If Forrester Research meant to stir the possum in forecasting the demise of the IT department within three years - and many people think it did - then it succeeded brilliantly. The company fanned a firestorm of criticism, tempered by the odd shower of support, in giving IT organisations three years before emerging e-commerce models kill them off.
Australian CIOs and industry players have joined their US counterparts in rejecting the forecast. They fully agree with Forrester's claim that the rapid expansion of e-commerce is forcing dramatic changes to the IT organisation's role. However, they vehemently rebuff its conclusion that the trend will diminish the reliance of organisations on in-house IT departments. Some of these players are even casting aspersions on Forrester's motivations, and questioning the quality of much of the research coming from it and similar organisations.
Forrester's controversial research report, entitled "The Death of IT", says e-business will be the nail in IT's coffin that puts technology management directly into the hands of business managers and outside service providers. Indeed, Forrester analyst Bobby Cameron, who wrote the report, says that as business processes take centre stage in e-businesses, "the IT organisation as we know it will disappear".
Cameron believes Global 2500 companies are reinventing themselves to participate in emerging e-business models - requiring an emphasis on processes, not management. But he says the demands of e-business create a technology management gap IT just can't bridge. "Separated from business process teams and isolated from external constituents and technology sources, the IT organisation as we know it will die," the report says. Most Australian CIOs and industry players just aren't buying it. For instance, St George Bank group executive information technology John Loebenstein describes the report as "headline grabbing at best".
"The CIO and IT department will not become obsolete in three years," Loebenstein says. "No doubt, as business changes, we will all be doing different things in the next years, but my prediction is that we will be as busy as ever - including managing those functions which are outsourced to Internet providers."
Loebenstein agrees with Forrester that the Internet provides some fantastic opportunities for corporations to achieve new economies and efficiencies, with procurement providing an excellent example. And he foresees a time soon when "buying/bidding" forums will probably be hosted-managed by outsourcers who will provide a "conglomerate" service. Other business functions - human resources, for instance - will similarly rise to new paradigms through Internet opportunities, he says. "These functions will generally be classed as 'commodity'-type functions, where there is no competitive advantage to be gained in having your own and much to be gained by scale efficiencies."
Even so, he says, some HR functions will undoubtedly be retained in-house, thanks to the growing recognition of people as a company's greatest asset and the source of significant competitive advantage. However, there's no way Loebenstein can see the demise of the IT department in terms of core business.
"IT ability, and its alignment with the business, is an area where companies define themselves," he says. "For example, in a bank. I can hardly see every bank subscribing to a common set of products delivered by an outsourcer through a channel, which is only the Internet. How will there be product and service differentiation?
"Also, it is evident that the Internet is not going to supplant all other channels and make all other channels obsolete. Customers choose which channel they wish to make contact through, and different channels provide the greatest value and convenience at different times or stages."
IT's All in the Title
So is Forrester making the classic mistake of talking about IT managers, but referring to CIOs?
True CIOs are not IT infrastructure implementers, but strategists who are truly key in aligning an organisation's IT with the business. True, the expansion in electronic businesses may increasingly disperse technology and its management from traditional IT departments to various business functions, such as procurement or distribution - as Forrester asserts. But Forrester insists that as business owners both within and outside the corporation take charge of technology management, a new e-business technology environment, exT (external technology) will arise. This will support internal and external constituents using technology from process teams and exT service providers.
Australian CIOs doubt it, and there are several powerful counter-arguments. For one, Joe Deragon, CIO of Zurich Australia, points out that all business units tend to be silos and it typically takes someone like a CIO to bring them together and coordinate their e-strategies. "So I would suggest that maybe the role of the CIO will become even more important - if they let him do his job - because in most organisations the CIO either gets relegated to, or is busy tending to, technology problems, so basically spends his day not being a CIO."
Like Deragon, Southcorp CIO Wayne Saunders accepts that e-commerce will require a different approach to the management of content (data) and processes from current traditional models. He also accepts that much of that management will rest with the business people who know and understand the content and business processes that drive it - as Forrester predicts.
However, Saunders insists the fundamental business processes that underpin e-commerce will still demand data to run the business be gathered and vast arrays of information be managed. "I don't see these 'e-business networks' replacing planning, budgeting, forecasting, and so on, or many of the other traditional aspects to IT and business such as plant management," Saunders says.
Of similar mind is Miriam Ryan, regional IT director at Oracle. Ryan says that as Oracle moves to standardisation, IT's role is becoming one of facilitator. But that transformation is taking place without in any way diminishing the IT organisation's importance. Indeed, the complexity of new systems argues against the likelihood of the IT department disappearing per se, Ryan says.
"The role of the IT department is moving away from customer development for sure. I would agree with part of it, but the need for support and the complexity of dealing with the support questions are growing," she says. "What I see is that the more you integrate systems together, the more complex they become by definition. It's requiring people with a good deal of technical knowledge to actually understand all those linkages and therefore unravel what it is that needs to be done."
Peter Hind, who works closely with CIOs as InTep manager with rival research company IDC, agrees with these sentiments. "When I read the report I thought: 'Well, here we go again. Here's yet another organisation that thinks technology solves everything, without any recognition of the change management, the people issues, the cultural things involved in the IT role'," Hind says.
"People are certainly talking to me about the idea of process outsourcing, where the IT department is a series basically of contract managers who manage suppliers but also act as the liaison between the rest of the business and IT.
"But I kept reading that article and I thought this could be a recipe for disaster - huge grey areas, nobody in the outsourcer really cognisant of where the business is and where the business is going, no dialogue going on between the two. It's this sort of feeling that you can outsource it all and there's some magic widget that will make that work. IT is all about people and issues and culture."
GartnerGroup, in the person of Marianne Broadbent, its vice president Executive Programs Worldwide, also sprang to the attack. Broadbent says a headline like "The Death of IT" certainly gets a reaction, but misstates or oversimplifies the position. It ignores the shift that has been going on and the message GartnerGroup's executive programs has been developing in conjunction with more than 1300 CIO members worldwide.
"As we enter the new millennium, it is very clear that the traditional, centralised IS organisation of the past has given way to a more fluid structure, with multiple organisational styles and sources that fulfil different purposes in the enterprise," Broadbent says. "In fact, for many Web-centric [companies], the very role of the CIO has evolved to that of business visionary, technology opportunist and channel strategist, from its historical roots as an operational manager and technology adviser. For others, it has been transformed into three separate positions: the business information executive (BIE); the chief infrastructure officer (CIO); the chief technology opportunist (CTO).
"The increasing involvement and focus of line management in IT oversight reflects the importance of IT to the attainment of strategic business goals. The advent of e-business and its impact on the business model will cause IT and business leadership to integrate their roles around the transformation of core business processes, and to take advantage of new market and operational opportunities."
Broadbent says that in her view the predominant role of the CIO is to "shape and manage informed expectations about the enabling role of IT in business".
Forrester claims e-business technical demands are exceeding a single company's IT capabilities. The complexity and rapid pace of change in e-business networks require scalability to cover unexpected surges in use; reliability to provide 24x7 availability; ubiquity to reach all segments of potential markets; and speed to change application capabilities to meet market shifts. Since IT groups can't efficiently pull this off on their own, Forrester says companies must seek outside help.
But Deragon says that with so few Australian companies with capability available, it would be a high-risk strategy to trust a business to them. "As it matures, that may become a viable thing to do; but at this point, it's not really a practical thing to do either," Deragon says. "We just don't have most of the e-skills in Australia in any volume. For example, in what I'm doing, where we've done an extensive amount of enterprise architecture around becoming an e-business which is all-encompassing, there are simply not the skills in Australia to effect it. So if I want to deliver that, I actually have to go offshore."
Colin MacKinnon, a partner with Deloitte Consulting, calls the Forrester report a "simplistic over-exaggeration" and says he has no doubt it was meant to provoke reaction. But he says it does recognise a real trend to transactional processing outsourcing.
"And whilst there's been a general theme towards outsourcing the operational aspects of IT, I think e-business is certainly going to increase that and there is going to be the advent of people that Deloitte tends to refer to as commerce service providers (CSPs) as opposed to ISPs.
"They will provide end-to-end business services around certain e-business-type transactional streams. So we will see a lot of operational transaction processing being done by third parties on behalf of the [organisation]. Whether it's an actual outsource or through a strategic relationship or something else is another issue."
But he says the only internal IT shops that will go will be the dinosaur IT operations that are totally focused around operational service provision. "Any state-of-the-art IT department is far more focused around relating what IT can do for the business and bridging the gap in terms of applying real understanding to the business of where technology is going and identifying opportunities for IT to contribute to the organisation's strategic success. That's never going to go away," he says. "But I would agree that IT has traditionally been a bit of a silo that the business has found difficult to deal with. I do agree that the business will increasingly be accountable for and will seek to own IT and drive it from a business perspective," he says.
On the other hand, Robert Heap, general manager outsourcing for Siemens Business, says the world of e-business was already changing the way organisations worked, and he knows just where Forrester is coming from. "Certainly, the electronic revolution has changed the way everyone works," he says. "In respect to IT this has meant a totally new approach. So rather than seeing IT in terms of its traditional support functions, it has become an integrated business tool that links interdependent companies via the Internet.
"The speed at which organisations are changing is also having a major impact, particularly for companies who lack the capacity to adapt quickly. This is where outsourcing companies like Siemens Business Services come into play, as we take over the risks and responsibility for managing change and ensuring a company's competitiveness."
Heap says the convergence of information and communications technologies is not only assisting organisations to work collaboratively towards shared business goals, but facilitating the creation of new businesses themselves.
Forrester's Cameron told US Computerworld Online he wasn't surprised by the CIOs' rejection of his findings. And he says if most CIOs he spoke to do not see themselves going away, chief financial officers most certainly do.
Cameron says other research surveys conducted by Forrester have also pointed to a declining role for IT groups. Still, he says, many CIOs appear to be either unaware or in denial about their shrinking role. For example, in one recent survey of about 40 companies, CIOs reported that about 60 per cent of all spending on e-commerce came out of the IT budget. "Then we turned to e-commerce vice presidents at the same companies and asked what per centage of their technology spending comes out of the IT budget," Cameron said. Their answer: 5 per cent to 6 per cent."