Study finds IT

Forrester Research Inc. gives IT organizations three years before they’re killed off by emerging e-commerce models that put technology management directly into the hands of business managers and outside service providers.

But CIOs just don’t buy it.

Yes, they acknowledge that e-commerce is expanding wildly. But they say it’s increasing, not diminishing, companies’ reliance on in-house information technology departments.

J.R. Simplot Co. in Boise, Idaho is a prime example. The US$3.2 billion food company’s 135-person IT group is developing PlanetAg, a new Internet-based marketplace.

Due to launch next month, Simplot will use PlanetAg to sell agricultural products on-line along with complementary goods and services from other companies, said CIO Ray Sasso.

“When you give people on-line access to products and services, they need access to the status of orders, approvals and other things in the back office. That makes the really big challenge data management, and that can’t be done by anybody but us, and that’s just the ugly truth.”

Similarly, it’s the 100-person IT group at Ryder TRS Inc. in Denver that built and now maintains a business-to-business Internet-based “mini exchange” for the 1,000 independent vendors that do maintenance on Ryder’s trucks.

“That application was an IT initiative, and it was driven by IT as opposed to anyone else,” said CIO Puneet Bhasin.

At Ryder, “IT is still very involved in application development – not just for legacy applications but for Web-based applications,” Bhasin said.

In stark contrast, in a report released last week titled The Death of IT, Forrester foresees an “explosion” in outsourcing to so-called “e-business networks – interdependent firms that link (companies’) business processes in real time over the Internet.”

Additionally, Forrester forecasts that growing electronic businesses will increasingly disperse technology and its management from traditional IT departments to various business functions, such as procurement or distribution. As a result, “the IT organization as we know it will disappear,” according to Forrester analyst Bobby Cameron, who wrote the report.

As for current CIOs, the “enlightened” ones – about 10 to 15 per cent – will move up the corporate ladder into such roles as chief operating officer or president. But for the majority of reactive CIOs, “their future is with working with outsourcers,” Cameron said.

“I don’t see that happening at all,” said Brian Kilcourse, CIO at Long’s Drug Stores Inc. in Walnut Creek, Calif.

Instead, Kilcourse said, IT departments may focus more on infrastructure to support increasingly dispersed and far-flung information exchanges. They will also dismantle groups organized around specific technologies or stovepipe systems, such as mainframe or PC groups and retail systems or pharmacy systems groups.

“But at Long’s, there continues to be a strong demand for strategic information systems,” Kilcourse said. By definition, he said, that usually means proprietary, in-house technology because “if someone else can buy the same thing, it can’t be very strategic.”

Forrester’s Cameron said he isn’t surprised by the CIOs’ rejection of his findings. “Most CIOs I talked to don’t see themselves going away,” he said. On the other hand, their chief financial officers do see them disappearing, he said.

Cameron said other research surveys conducted by Forrester also point to a declining role for IT groups. Still, many CIOs appear to be either unaware or in denial about their shrinking role, he said.

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 percentage of their technology spending comes out of the IT budget,” Cameron said. Their answer: five to six per cent.

“Right now, IT is a stovepipe. It owns everything technical,” Cameron said. “What I’m pointing out is we’ll move to a point where accountability for technology will be with the (business) process team.”

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