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May 11, 1998

More From IT

Texas Instruments turns its IT department into a consultancy to speed development

By Charles Waltner

exas Instruments, hoping to make more money from its IT investments, has sought help from a consultancy: its own.

The semiconductor manufacturer last summer set up its IT department as a consultancy. Its customers--the company's business-unit managers--are reaping benefits from the new IT management approach. Business managers control their own application-development budgets, allowing them to enjoy better results from their computing investments because they're involved with projects from st art to finish. They also report that the consultancy structure has reduced project-development times by 25% or more through streamlined communication with the IT department.

Under the new structure, the IT department recommends the most effective technologies for business units' projects, then facilitates the project development just as an outside consulting firm would--working closely with business managers to ensure their projects' success.

To help its IT organization focus on strategic implementations, Texas Instruments has segregated more cost-focused utility-management tasks, such as server maintenance, into another group (see sidebar, " Cost Managers And Caretakers ").

Efficiencies in IT services are more important than ever for Texas Instruments, which generates roughly $10 billion in revenue a year. The company is in the midst of a handful of multiyear, enterprisewide projects that could significantly influence its compet itive capabilities. One project aims to improve the flexibility of marketing database information for reaching smaller customers. Other projects focus on reducing manufacturing costs, deploying SAP applications, and reengineering for the year 2000.

Management Innovator
"Providing service levels like an independent vendor is not a standard approach in corporate IT departments," says Vaughn Frick, a research director at Gartner Group Inc. "Companies that achieve this successfully will definitely have a distinct competitive advantage."

Pallab Chatterjee, Texas Instruments' CIO, initiated the management changes last June, just a month after taking on his role. He previously headed a number of Texas Instruments divisions. As someone with a bu siness background, Chatterjee naturally gravitated to a service-oriented IT approach. He met with industry management advisers such as Gartner Group and Dataquest to formulate his idea for the restructuring. He ended up with a divide-and-conquer approach.

The CIO recognized that Texas Instruments' IT department suffered from a conflict of interest: It was pulling money for IT maintenance out of the same pot used for developing strategic business applications. These two tasks require opposing revenue and management models. IT maintenance focuses on cost control, while application development focuses on return on investment. "Figuring out how to improve bandwidth efficiency is a much different model than changing an order-entry system to get 10% more capacity from factories," Chatterjee says.

To avoid muddling matters, the IT organization's new, centralized utility-management group focuses only on lowering costs associated with maintaining mainframes, servers, desktops, LANs, and WANs. The goa l of the IT consulting group, on the other hand, is to improve the company balance sheet by providing technological tools to business operations.

Managing Relationships
At the heart of the new IT consulting structure are four "relationship managers" who report to Chatterjee. These managers are liaisons between the IT department and assigned business units, including manufacturing, marketing, and operations. They also have "lieutenants" who help them manage projects. The managers fill a role that didn't previously exist at Texas Instruments: They're IT people who know the business.

Certainly, relationship managers have helped Melendy Lovett, manager of total compensation in human resources at Texas Instruments. Lovett was in charge of creating a corporatewide Web site for providing information and self-service applications that employees use to manage everything from 401(k) retirement plans to profit-sharing bonuses.