platform on which to move forward. I really think that companies that are not in tune with this way of thinking will be left behind."

Copyright © 2000 IDG Communications, Inc.

  
Shop Tech Products at Amazon