What has IT done for me lately?
Re-engineering IT requires a lot of patience," says business consultant Jerry Hoff, former chief executive of Sun Life. "It's an enormous task, and it simply takes too long. In addition, most companies believe they have more important issues to deal with." The result: "IT is often left out of business re-engineering efforts." And that, adds John Alexander, president of Portland, ME-based Business Technology Consulting, is "like re-engineering insurance claims without understanding the claims processes."
Why is the prospect of re-engineering IT so daunting? Why do IT organizations often find themselves reacting to strategic initiatives, rather than playing an integral part in them? For one thing, while some re-engineering issues are universal, some twists in the process are unique to IT. When a company is realigning its business to help it respond more quickly to customer demands, for example, it already knows how long the current process takes, so a practical goal can be established, measured, and adjusted. IT organizations, on the other hand, have few targets and even fewer measurements, and those that do exist are frequently driven by hardware or software are constraints rather than business goals.
Eli Dabich, a former CIO who is now principal of the Maryland- and California-based consulting company Synergies Associates, believes discipline is key. "We must put discipline into the maintenance of IT," he says. "IT organizations need to button down their systems and clean up their maintenance processes." Dabich notes, for example, that the maintenance of existing legacy systems still is consuming a minimum of 30 percent to 60 percent of most IT budgets. Most CEOs do not understand why these costs are so high, he adds, and most CIOs are afraid to tell them. Instead, CIOs often recommend building a new system.
The question of what IT is doing for a business must be defined by the business itself. The answer is an integrated infrastructure that supports IT workflow, minimizes the implementation of new technologies and processes, and provides a framework for all projects.
It is particularly critical to measure the overall end-to-end solution to ensure that one process is not improved at the cost of another. The automation becomes strategic because a good process workflow tool automatically collects the metrics and data required to do the analysis for the improvement processes.
The automation must include and control both the environment for the systems and their technical development. The automation for both the processes and the system environment enables organizations to eliminate redundant and inefficient processes and system components. It provides a benchmark for future change and supports current project impact analysis. It also provides the framework to introduce new tools and technologies - when they are appropriate. As Business Technology Consulting's Alexander points out, it's important not to allow technology to drive the business, but to make sure that the chosen technology solves the problem and supports the business.
IT organizations have a myriad development and maintenance tools from which to choose. Therefore, workflow tools must have an open architecture that allows tools and processes to be easily linked and integrated. Programmers should be able to sit at their PCs and point to functions, without having to know which tool or technology will be invoked. The intelligence must be in the workflow processor if IT is to achieve true productivity.
The tools that can help automate IT processes are available today, and the results are encouraging. Organizations that have defined, analyzed, and automated their processes have demonstrated an average 30 percent cost savings. More important, flexibility to respond more quickly to their internal customers has increased dramatically, and this, in turn gets products and services to external customers more quickly. By implementing process flow tools, communication between business groups and IT also has improved, creating stronger alliances between what could otherwise be competing factions and producing lasting benefits and results.
Working together, cross-functional CEOs and CIOs create an IT organization chart tailor-made for their corporate strategies.
While many corporations have turned themselves inside out over the last few years, their efforts at re-engineering, at flattening a hierarchical structure, at managing change too often have not taken the IT organization itself into consideration. Though technology and its uses have changed, the IT organizations at most corporations are still in a catch-up mode when it comes to meeting business-strategy requirements, let alone providing strategic advantage.
For their part, CEOs, more grounded in strategy than technology, often have been content to have the same type of faith in their CIOs that most people have in their physicians or their accountants: If the doctor recommends surgery or the accountant suggests a new deduction, many consumers will bow to expertise and acquiesce - not knowing the options or alternatives. If the CIO tells the CEO that adding technology will fix the problem - as he often has - then technology probably gets added.
But as the demands on technology have grown and as top executives have come to suspect that technology alone might not be the answer to their problems, corporations have begun to seek second and third opinions. IT executives now lie awake at night worrying not only about their job security, but about their function's strategic position in the corporation, about a lack of internal and external customer satisfaction with IT's "value-added," about upcoming funding battles, priorities, outsourcing, flexibility, and resources - both financial and technological. Worse, the corporations they serve are continually dissatisfied with the service and the information they're getting from their IT organizations. In their frustration, they often make decisions - to outsource, to cut funding, to buy new equipment - that may stem the bleeding, but actually may cripple the company in the long run.
The solution to these problems is more basic, more systemic. It involves the combination of culture, reward structure, and information flows that are all largely dependent upon the original structural design of IT organizations, which were intended to drive a set of outcomes that are very different from those required today. If you change the organizational structure, it sets the stage for other efforts to encourage the right behaviors.
The sort of traditional organization structures that characterize most IT organizations neither accommodate changing information flows nor drive cultures that can take advantage of today's knowledge worker. Embedded in the industrial revolution, where the organizing principle was the control of labor, and focused on maximizing control, creating stability, and maintaining costs, these structures simply cannot support the development of scarce specialized skills or respond quickly and effectively to the needs of today's virtual work groups and dynamic cross-functional teams.
What's needed is a structure that is flexible, that is focused on quality and value creation, that provides for empowerment through education and delayering, and that aligns the strategic needs of the enterprise with the capabilities of information technology - which means that no two structures will be exactly alike (as the sample organization charts featured above and below demonstrate).
Creating this customized design requires the active, cross-functional participation of the CEO, who, while clearly charged with seeing the needs of the whole enterprise, is also more and more frequently being called upon to understand the rudiments of information technology. But it also demands a strong, empowered, respected, and cross-functional CIO.
The CEO must act as the captain; the CIO must function as both a change agent and an organizational architect - a "business partner" in a very real and practical sense. The CIO must bridge the gap between what technology is capable of doing and what technology actually does - and then be able to explain that to the rest of the company. The cross-functional CIO needs to know something about the powerful influences of organizational culture and the many impacts of technological interventions on job designs, communications, and, ultimately, customer satisfaction.
In fact, CIOs who have successfully led large-scale transformation are actually spending less and less time on the technical aspects of computing. Instead, they are spending nearly 90 percent of their time on such change-management activities as change planning, governance, leadership, culture, program management, and communication - terms that were unlikely to even be part of their vocabulary just a few years ago.
Before making any attempt to restructure the IT organization, re-engineer key processes, or initiate a change program, the newly cross-functionalized CIO has to align the IT organization's vision strategically with that of the enterprise.
It's critical, also, throughout the redesign process, to evaluate whether decisions are being made for solid business reasons, or whether politics, culture, the corporation's history, or the organization's previous structure are clouding judgment and encouraging easy, but not necessarily appropriate decisions.
And selecting a design is not the end of the process. The best design is only a paper tiger if it isn't implemented, tested, refined, and continually kept up to date. A new structure that is imposed from above without regard for both the cross-functional IT needs of the corporation and the capabilities of IT itself will face severe limitations when it is implemented.
Robert Laud, a partner in Andersen Consulting's Change Management practice, specializes in organization strategy and design, culture change, technology and work force integration. Peter Thies, a director with the Delta Consulting Group in New York. works primarily in the areas of organization diagnosis, organizational change and architecture, and information technology strategy.
Horror stories abound, but some OEOs and CIOs are working well together.
"In the '80s, companies poured millions of dollars into technology that bore no fruit for them," says Evan Scott, a partner at the Howard Fisher Associates executive search and consulting firm in Philadelphia, which specializes in technology placements. "There isn't a company today that hasn't been burned in some way by technology." In response, legions of management consultants, business-school seers, executives, and technologists have spent much of this decade calling for the closer integration of business and IT strategies.
In spite of the rhetoric, bringing the two together has proved to be easier said than done. Companies still are struggling to get the value they expect from their systems, and their disappointment is reflected in the turnover among those who oversee corporate technology: Every two years, about a third of CIOs in America change jobs, according to annual surveys by Deloitte & Touche LLP.
But there are some success stories out there - companies that have built systems on time and within budget, used the technology to meet business goals, and, yes, even some that have found a measure of competitive advantage. In those corporations, executives have developed ways to bridge the gap between technology and business - and for the most part, they've done that by bridging the gap between CEOs and CIOs.
"The turnover [in CIOs] tells you something in itself," says Frank Erbrick, CIO at UPS in Atlanta. "You have to ask yourself the logical questions: 'Why are these guys failing so badly? Are they all the dumb people in the industry?' That can't be, so there has to be something else wrong. The way they're managed and the way they play in the corporate world is the difference."
Companies that have enjoyed success with their technology tend to understand how the top technologist's job has evolved, says Scott. "The CIO position is not a technology role anymore, it's a business role. It's an influence position, and the CIO has to be a good business person."
Erbrick, who rose through finance and operations at UPS, fits that bill - and he's been the company's CIO for an almost unheard of 10 years. During his tenure, he and CEO Kent "Oz" Nelson have worked closely together to move the $21 billion shipping company squarely into the Information Age. "We built the world's largest tracking system - we have package-level information on every one of our packages," says Erbrick. "We built a new financial system and an entirely new billing system." And they built all the systems needed to run UPS' fleet of planes - "the seventh-largest airline in the U.S."
Erbrick agrees that technical proficiency is secondary in a CIO. "Good IS guys believe in the company and in the value of their contribution to that company."
Three years ago, Snap-On Inc.'s CEO Robert A. Cornog hired Lawrence G. Panatera as CIO and immediately put him to work learning Snap-On's business. "He said, 'Don't worry about IT for the first 90 days; it will sustain itself,'" says Panatera. "He gave me access to everyone and every place in the business. I visited the field organizations and all our various facilities. I really understood what it took to take a tool order and then how to make and deliver tools."
One of their first accomplishments, Cornog says, was to create more comprehensive statements to send franchisees that provide information needed to run their operations more effectively. And now, the company is working to shave weeks off the time it takes to pull inventory information together.
Many companies bring technology and business together by putting the CIO in the upper tiers of the organization. At UPS and Snap-On, for example, the CIO reports directly to the CEO. But other arrangements can work, as long as the CIO has access to the top and participates in decision making. "You not only need to be on that executive floor, you need to be one of the guys," says UPS' Erbrick. "When I walk into the CEO's office with the CFO, I'm his peer. There is this fundamental trust. I am involved not only with development, but with the genesis of the idea. My efforts are critical. What initiative can they undertake that doesn't impact information systems?"
At the Chicago Mercantile Exchange, the relationship between IT and business has been fruitful enough to win the Partners in Leadership Award given annually by the Society for Information Management in recognition of effective cooperation between corporate and technology executives. CIO Mike Kelly, though a layer away from CEO William J. Brodsky, is kept in the loop. "I regularly sit in on the senior staff meeting, where we discuss the whole gamut of running the exchanges. I get the feedback; I get the sense of where the problems are; I get an opportunity to raise issues at the staff level, particular solutions to particular problems," says Kelly.
Although CEOs and CIOs often talk about working in partnership, they are not, after all, equal partners. The CIO can only do so much on his own; it's the CEO who bears much of the burden for making the relationship work.
"You need a very strong senior leadership that looks past short-term or vested interests and toward setting up an environment where things can be tried that have longer term and much larger potential," Kelly says. "Obviously, it's the CEO who provides the political cover and the resources.
Successful CEOs know when to back the CIO up - and when to back off. "You built the organization, and you have to believe in it," UPS' Erbrick says. "If not, get rid of it. But don't second-guess it. The CEO should define what the business needs to do, and define what technology needs to do, and then set up long- and short-term goals as he would for anyone else in the company. But don't tell the IS guys how to do it."
The CEO also can help by taking responsibility for gaining the IT knowledge needed to work in concert with the CIO. Snap-On's Cornog, who regularly attends technology seminars - often along with CIO Panatera - says, "Whether we start out as engineers, lawyers, or financial people, it is important that we understand what technology can accomplish." But, he adds, "first you have to know what technology you have; next you have to know where you want to go; and then you have to have the patience to get there. You have to realize that technology rarely provides immediate gratification. As a CEO, I have to look far out on the horizon, at what I am trying to accomplish in the long run, and what the business will eventually look like."
Mark Bartolomeo is president and chief executive of Softlab, an Atlanta-based developer and marketer of maintenance and redevelopment products and services.
RELATED ARTICLE: CEO POCKET GUIDE TO The Computer Biz, Er, Business
CIOs, doctors, and politicians share a similar curse: They can't speak plain English. Here's a quick entree to computerspeak that will help chief executives hold their own during the next IT (oops, that's Information Technology) tete-a-tete.
Chief Information Officer (CIO). He's supposed to be running your computers and stuff, but he's more worried about appearing to be a business guy. CIOs lust after just one thing: your job.
IT Organization (ITO). A mysterious bureaucracy run by the CIO that normal employees love to hate. Be bold - it's a great candidate for outsourcing.
Client/Server. A new time-waster that's supposed to replace the mainframe and save money. The development software is so simple that none of the mainframe programmers knows how it works.
Cross-Functionality. Desired trait of mainframe programmers who have to learn client/server. Also, ability of hardware to do many things, according to the guy who sold you the darn box.
Object-Oriented. Client/server programming technique akin to Tinker Toys. Computer instructions are put into modules like those round, knob-like pieces. The system works when you plug 'em all together with the sticks. Objects are reusable if not glued.
Data Warehouse. Like a giant room filled with computer diskettes containing every report in memory, and then some. Ensures that no one goes without some dirt on his or her predecessor.
Electronic Data Interchange (EDI). Automated software that lets suppliers and customers shovel more reports into your data warehouse. But not to worry; that saves money, too.
Internet. Time magazine's next "Man of the Year." A revolutionary network connecting every computer and wacko in the world, filled with smut and already attracting mall rats. Like your IT Organization, no one really runs it; unlike the ITO, it actually works.
Intranet. A corporate internet connecting every computer and wacko in the company. Usually linked to the Internet.
World Wide Web. A labyrinth of computers linked worldwide over the Internet. Mainframe programmers don't know how to develop Web software, but ordinary mortals can use it after five minutes of training.
Firewalls. Sort of a condom for your intranet. A computer and software that protects your data warehouse from exposure to hackers while allowing you to sample the Internet's pleasures.
Capacity Planning. The CIO's attempt to justify buying more computers. Works as well as President Clinton's attempt to devise a national budget.
Massively Parallel Processing. A computer so powerful that it can compute the national debt to 24 decimal places. Uses hundreds of microprocessors to simultaneously work on different parts of the problem, like members of Congress working for the country's greater good.
Asynchronous Transfer Mode (ATM). Superfast networking technology that simultaneously transmits voice, data, and real-time video. High-margin product sold by networking companies that saves money.
Broadband. Network with enough capacity to simultaneously carry multiple channels of voice, data, or video. Required to fill your data warehouse to capacity by the next capital budget cycle.
Workflow. Automates procedures by imposing sequential rules on each procedure. Required by IT Organizations, because mainframe programmers don't understand how real people do their work.
- Dave Buerger
Dave Burger is a computer industry consultant and writer in Atlanta. He can be reached through the Internet at firstname.lastname@example.org.
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|Title Annotation:||includes related articles and glossary of IT terms; information technology|
|Publication:||Chief Executive (U.S.)|
|Date:||Apr 1, 1996|
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