If Grace Removals Group IS manager Howard Malyon gets less than half a dozen calls on any given day from vendors wanting to talk to him about e-commerce, it's been a great day.
Grace Removals Group is only just venturing into the e-business arena, Malyon says, and doesn't yet know what kind of budget will be available to launch any e-business initiatives. It's done a proof of concept and knows where it wants to go, but Malyon accepts it's likely to be extremely difficult to find the right person to carry the strategy through. There's every chance he'll eventually decide to outsource much of the work in preference to bringing in experts for the short term who will inevitably take most of their knowledge away with them again once the contract expires.
Meanwhile, he says it's phenomenal how many people phone up wanting to latch onto the e-commerce bandwagon.
"Now whether they've got a good product or not I don't know," Malyon says. "But you think to yourself, I need to find out about this because obviously it is the in thing, and yet my knowledge of it isn't all that great."
With a dearth of expertise on hand to help him, Malyon is left to make those evaluations himself - and it seems other CIOs know exactly where he's coming from.
Time to Get Radical
"The IT director is in a unique position to help the enterprise implement a radically new business model for the e-commerce age," says Xephon (UK) research director Mark Lillycrop. "But this involves a whole new range of disciplines - in terms of Web-based development, value-chain management, customer information management, and security. With the scarcity of skills and technical resources currently facing the industry, we see the IT director of the future acting not as a line manager but as a top-level service provider to the organisation."
Lillycrop's conclusion is drawn from the results of Xephon's third annual "IS Plans" survey, just published in a report called Tomorrow's Data Centre. He says for most IT directors, being a service provider to their organisation will mean drawing heavily on the corporate experience of internal project teams, but bringing in external specialists as needs demand. Companies must give their most senior IT staff the flexibility to perform this role effectively - otherwise they will lose out in the e-business race, he concludes.
The IS Plans survey draws on discussions with 72 members of IBEX, an informal association of senior IT professionals from large (primarily mainframe-based) enterprises worldwide. The IT research and publishing company, specialising in the enterprise data centre, says it draws survey participants from a wide cross-section of industry sectors, and particularly the insurance, financial services, government and utilities areas. They share many common themes.
"The pattern remains remarkably consistent," the survey finds. "IT chiefs are coping with ever-accelerating technological and business change, with fewer top-class staff and a relatively static budget."
My Kingdom for Some Skills
The shortage of suitably qualified staff continues to plague IS departments as they wrestle with the new demands of e-business. IS managers were asked to identify their key priorities and challenges over the next two years. They identified the problem of finding and retaining personnel with the right mix of technical and business skills as becoming more and more critical.
Malyon knows all about it. When Grace Removals Group tried to find a network engineer recently, he found it so hard to find anyone with the right blend of business and technical skills that he finally decided to outsource the function. At least that way he could access the resources of perhaps three or four people from the outsourcer - people IS could never afford to employ full-time.
Meanwhile, Computron Software's IT director Satendra Hsankar has been trying to recruit three people for more than two months without success. Getronics Australia MIS manager Kim Turner says she hasn't had to look for any new staff recently but struggles to ensure the staff she already has on board have the right level of experience and training. Her combined strategy involves sending key staff on business courses, as well as seeding them as appropriate into business groups.
However, Freight Corp CIO Robert Mackinnon, who agrees there have been times when it's proved awkward finding exactly the right resource, accepts he's been luckier - or cannier - than most in eventually succeeding in getting the right person on board. "Either I've always been lucky or I've always engineered myself that way, but we're always doing interesting work," Mackinnon says. "I think if you're doing interesting work with an organisation that's got a clear direction and a future and that looks to be an exciting place to work, getting the right skills isn't a major problem."
The staffing issue made it into Xephon's top three "challenges" of 78 per cent of respondents this year (compared with 75 per cent last year and two-thirds of respondents in 1998). Cost constraints came second, nominated in the top three obstacles by half of respondents (51 per cent). Xephon says it's clear IS management feels its business contribution is now compromised by the budgets available.
What Goes Down, Spirals Up
The unit cost of IT equipment may have fallen sharply, but inefficient software, inefficient use of resources, inexpert systems management and administration have conspired with demand for higher levels of function to prevent technological advance from coming through in reduced spending. The picture for software is even more worrying, Xephon says. Gross inflation of products, massive profit margins, lemming-like acquisition policies and the creation of a sellers' market have caused a spiral of software expenditure that is all too rarely balanced by improvements in deliverable function or efficiency.
Lack of skilled staff also has an impact on costs. Apart from soaking up IS budgets, staff costs, driven by shortages, make software product development massively expensive. Some 51 per cent of managers interviewed this year in the survey cited cost constraints as a key challenge or obstacle.
At Computron, Hsankar says the executive is more inclined to see the key issue as delivering the benefit for the amount of investment planned. Malyon agrees cost constraint is a major problem, but Mackinnon finds Freight Corp is less concerned with the cost of developments than with their business benefits.
"Maybe I'm just aberrant," Mackinnon says. "And sure there's always cost constraints in any business, and every business has got a bottom line focus. But I've always found that if I'm doing things in IT that clearly have a business benefit - be it a means of improving the business' bottom line or something of strategic importance that may be difficult to quantify with the business case - I haven't had a lot of trouble getting the budget funding I require from the board."
Too Close for Comfort
Close liaison with business activity may make IS more interesting today, but it also means any computing shortcomings are immediately apparent to users. To make matters worse, almost every end user has a perception, however unrealistic, of how easy it is to operate a commercial computing environment. "However cynical it is possible to be about the gap between the reality and the perception by end users of their own expertise, it has to be said that IS has consistently failed to make IS as easy as it could be," the report concludes.
It says increasing maturity on both sides of the IS/business border should lead to more proactive contributions on one side and more realistic expectations on the other. Xephon finds real hope that the most mature environments will actually see the disappearance of any perceptible divide in the future.
In the meantime, corporate managers at Freight Corp are increasingly appreciating IT's ability to help them either gain market share or reduce their costs, Mackinnon says, without fully understanding how long it can take to build an industrial-strength corporate system. "There's a big gap between expectations and what IT can actually deliver."
In part, he blames a growing need for instant gratification along with the increased familiarity that comes with having PCs at home, especially where managers' children are involved. To deal with the issue, Freight Corp engages whenever possible in projects with a short, sharp duration.
"We're doing some stuff in e-business at the moment where we've laid down the gauntlet with the business to say we want you to think seriously about your priorities, and think seriously about what you can have delivered by IT within 90 days," he says. "We've really got the business to think about the things that they would like to have done. Then if they're too ambitious, we can counsel them about what's possible and what isn't. At least that way you build up a head of steam, and you allay some of their concerns about not doing things quick enough."
Freight Corp also relies on a corporate methodology that has a heavy emphasis on engaging the business in IT projects. The business takes responsibility for key decisions including budgeting and sign-off. Involving business unit managers in issue resolution makes them more attuned to some of the complexities and the issues to be resolved. "To use a cliché, it's really a partnership between the business and IT," Mackinnon saysMeeting increased user expectations is certainly a major juggling act, Malyon says. At Grace Removals, just about everybody now has a PC on their desks, so the expense of buying all that equipment is over. "Now we've got the expense of people saying: Well, I've now got all this you-beaut gear on my desk, I want to be able to do more with it'. But when you put in a budget and say let's spend $100,000 on a piece of software that can do this, that and the other for you, people say: Hang on, you want to spend how much?'."
The pressure means Malyon spends more time looking for alternatives and considering whether the proposed ROI of an investment is greater than the potential expenditure. "And I think often, when you look at the bottom line, [that sometimes] the return that you get when you make the investment isn't there, or is not as quick sometimes as you'd perhaps like it to be."
Meanwhile, at Computron, Hsankar struggles with greater demand from business areas to extract more from technology by way of promised benefits. He says business units want products to better use the Web, are keen to rationalise the amount of equipment and software in-house and want IT to concentrate more on new Web-enabled products.
Running to Stay in Place
IT directors place keeping up to date with changes in technology somewhere between a challenge and an obstacle. The issue came fourth this year in the IS Plans survey, nominated in the top three by one-quarter of respondents. It was second in 1998 (45 per cent) and fourth in 1999 (38 per cent), leaving Xephon to conclude the effect of the last significant wave of technological change - the incorporation of Web technologies into a variety of IS areas - is ebbing away.
Australian CIOs agree. Hsankar says keeping up with technology is a problem as well as a challenge in the sense that organisations frequently have to keep their life cycle short for new implementations and solutions or watch the technology game change before they deliver. Getronics' Turner tries to cope by sending staff on lots of training courses and to plenty of conferences, although she says it's hard to pick the valuable ones from the ones that prove a total waste of time.
Meanwhile technology marches on, and Xephon notes several technological trends of significance.
"The next major advance in technology - Storage Area Networks (SANs) - is gathering momentum. It is significant that all the major storage vendors, and numerous third-party support and services suppliers, have already acted to tackle concerns about innovation and heterogeneous conn-ectivity and interoperability," the report says. "Each has set up extensive interoperability laboratories, enabling them to test and certificate customers' proposed environments, and to take responsibility for end-to-end SAN operation."
The report notes one other significant current technology trend: the move towards component-based, perhaps object-based development - a move substantially aided by the advance of Java. However, Xephon says this is happening almost by default, rather than as a definite IS initiative.
You've Got the Whole World . . .
Most of the survey participants see their involvement in strategic business decisions increasing over the next two years. Indeed, the corollary of "increasing demands from the business" is that IT now has a role not just in the day-to-day operation of the commercial enterprise but in its whole future direction.
Most IT directors surveyed believe they'll play an increasingly large role in corporate decision-making over the next two years. With e-commerce topping the boardroom agenda, 54 per cent say they expect to exert more influence within the organisation, compared with just 8 per cent who see their influence diminishing.
For some IS shops that makes for particular difficulties.
"The MD here is certainly trying to drag us more into the actual day-to-day operation of the business and is concerned with how we can look at using computerisation to improve profitability, improve performance," Malyon says. "But as much as I think it's necessary that we just become another department within the organisation - that perhaps overlays a number of different departments from the point of view of looking at what they do and how we computerise it - it's also very difficult.
"You've got to see what is really fundamental to the business, which isn't always easy for IT because you're not always totally aware of how the business functions." Malyon says.
Well over half of respondents to Xephon's survey see the influence of IS management over strategic business decisions increasing (a slightly higher proportion than last year), while few anticipate a decline in influence. With so many companies now modifying their traditional business model and focusing far more on e-trading and online services, the IT manager has a unique contribution to make to the future planning process.
Web Projects Rule
The most significant IT project reported by respondents, by a huge margin, was e-commerce. Many research houses suggest that, although consumer-driven Web sites have fuelled Internet growth to date, B2B and e-procurement will be responsible for a much larger proportion of Web development in future, as the whole commercial supply chain moves onto an extranet-based model. However, Xephon's findings suggest the swing from consumer to B2B is not happening as fast as is widely believed: two-fifths of respondents listed B2B among their top five projects over the next two years, while nearly half are still focused on B2C. Some 72 per cent of respondents listed either B2B or B2C (or both).
"E-commerce dominates business thinking and the computing activity that supports it," Xephon says. "The survey findings show that the business-to-consumer variant is more important than business-to-business - at least to the predominantly large organisations in the survey.
"There are no dotcom companies in the survey panel, so the opinions expressed are those of established organisations. Perhaps the motivation of not wanting to be excluded from e-commerce in the consumer area is more compelling than the need to remodel inter-business value chains."
The report concludes flexibility and a more innovative approach are needed; the dotcoms are better suited to this approach, not least because they have no corporate cultural baggage to carry, but also because they are by nature entrepreneurial. They are betting the corporation on e-commerce success anyway, so it could be argued that they have nothing to lose.
However, e-commerce is not a huge issue for Turner at Getronics Australia, where as in many Australian subsidiaries, all e-commerce activity is being driven from head office overseas. "We're rolling out some service application systems at the moment, and consolidating those regionally. They have an e-commerce component in them, but the main driving factor there is global," she says. On the other hand, with every end user wanting their software to be Web-enabled, whether it offers a significant advantage or not, Turner says there is real pressure on the Australian IS group to deliver.
That experience is consistent with the Xephon research, which found "Web-enabling existing systems" an extremely significant issue for large corporates.
Faith, Hope and Security
Security has leapt from 17th place to fourth over the course of its three annual IS Plans surveys. Given the preponderance of mainframe users among the IBEX membership, one might expect security to be taken for granted, Xephon says. Not so; the Internet has raised a whole range of new security issues, many of which have threatened business productivity and corporate credibility in ways that could scarcely have been imagined two years ago.
Xephon says traditional approaches to security management are no longer viable, and many data centres are reappraising their approach to this highly sensitive area. Home Care Service of NSW acting CIO Ian Bullus agrees that while traditional approaches to security were quite sound, whether they will continue to be sound for the future must be a matter of continuous reappraisal.
"When you start opening up things to electronic transmissions which can instantly pervade the whole of the global scene, traditional mechanisms are not valid," Bullus says.
"Useful approaches are continuous monitoring and being continually aware of where possible breaches may be occurring and taking steps as necessary. It's never shutting the door after the horse has bolted, as per the old expression. It needs to be a proactive operation, not a reactive. You've got to actually do the belts and braces up front, not afterwards."
Hsankar is a little more relaxed, saying the whole area has become so decoupled it's now less necessary to build as much security into internal applications, with a host of vendors like VeriSign providing product making it easier to put security in place.
Meanwhile, Xephon says some of the key priorities of 1998 and 1999 appear to have slipped out of focus in the wholesale rush for the Web. Of course, issues such as network integration and consistent system management are still on-going projects in most large data centres, but Xephon says they've been eclipsed in the shift towards a more Web-centric view of the enterprise infrastructure.
However, Bullus doesn't see much sign of it in the public sector. He says while the NSW government itself is following a course of action to incorporate a lot more Web-enabled transmissions across the state with its Connect NSW strategy, in individual agencies internal systems remain predominantly important.
"If we can enhance those systems through the utilisation of Internet type technologies and Web-based technologies within, then so be it; but from an agency perspective, yes, there is that outlook, but it isn't all-encompassing. It's still business based - and [it's] business applications systems which are very important," says Bullus.
Xephon finds business intelligence - fundamentally important to the IT strategy of most corporates - is now being viewed in terms of Web and intranet content management, with corporate information stored in back-end systems being dynamically tailored and channelled according to user-defined profiles. However, for Bullus this is just not the case.
"Business intelligence is vitally important for the business operations; but in terms of turning around and saying it's Web technology that is pushing that intelligence - no. But there is a far greater emphasis now, and a far greater shift, back to the business of the organisation and the business of the government agency - what it is really doing and how it can use IT to facilitate that business."
The More Things Change . . .
Comparing its three annual surveys, Xephon says it is striking just how consistent the main priorities and challenges have been. Despite the rise and fall of Y2K compliance, and the meteoric growth of e-business, IT managers remain primarily a strategic service provider to the organisation, redirecting manpower and technical facilities according to the commercial imperatives of the day.
"Ultimately, their success as contributors to the strategic business decision' will depend on how adept they are at juggling increasingly scarce resources and predicting the next priority before it arrives," it says.
Our Aussie CIOs know just what it means.