Mapping the New landscape

Mapping the New landscape

"They say that time changes things, but actually you have to change them yourself."-- Andy WarholThe survey finds CIOs grappling in a world of rapid and radical change both in terms of technology and the fundamental ways business will use it. While e-commerce is an important breakthrough that is reshaping the business landscape, information technologies such as data warehousing, workflow management and new architectures will also play a critical role in determining whose IT strategy is best-suited to the challenges of the 21st century.

-- Russell Brewer, partner, technology transformation, Deloitte & Touche Consulting Group AustraliaFrom the explosion of the Internet as a business development tool to the rapid expansion of new technologies, CIOs around the world are bracing to face yet another onslaught of massive change. Within two years -- electronic commerce (e-commerce), that long-heralded yet so far unrealised "killer application" of the Internet -- is set for explosive growth.

And CIOs, usually ultra conservative when it comes to early adoption, are not only accepting the element of risk but are using it to spur on their efforts.

In fact, there are so many CIOs now prepared to play with fire in this area that Deloitte & Touche Consulting Group, which recently released its new survey of chief information officers, has described what it sees as a substantial paradigm shift towards acceptance of risk.

" . . . what's remarkable is this element of risk, which -- far from discouraging the marketplace -- only seems to spur it on. If we're not mistaken, this is nothing less than a fundamental paradigm shift in favour of risk -- with a corresponding fear of the equally real risks of inaction," the report says. Indeed, the survey paints a picture of a new breed of CIOs overcoming their natural caution as the sectors of consumer business, energy, financial, health care, manufacturing and public get ready for explosive adoption of the Internet as a true transaction channel.

"Many of these businesses are saying that this is going to happen and there is no use avoiding it or deferring it until something comes along that totally minimises the risk," Deloitte & Touche Consulting Group Australia partner, technology transformation Russell Brewer told CIO. "And so they are accepting the fact that there's going to be some degree of risk there, because they see the greater risk as not doing anything -- and that needs to be recognised by the CEO, as well as the CIO and the Board."Summarising the responses of more than 1000 CIOs around the world -- across six primary industries and 25 countries in every major region of the world -- the survey report is designed to help CIOs and their organisations plan for the future by providing a snapshot of the recent past. The report also projects how the IT world is likely to look in two years, based on CIOs' planned spending today, and according to Brewer, it shows CIOs poised at a historic business watershed.

CIOs are acutely aware of the risks posed by e-commerce, the research makes clear. Technological immaturity, the urgent need to address other project priorities including Y2K, and even more pressing, lack of proven business benefit are all identified as barriers to internal applications.

Of overriding concern is security, both when it comes to marketing (58.6 per cent) and customer transactions (57.3 per cent). Yet the CIOs interviewed for the survey seem to have acknowledged that while security is always a concern, there's another danger they can't afford to ignore -- that organisations might be so cautious in adoption that they end up missing significant opportunities.

"Until now, businesses have been hesitant to adopt e-commerce because of security concerns, or the perception that their customers simply aren't using it to buy products and services. Now, companies are coming to the realisation that security will always be an issue -- but that it's less of a concern than missing out on a vital new channel that could provide a tremendous competitive advantage," Brewer says.

"Sure, CIOs remain concerned about security on the Internet -- who isn't? -- but these doubts don't seem to be stopping them. Perhaps they're coming to the realisation that security will always be an issue. Or perhaps CIOs reason that, on balance, security poses less of a risk than that of missing a vital new channel -- not to mention the possible revenues and enhanced market position of those who get there first," the survey report says.

Or as Brewer puts it: those who make the investment and take the time to get it right will benefit, gaining significant competitive advantage over their more cautious colleagues. But will the advantage early adopters win last long? Brewer has no idea how long the window of opportunity will be. "Anything which comes along has a certain window of opportunity and I can't predict how long this one is going to be and I don't think anyone can, given that things are evolving so fast," he says.

Coming of Age

According to Brewer, the message CIOs should take from the report is that now is the time to pull out all stops. Reinforcing that view is the companion and newly-released Deloitte & Touche "1998 Annual Software Industry Report", which focuses heavily on e-commerce and the Internet and the way they are already changing the face of employment in some industries.

"The travel agent, the stockbroker, the fax machine service technician -- just a few professionals whose ranks may thin at the hand of the Internet. Today it is commonplace to book your own travel, trade stocks on the Web and not use the fax machine, preferring to transmit clean copies of documents via e-mail," that report says. "Since our last report we find enterprises and consumers adjusting to new business models. For some it's a struggle. For most it's an opportunity not to be missed."With everyone agreeing the Internet represents the future of business, the survey set out to determine when the Internet would take its place as a significant business development tool. The answer? "Beginning now and growing steadily over the next two years." Indeed the authors predict electronic consumer transactions on the Internet will increase by almost 300 per cent over the next two years, reaching an adoption rate of more than 50 per cent.

The so-called epicentre of the 300 per cent Internet tremor is in the range of active "customer transactions" -- from buying a car to banking. Within two years, such Internet transactions will pass the critical 50 per cent mark. And "passive" marketing activity will approach a penetration level of 80 per cent, according to the report. During the same timeframe Internet-enablement of supply chain applications will increase by 45 per cent, with more than 70 per cent of companies using the Internet for business-to-business communications and thus freeing commerce from the bonds of time and place.

Brewer says equally significant is the trend for major applications from suppliers like PeopleSoft and SAP and Baan to become Internet-enabled. "The major ERPs being put in place now have this Internet facility being provided, with the view that businesses are in fact going to be going down that particular line," he says.

Given this context, it's not surprising that the survey finds technological innovations are fostering a need for even further technological innovations to support them, and predicts information access technologies like data warehousing and intranets will more than double over the next two years. At that rate the Internet will have penetrated up to 80 per cent of all organisations before century's end. At the same time ATM (Asynchronous Transfer Mode) should increase fourfold and use of network computers should double as organisations seek to leverage new distributed systems architectures.

The report puts this down to what it calls the "overall explosion in today's technological climate" in a realm where one technology or need supports yet another technology or need in a seemingly never-ending cycle. The report describes the evolution as occurring in three phases.n In the first, the organisation is building the basic architecture of infrastructure, with much of the investment aimed at creating LANs or other infrastructure to allow companies to make even greater investment in emerging technologies.n The second phase sees technologies implemented to improve productivity or cost advantages through improved processes, delivery systems and enterprise-wide applications. The survey identifies sophisticated tools now gaining wide acceptance -- like groupware, workflow management and voice recognition -- as being capable of yielding even greater productivity and profitability.n The final phase is where technologies are implemented to enhance information access and hence strategic advantage. Phase three is where the company finally reaps the cumulative benefits of its technology investment.

Not surprisingly, the major investment so far has been in architecture, followed by cost-cutting productivity tools.

"In the future, we will see more emphasis on information access tools -- tools designed to help companies make smarter decisions," the report predicts.

"Because of their complexity and high cost, access technologies have long remained at the bottom of CIOs' priority lists. But now that the technology is mature and the need more pressing than ever, it's clear that, before the end of the millennium, access technologies will be the hot ticket. So hot, they'll be implemented in four out of five companies."The need for information and data warehousing is becoming critical, according to Brewer, as is the need to make that information available over the Internet to customers and to all those who need it internally. "While e-commerce is an important breakthrough that is reshaping the business landscape, information technologies such as data warehousing, workflow management and new architectures will also play a critical role in determining whose IT strategy is best-suited to the challenges of the 21st century."Technologies including automated call centres will take the customer relationship management exercise to new heights, he says.

"A lot of people spend a lot of money putting in call centres, but they don't necessarily have them linked to their computer system. They don't actually understand it is both inbound and outbound; they don't understand there are a vast number of different ways and means that the customers and businesses can actually communicate with your business, rather than just over the phone.

"The smart ones are putting in the time to think through the strategy, to work with their people internally, to engage people who have done it before, and to look at how they can bring all the aspects of the business together to achieve this new dynamic. They know it is about managing the relationship between themselves and their customers and themselves and their suppliers," Brewer says.

And this customer-centric focus is coming sooner rather than later, underpinned by appropriate technologies including data warehousing. Make the information in the data warehouse accessible via browser software over the Internet, intranet and extranet, and a new relationship with customers becomes possible.


For some, re-engineering is seen as a technique whose failures have considerably outweighed its successes, and as synonymous with downsizing. But the report makes clear that re-engineering is still vitally necessary for businesses needing to realign their work processes to position them to better harness the full power of new information systems. And CIOs reported little difference between their expectations of benefits and the benefits they have achieved from re-engineering.

For instance, on a scale from 1 to 5 -- where 1 equalled no benefit and 5 equalled significant benefit -- CIOs rated their expectations of both improved service and improved employee efficiency at 3.8, and their realisation of these two benefits service at 3.3. And they rated their expectations of increased flexibility/agility at 3.6 and the realisation at 3.1.

This has given the authors of the report enough confidence to predict that soon re-engineering will not be seen just as a means of cost cutting but as a vehicle of revenue enhancement and growth. "Indeed, if re-engineering shows anything, it's that people and organisations can consistently hit new targets -- but only if they take careful aim," they say.

Local Perspective

As well as views from specific industries including consumer business, energy, financial services, health care and manufacturing, the report also provides comprehensive regional views from CIOs. It shows, for instance, that 31.9 per cent of Asia Pacific CIOs currently use supply chain applications, and 39.9 per cent intend to within two years. In North America, by contrast, barely 13.6 per cent of organisations are currently using supply chain applications, while a whopping 51.4 per cent intend to within two years.

Brewer warns the data here should be viewed with caution, saying Australian CIOs' attitudes typically reflect those of their North American counterparts more closely than those of their colleagues in the Asia Pacific.

But Australian CIOs do have a serious problem in getting the people who are focused on the strategy of the business -- the marketing, business development and corporate strategy people -- to work together on adoption of technologies like e-commerce. "Some people see this as a whole lot of technologists getting their jollies off on technology, where it should be seen as a real business opportunity, and it has to be part of the overall corporate strategy if you are going to actually move in this direction," he says.

"You can't set your objectives without the right technology strategy, and yet the technology strategy in all its various architectures then enables the business to achieve its objectives and its vision. And I think it's a question of people being able to get that loop closed, and to understand what it all means."Exploding the MythBy dint of being the largest and most complex projects most organisations will ever undertake, ERP packages, the report says, are virtually guaranteed to produce high levels of emotion and questionable notions. And it sets out to explode at least one myth -- the conventional wisdom that implementing SAP than implementing any other package results in good people leaving the organisation.

In fact, average staff turnover in SAP-based IT organisations is virtually identical with turnover levels in PeopleSoft- and Baan-based entities; while as a proportion of the overall IT budget, allocations for training and recruitment for SAP are virtually identical with those for Oracle and PeopleSoft.

-- S Bushell

CIOs In Profile

The glass ceiling is firmly in place for women CIOs, especially in the Asia-Pacific, where only 5.4 per cent of CIOs are women compared to 8 per cent overall. At present North America, Central Europe and Africa lead the world in terms of advancing women into the ranks of CIOs, the report says, with the number of female CIOs in North America edging up from seven women per 100 CIOs in 1994 to 10 in 1997.

North America also distinguishes itself by the size of the CIO salary. The average salary for a CIO in North America is $US122,000, while it is just $71,000 for Asia Pacific. If that rate sounds rather low, put it down to the lower earnings of female CIOs. Male CIOs in the Asia Pacific earn an average of $96,000 per annum, while for females the rate is just $70,000.

-- S Bushell

*[CIO magazine's annual Salary Survey appeared in the May issue -- Ed.]

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