June 7, 1999

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E-Business Evolution

Electronic business is driving change throughout the enterprise--and forcing IT managers to take a leadership role in making business decisions

By Gregory Dalton

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here's an old saying: Be careful what you wish for--because you might get it. Many IT managers have aspired to a greater role in the strategic business decisions of their organizations--and thanks to electronic business, they're getting that wish. That's one of the conclusions of a recent survey of 375 senior business and IT executives conducted jointly by InformationWeek and Business Week to gauge the impact E-business is having on companies. Other conclusions of the survey also illuminate the increased pressure on IT: E-business is causing IT departments to reengineer, and it's making greater demands on all workers in terms of job responsibilities and expanding skills.

Technology managers feel the pressure. "We're expected to be more aware of the alternatives and opportunities for change and to enlighten business people about what we see evolving," says Arnold Testa, VP of IT at Siemens Information and Communications Network, a unit of $26 billion Siemens AG that manufactures telecommunications equipment.

More than 70% of the 250 IT managers surveyed say E-business has thrust their departments into a business decision-making process, and almost 60% say E-business has forced IT to lead business-process reengineering.

The imperative for IT departments to help their companies with business strategy and organization is just one of the ways in which E-business is driving change throughout the enterprise. Other key findings of the survey:

• E-business is having a significant impact on IT structure and function. In all, 60% of IT executives surveyed say E-business has significantly changed the role of their IT departments; 61% say E-business has forced their IT departments to reengineer.
  
• E-business is having a significant impact on most employees: 80% of surveyed sites say employees are burdened by new skills requirements, and 73% say that E-business has spurred additional employee training. Also, 55% of respondents say E-business has forced individual employees to take on more responsibilities.
  
• E-commerce sites have yet to pay huge dividends. Only 28% of respondents with Web retail sites say their online sales have increased significantly as a percentage of total sales in the past 12 months; 42% say sales have increased somewhat, and 29% see no change (see chart, right).
  
• But IT and business executives from all industries agree that generating new sources of revenue isn't the main goal of deploying E-business applications. In fact, that ranked well behind creating or maintaining a competitive edge, improving customer satisfaction, and keeping pace with the competition (see chart, below).
  
• Companies are not meeting all their goals. When asked which E-business goals were set prior to deployment and which have been achieved, 84% of respondents say E-business applications are helping their companies keep pace with the competition, and 80% say the apps are creating and maintaining a competitive edge, but only two-thirds say the applications are helping them establish brand awareness or reduce operational costs.
  
  

The InformationWeek and Business Week survey polled IT and business executives in five sectors: finance, health care, information technology, manufacturing, and retail (for more on the survey's methodology, see "How The Study Was Done"). It found that E-business in its various forms is practically ubiquitous: 81% of respondents say their companies have Web sites, 76% have intranets, 56% have traditional or IP electronic data interchange networks, and 35% are engaged in electronic commerce on the Web.

As E-business becomes more strategic, IT managers are being forced to play a more important role in business decision-making. When asked to rate how involved several groups are in planning and implementing their companies' most strategic E-business applications, IT and business executives agreed that IS and IT management was most involved, followed by executive management and marketing (see chart, next page).

"IT has always been associated with business," says Steve Ward, VP of business transformation and CIO at IBM. "But now it's become even more tightly associated with business decisions. IT needs to be part of business strategy sessions, both in terms of where the Web can take us and delivering what customers want."

continued...page 2, 3


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