Posted by: Monideepa Tarafdar | June 13, 2010

Different Strokes for Different IT Folks

One question that I often ask students in graduate classes is  – What does Information Technology (IT) mean to your company? I get all kinds of answers. Most often they include descriptions of what people do with applications – “IT means excel, powerpoint, word, Internet” or  “IT means CAD/CAM applications or programmable logic controlling applications or scheduling applications”. Some people say – “IT means my desktop or printer or the network”. Less often, I hear “IT is the lifeblood- it is the means through which we reach customers. If IT is down, we cannot function”. Obviously now, a CAD/CAM application is different from the lifeblood application which again is different from the printer and desktop. It is like the blind-folded men and the elephant – each person is able to describe only that portion of the elephant that they can feel, as a result the elephant means a swishing piece of muscle to one man, hard pointed sword like things to another and an endless hide of soft skin to yet another. Each is part of the elephant yet each is distinct and bewilderingly so, if someone cannot see the whole elephant.

The truth is, IT means different things to different companies. Often it means different things to the same company. There was an article in 2003 in the Harvard Business Review called “IT Does not Matter”. The author, Nicholas Carr argued that IT, meaning networks, cables, servers, laptops etc is like plumbing – it should be there when you switch it on. Firms should not have to think about what to do with IT. The technical capabilities of IT are widely available and have been getting relentlessly cheaper and easier to acquire for the last 20 years; trying to “strategize” with them and trying to use them differently from others is an exercise in futility. After all, you do not do “strategic planning” for your company’s electric and water services. Everyone has them, so the best one can do is to acquire the most reliable technology at the lowest price possible. So it should be with IT, argues Carr. At around the same time, in 2001, Michael Porter wrote “Strategy and the Internet”, also in the same journal.  He argued that while the Internet is ubiquitously available, using it for differential benefits or costs over competitors requires a solid knowledge of the firm’s product-market, operations, customers, processes and what makes it tick. Building on this knowledge, if one applies Internet to the right areas, they can use it in ways that competitors do not, to achieve benefits that they cannot. That is, strategizing with IT is perhaps the only way to extract superior benefits from it. Which of these views is true? The truth is – both.

There is a consensus emerging that broadly speaking, firms have to deal with two kinds of IT. One is the hardware and infrastructure part – networks, servers, routers, transaction processing systems, databases. This is the vanilla stuff, very essential, and often the backbone of the firm, especially if it is in sectors like banking, distance education, and now increasingly, healthcare. The technology here is pretty standard and needs to be “up” all the time. The other part is the more customized part – maybe a particular application that is unique to the firm or an end-to-end capability that is enabled by IT (think Amazon’s storefront and fulfillment), or a system that provides competitive differentiation and that competitors do not have access to, either because it is very new and they do not have the know-how or is very complex, “firm-embedded” and hence difficult to replicate. This part is certainly not vanilla – it is most certainly “strategic”, that is, it can make a difference between success and failure in the marketplace and hence must be carefully tended to.

These two types of roles that IT plays – the plumbing/infrastructure role and the competitive differentiator role – have implications for how the firm must plan, organize, control and staff the IT function. In this post we consider the last one- staffing. What are the skills required of the IT function that must be able to fulfill each of these two roles?

Let us begin with the senior most person in the IT department, typically the CIO or Vice President (IT) or Director (IT). The CIO of the IT department that primarily has an infrastructure role should be an expert in technology and should also understand why the firm acquires the applications it does. He should be able to provide reliable and cost effective IT that is well oiled and well maintained, with minimum down time. The accent is here on reliable technology, not necessarily state of the art technology. His/her department should have people who are good at project management, technology upgrades/maintenance and user handholding. This CIO should be able to project and fulfill technology requirements of firm in terms of required bandwidth/computing power, transacting processing and error free applications. He or she should be able to interact with vendors and outsourcing companies, and frame contracts that take into account the firm’s requirements and protect its interests. He or she typically reports to a finance VP or CFO in most cases. A recent trend, started by the increasing use of IT in the shop floor and in operations for banking etc., has the IT head in such firms reporting to the COO. In many companies such a CIO is known at the Chief Technology Officer, whose job is to deliver unflinching IT infrastructure to the rest pf the firm.

On the other hand, the CIO leading the strategic IT function has his or her job cut out- identify and deploy IT that can make a competitive difference. Sure. Easier said than done. Such a CIO is very closely networked to the other C-level officers, and has their ear when he says something. He is part of the executive suite, and has a say at the table when strategic acquisitions and new product launch decision are communicated. His job is like than of an entrepreneur, he has to study technology and the firm’s business and suggest ways that of enriching either or both. His or her jobs are – scouting for emerging IT and find ways to promote that IT vis-à-vis economical potential, interaction with other departments and making sure that new IT products take off the ground. This requires credibility with the other departments, budget related authority to experiment with prototypes and a close relationship with the CEO such that new IT-based business initiates have an enthusiastic ear at the top.  He or she leads an IT department that is able to do, for example, technology analysis, competitor analysis, business analysis and user education. The IT department in this case should find ways to keep themselves abreast of the latest IT, and apprise other managers about them through stories and narratives, and examples of use by competitors. Cost is not the only criterion for these companies, rather flexible, curve-leading and quickly re-configurable IT is.

Now- which role is more important? That depends on a host of factors, among them the firm’s processes, industry, competitive strategy, internal culture and inclination to deploy IT for competitive ends. If you are a low technology metal shop for instance, the first role is more important, if you are a bank or an internet retailer, the second one is. Plus, the roles may be inter-dependent. For example, if the CIO cannot provide reliable infrastructure, applications and transaction processing databases in he first place, he or she may not have enough credibility at the strategy table. Therefore the ability to first make sure that the IT shop runs smoothly is perhaps one of the first steps to more strategic and competition-oriented uses of IT.

(Here is a nice post, BTW, about the changing role of the CIO: http://devrevival.wordpress.com/2009/06/03/the-impact-of-social-media-on-the-cio/)

To come back to the elephant, IT has many different implications for the business – it can be a commodity and an un-differentiated resource (e.g. banking networks – every bank has one and it is a cost of doing business) and at the same time one that provides inimitable competitive advantage (e.g. Dell’s end to end order fulfillment system that enabled it to be the first and for many years the only PC manufacturer with a direct delivery model). Managing each role requires different skills. The trick is to understand where a particular firm predominantly stands – and acquire the IT human resources to manage its IT accordingly, and to NOT assume that it would be the same for all firms or all business units within a firm, or even all functions within the same business unit. That is, to look at the elephant as a whole.

References:

Carr, N. “IT Does not Matter”, Harvard Business Review, May 2003.

Porter, M. “Strategy and the Internet”, Harvard Business Review, March 2001.

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