At a recent symposium on the future of IT organizations, Gartner Inc. predicted that by 2011, at least 10 per cent of IT organizations will be disbanded, 10 per cent will be relegated to commodity status, and at least 75 per cent will change their role, based on extrapolations from current economic and technology trends.
“This is not the death of IT organizations — we would rather call it a renaissance,” said John Mahoney, Gartner’s chief of research. “A new organization type is emerging, one that will take the lead on information and process.”
But some people think Gartner’s predictions go too far, including Nicholas Carr, author of the controversial Harvard Business Review article “IT Doesn’t Matter”, which made waves in technology circles in 2003. “They are making a provocative forecast; it sounds a bit aggressive to me,” he said. “I would think one in ten IT organizations would at least be moving towards being disbanded by 2011, but whether they’ll actually be gone is another thing.”
We spoke with four Canadian CIOs to get their reactions to Gartner’s predictions and Nicholas Carr’s “IT utility” analogy: Dietmar Reiner of Ontario Power Generation (OPG), Loren Hicks of Lavalife, Linda Weaver of Smart Systems for Health Agency (SSHA), and Mauro Lollo of Unis Lumin Inc.
All four believe the timeline of Gartner’s prediction is premature. It’s unlikely 10 per cent of IT departments will disappear off the face of the earth by 2011 — a mere five years from now. But they agreed it’s quite likely true in the longer term. Moreover, they say, IT departments are already shifting away from their traditional role of looking after the guts and plumbing of systems to refocus on loftier business goals, thank you very much.
All are in total accord that IT departments must become more strategic. Like “motherhood”, they say, that’s an issue not worth debating.
But the devil is in the details. What does strategic use of technology really mean? Is outsourcing the answer to deal with those bits deemed non-strategic? Is IT comparable to electricity, a commodity that can be supplied via a socket, as Nicholas Carr suggests? What is wrong with IT departments and why does everyone keep trying to fix them?
The body and soul of IT
The pattern of disappointment that reached its zenith in the go-go nineties is probably what has hurt IT the most, says Reiner. “IT has got this legacy of being the thing that will get you to the Promised Land, and it’s never as perfect as the sales pitch,” he says. “But IT is here to stay. Now IT departments, that’s a different question.”
IT tends to be one of the largest supporting costs inside organizations, he says. Unlike other support functions such as HR and finance — which tend to be perceived as necessary evils and not services — sticker shock sets in when organizations see the IT price tag. “Because it’s big money, the questions about the value of IT get tougher and tougher, and that puts IT departments at the forefront.”
He says in the traditional, operational IT space — making sure boxes run and that someone is there to fix or replace them when something breaks down — outsourcing providers will likely take on a bigger role in the future, serving companies such as OPG, which uses IT but is not an IT company per se.
But in the avant-garde, strategic space, he believes IT is beyond commoditization in many ways. Reiner is well-versed in the workings of both IT and electricity, and Carr’s comparison, he says, is interesting but limited. “I can see where the desire to draw the analogy comes from,” he says. “But not all of IT can be commoditized like electricity can. At the applications level, IT is different”
No one disputes that certain generic elements such as financial applications, which are fairly standard from business to business, are commodities that are amenable to the utility model, says Reiner. However, there are many critical applications that bring competitive advantage to the business, he says. But they run on the commoditized box, and the box sits inside the utility. Box and application are conjoined, like body and soul, and often inseparable. This makes clear delineations between strategic and non-strategic technology difficult. With electricity, by contrast, the device that consumes it is always separate and does not reside at the utility.
Of Fords and Maseritas
Loren Hicks, CIO of Toronto-based Lavalife, presides over a proprietary system that has been custom-built over the years as the company rocketed from obscurity to prominence in the online dating space. The company uses an array of emerging technologies to reach its customers via Web, wireless, instant messaging and video.
“Many companies are driving Fords, all standard. At Lavalife, we built our own car. We had to, because no one else was doing what we do,” he says. “I work at a firm where all our products are customer-facing and technology-based, and I tell you, IT matters.”
Outsourcing is a red herring, he says, and an issue that has been over-blown. In his view, it is simply a different way of managing IT, rather than disbanding it. The technology components that provide no competitive advantage can be treated like utilities, as Carr suggests, and decisions to keep them or farm them out are purely economic.
“Who it is that provides Microsoft Word on your desktop is completely irrelevant. It’s important it gets done but the company doesn’t get a nickel of revenue from it.”
In certain established industries, where the business processes and workings of IT are cut and dried, an in-house IT department brings no strategic advantage and makes little economic sense, Hicks says. In the oil refinery business, for example, the process controls and the technology needed to automate refining is an exact, well-known science.
“So does IT matter in that instance? Yes. But is it strategic? No. Could you outsource it? Yes. Could you have IT be part of the engineering department? Yes. Does it mean it’s not IT work? That’s debatable.”
Hicks points out that a redefinition of what constitutes IT work may be needed in the coming years as more and more aspects of modern life are computerized and connected and society grows more techno-literate.
“There’s a computer in your car. Does that mean your mechanic is now an IT guy when he’s checking your fuel emission system, which is all computer-controlled? It all depends on what you mean by IT specialist,” he says.
The Yin/Yang of IT
Linda Weaver, CIO at Ontario’s Smart Systems for Health Agency (SSHA), says she agrees with Gartner’s predictions at a gut level, but sees difficult staff issues emerging as IT departments pare away lower-level work. As IT becomes more complex, staff must have a higher degree of knowledge to do the troubleshooting, assessment and analysis necessary to manage the more strategic aspects of technology, she says.
Weaver believes many IT departments will likely shrink by 10 per cent due to the loss of entry level positions used in the past to train junior staff. “In our own environment, we have fewer jobs for what we consider tier-one staff, which are kind of your first five years out of school, because a lot of the work they do — gathering, recording and structuring information — is being done by automated tools and being presented to tier-two staff, who are people with five to fifteen years of experience.”
Weaver says this will ripple through the food chain of IT, as fewer tier one’s means fewer tier two’s and three’s down the line, and this will raise many issues in the future. “Organizations today are looking for IT staff with experience in multiple technologies, but if we don’t give them a place to learn, they will never exist on other levels.”
At SSHA, different paths are being developed to help staff get to higher levels of technology expertise by involving them earlier in design and architecture work, while also giving them operational experience along the way.
What’s fundamentally wrong with IT, she says, is the disconnect between the way IT departments and business units solve problems. People in IT and engineering tend to approach problems in a very analytical, structured manner, but the business and health-care spheres require a certain amount of intuition.
“You don’t find many situations where you go to engineers and ask, what do you think is the right answer? That would drive them insane. And even if you got an answer, you should worry, because they don’t ‘think’ anything, they analyze and know,” she says.
Weaver is convinced many problems in IT spring from the types of individuals involved: analytical IT people on one side, and intuitive business people on the other. “IT folks aren’t deliberately obstructive. Typically, if they don’t understand the business, it’s because no one’s explained it to them in their analytical way. I think we need to identify and train people who can be both analytical and intuitive.”
But at this point in time, those skills rarely co-exist in the same person, she says. So is IT doomed if salvation will only come from the small handful who have both abilities?
“You would think so, but the education system is accounting for this and starting to make adjustments. In technology and engineering faculties, almost all of them include courses that would have been considered social in my time, like economics and organizational dynamics. But that adjustment was only made in the last 10-12 years, so those people are just starting to get to the middle management levels.”
The Kinks in outsourcing
Mauro Lollo, CIO of Unis Lumin, a systems integrator and outsourcing firm based in Oakville, believes Gartner’s predictions and timelines may be only slightly off the mark for certain industries. “By 2011, some industries may take the lead on that. Those that are ultra-competitive and have very slim margins — telecoms, food services, retail — these have to tightly manage their businesses,” he says.
Outsourcing may be a good idea in theory but is not working out so well in practice, he says. “We’ve been watching this pattern for the past 20 years. A large outsourcing contract is announced, but five years later when the contract ends, the organizations tend to take IT back in-house,” says Lollo. “Ask yourself why: Were they being properly served by completely throwing out their entire IT organization?”
Lollo sees the central problem as loss of control rather than lack of focus on strategy. Companies are pushed into such rigid price structures and processes that they can’t act dynamically enough. “For example, if a company has a new product design and needs to get it to market in three months to beat the competition, it may not have the flexibility it needs to get that done with outsourcing, what with cycle times, contracts, and so on. I think it hamstrings a lot of organizations.”
If the CEO says, if you guys can increase my EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization), I’ll kiss you, that’s where we get the best results. It’s the language of the people at the top versus the guys running the IT infrastructure. That’s how all IT folks should be talking.”
–Rosie Lombardi is a senior Web writer at IT World Canada.