It would be unfair to say that all IS groups have simply stuck their heads in the sand and ignored the e-business changes swirling around them. In fact, as we researched this special report, we found several companies that have started to adapt - or at least have anticipated the need to adapt - to new IS demands. In some cases, new leaders have been brought in to drive change; in others, veteran CIOs have thrown out their old game plans and started fresh.
Some of the companies are traditional brick-and-mortar enterprises trying to adapt to e-commerce; others are high-tech vendors or Internet start-ups that are struggling to manage their own growth.
Among these progressive companies, profiled below, are The Mony Group, which turned an outsourcing disaster into a re-engineering success story; EDS and 3Com Corporation, a pair of IT vendors whose CIOs have reshaped IS because of e-commerce; and Drinks.com, a brand-new Internet start-up whose IS leader wears both the CIO and CTO hats as he strives to bring some traditional IS and business sense to a non-traditional business.
Mony: Starting Over
As CIO of The Mony Group based in New York City, E P Rogers in 1994 outsourced his entire 390-member IT department to CSC in a seven-year deal valued at $US210 million. The goal was to upgrade Mony's antiquated IT systems and prepare the company for e-commerce. But the result was disaster. Two years after inking the deal, it blew up over conflicts about cost and scope. Rogers sent CSC packing and rebuilt Mony's internal IS group. Subsequently, the Mony story became notorious as the cautionary outsourcing tale.
But what's little known is that in the wake of this disaster, Rogers hasn't just rebuilt IS; he's completely redefined its - and his own - role at Mony.
Mony's success story begins at the end of the disaster. When the outsourcing smoke cleared at Mony's IT centre in Syracuse, New York, Rogers had 240 IT workers left from the CSC transition. He offered jobs to them all, and 92 per cent returned. That left him with 115 jobs to fill, "And they had to be the best", Rogers says. You see, in the outsourcing interim, Mony's business changed to embrace the Internet. "The edict came down: If it's not Web-based, it must be Web-enabled," Rogers recalls, and so he had to recruit IS workers who possessed the hot new Internet skills. "But we found it was not just technical skill sets we were looking for," he says. "We needed people who were wired differently, who had a different expectation about how to do things." He needed people with business, Web and project management skills who could think, work and change course fast.
Ultimately, Rogers ended up infusing his IS group with a youth movement - scores of staffers recruited from upstate New York schools via job fairs, billboards and movie screen advertisements. "We did a lot of little things to recruit people," Rogers says. "It was not a conscious thing to go after young people, but people are wired differently coming out of school today. Their performance forces other people to think differently. [Veterans] can't help but love their energy and the way they get things done." Since adding these new people and skills, Rogers' IS group has upgraded Mony's technology infrastructure, built the company's Web site and improved its relationship management skills to work more effectively with business partners and vendors. The latter change required soft skills training, as well as recruiting people who possess some of the project management skills necessary to negotiate work across functional, geographic and IS boundaries. Reporting relationships have changed too. IS is still a centralised unit reporting directly to Rogers, but IS employees are deployed throughout the company's business units and are working under dotted-line reporting relationships with business executives.
Rogers is even willing to outsource selectively, but he'd never again turn over everything to external vendors. "That whole outsourcing situation was an executive MBA program in what not to do," Rogers says. Outside IS, Rogers' business peers can't help but notice how he now approaches work differently. In the old days, pre-outsourcing, Rogers pretty much minded his own business up in Syracuse. But during the outsourcing debacle, he started spending more time at corporate headquarters in New York City, where suddenly he found himself on the radar screen of all his business peers. "People started seeing me, getting to know me and saying, You need to be involved in this . . . '," Rogers says.
"When you're there for those early discussions, that's when you really start making a difference. That's when you start to develop a partnership focused on results." Since connecting with the business side, Rogers has partnered with the marketing and distribution departments to refine Mony's Internet presence, and he's established a place for IS at the boardroom table when prospective mergers and acquisitions are discussed. Through his outsourcing experience, he's helped IS acquire vendor management skills that benefit the entire company.
Clearly, Rogers' role as CIO has changed. "I used to spend 90 per cent of my time on IT stuff," he says. "Today I probably spend 80 per cent of my time on corporate business projects." Similarly, with new technologies, new skills and a more collaborative style, IS has evolved into an organisation much more attuned to the business. "IS has become more vibrant," Rogers says. "We used to be in the back office, but now we're out front making a difference every day." 3Com And EDS: Walking the Talk We frequently ignore the IT vendors - dismiss them as disconnected from the market pressures and changes that affect their customers. Yet at two of the best-known IT product and service vendors, 3Com and EDS, the IS organisations are prime examples of "early adapters" - IS groups that faced the forces of change early and whose senior leadership responded by reorganising and refocusing their IS strategies and personnel.
Everything has changed at 3Com Corporationo. One of the pioneers in computer networking services, the California-based vendor recently divested portions of its businesses (for example, Palm Inc, the manufacturer of Palm devices) to refocus entirely on the small-to-midsize networking market, products for consumers and network service providers. Internally, 3Com has reorganised to focus almost entirely on its network and the Internet as the means to conduct and create new business.
How do these changes affect IS? The CIO role is essentially split. CTO John Hart, a veteran 3Com leader, heads the group developing new, emerging technologies for 3Com to develop as products, while new CIO David Starr, formerly CIO of Knight-Ridder, finds himself reshaping the traditional IS organisation - and his own role - to improve the company's own operations.
"Before, the CIO role was more maintenance and development, but now it's more of a business partnership role," Starr says. "It's a different kind of animal." Like most companies, 3Com used to have a do-it-all IS organisation: application development, desktop support and network management. Today, the desktops are outsourced, data centres are headed that way, and the network is everything - virtually the only thing - for Starr's internal IS group. In a decentralised environment necessitated by 3Com's global presence, many of Starr's 750 IT staffers are assigned to work in business units, reporting at least indirectly to business heads, taking a lot of day-to-day control out of Starr's hands.
This collocation puts business skills at a premium in Starr's group.
And while Starr has given up some aspects of traditional IS management, he maintains a tight grasp of IT resources. His top priority is deploying a new Web-based e-commerce infrastructure as well as upgrading 3Com's global voice, video and data network. These are IT systems that touch and in part are owned by every one of 3Com's business divisions, yet Starr doesn't foresee a time when these units will take over day-to-day control of the systems. "The company can't afford to have the individual business units in control of [these systems]," Starr says. "We just wouldn't be able to take advantage of scale, power or speed that way." On the surface, coexisting with a CTO and giving up many traditional IS tasks and management, Starr's role appears to have been curtailed. But in fact it has grown - just in different directions. Soon after he was hired, Starr was appointed to head 3Com's most critical e-commerce resource: network security.
This role not only gives him greater visibility inside the company, it has also propelled him to a national stage as a participant among a select public and private Internet security advisory group recently chartered by President Clinton. "The network is everything," Starr says. "As more eggs get put into the basket, the basket has to be more bulletproof." And at 3Com, at least, no one can protect that basket better than the IS group that built it.
At EDS, the Plano, Texas, IT services company founded by H Ross Perot, the corporate IS organisation has evolved to look more like, well, EDS. Before the arrival of new CIO Terry Milholland, formerly CIO at The Boeing Company, the EDS army of IT experts didn't serve themselves quite as fully as they did their customers. "We suffered from some of the shoemaker's son' issues before," says Milholland. "All of our focus had been external; we didn't treat ourselves like we do a client." But since Milholland's arrival last fall, he has reorganised IS so that it looks and acts more like a consulting company. The IS staff, formerly arranged by function (infrastructure, data centre, and so on), is now broken down into business process groups that sell their services to their internal clients - just like EDS sells its outsourcing skills to external customers. With this new model, IS is more flexible and responsive to customer needs, Milholland says, and he is able to demonstrate tangible evidence of the group's contribution.
Now, IT chargebacks that have been a source of controversy when introduced in many organisations - "Why should we pay for our own services?" critics argue - Milholland sees as a natural extension of the approach EDS specialists already take when serving their external clients. "I see it more as an evolution of roles, not a revolution," Milholland says. In other words, EDS professionals possess these skills; they just have to start using them internally as well as externally. The plus for Milholland is that through chargebacks he's now able to show an exact financial return on the company's internal IT investment.
In trying to act more like an e-business, the EDS IS group has had to refocus its energies and rev up its speed of delivery. Now, rather than operate as a discrete group on specific technologies or solutions, the 50,000 IS engineers are spread throughout the enterprise, helping develop new Web-enabled knowledge and data management services for internal and external use. The challenge for IS, Milholland says, is to provide these services fast. "There are higher expectations from business leaders," Milholland says. "We've got to react in days rather than months. A normal systems-development life cycle to build a new Web site won't cut it, and a lot of IS people aren't comfortable with that; it's a different discipline." Milholland's task is twofold: to hire the business-minded IS staff who can thrive in a faster, more flexible environment, and to change his own focus from internal technology to external business issues. How can knowledge and data be used for competitive advantage? What metric can EDS develop to help clients determine the value of IT in a merger or acquisition? How can companies account for (and report to their regulators) such invisible assets as intellectual capital? The more capable his IS group is in dealing with these questions, Milholland says, the more influence it will wield for EDS and its customers.
Drinks.com: Wearing Two Hats
Drinks.com is the classic Internet start-up. Based in Lake Bluff, Illinois, this new company aspires to be the Amazon.com of liquor - the Web portal where businesses and consumers go to learn about and purchase beer, wine and spirits.
Since January, Drinks.com has begun selling online to five states (California, Florida, Illinois, New Jersey and New York), and by 2001 it's expected to be in 30 states.
Yet unlike many Internet start-ups, which rely on a CTO to drive technology initiatives and a mix of consultants and outsourcers to manage them, Drinks.com has found someone who can do both. Tom Lebamoff, an ex-Andersen consultant, wears both the CIO and CTO hats at Drinks.com, and he's decided it's more cost-effective for this start-up to keep IS in-house and close to the business strategy. "I've seen the consultants and the amount of dollars and stock options they want upfront to do our work," Lebamoff says. "If we hired consultants . . . we'd end up doubling the size of our IS budget." In fact, when Lebamoff left Andersen to join Drinks.com last US summer, the company was employing consultants exclusively to run IS. "But no one was managing these guys," Lebamoff says. "We were throwing a shitload of money out the door for application development work we had to bring back and redo." So Lebamoff fired the consultants and then set about carefully building his own IS staff. He lured 13 other Andersen employees with business and management expertise, and he complemented them with roughly two dozen developers and programmers to build Drinks.com's network and database.
But even though his organisation has a traditional structure, Lebamoff hasn't employed people with traditional IS skills. Rather than seek technical expertise, he's sought people with good project management and people skills - forward-thinking folks who are willing and able to partner with their business-side colleagues and put in 70-hour workweeks now in return for a potential payoff if Drinks.com goes public. "It's almost like having an in- house consulting staff," Lebamoff says, but with a lot more management and accountability.
Ultimately, the marketplace will decide whether Drinks.com is a successful business, as well as whether the internal IS organisation is a successful dotcom strategy. But already Lebamoff believes he's found the right mix of business and IT skills to make this start-up a success. Of the 45 people currently employed by Drinks.com, 32 are in IS. "It's almost like business is a part of IS," Lebamoff says. "It's a brand-new game."
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