InformationWeek
Defining The Business Value Of Technology
June 7, 1999
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When IT and business do get together, the result can be successful Web initiatives. Gregor Bailar, CIO at the the National Association of Securities Dealers, says the NASD's Web site, which offers market data, educational information for individual investors, and academic research, was the result of a "mutual epiphany" by IT and business executives. "It was definitely the two working more closely than in the past," says Bailar. "I'm an intimate part of our overall strategy and design for the business." That's different from the past, when IT was simply given a project and left on its own to deliver it, he adds.
At Federal Express Corp., a company known for embracing technology, IT executives are engaged across the organization. "I now dual-report to the CIO and the CFO," says Toby Redshaw, VP of global supply-chain integration. In his previous position as CIO for Latin America, Redshaw reported only to the corporate CIO. He says both the CIO and CFO are interested in reducing costs and deploying new technology, but the overriding theme is fostering change--such as accelerating business processes--across the entire company. "The best thing you can do is accelerate the speed of your business," says Redshaw.
That's a key advantage of FedEx's supply-chain project, which is being worked on by about 150 business and technology people. The two-phase deployment--which is being kicked off across the United States this month and globally in the fall--consists of accounting and inventory modules from PeopleSoft Inc. and purchasing applications from Ariba Inc. Redshaw says 140,000 FedEx employees have been identified in the system with their purchasing hierarchy tied to business rules that determine who can buy what, and he expects about 20,000 to actively make purchases using the new supply-chain system. FedEx hopes to save millions of dollars by automating its procurement operations, but Redshaw says the project is also aimed at instilling the Internet values of change, flexibility, and speed even deeper into the company.
"Why spend millions of dollars on software when the business change is the real benefit?" he asks. "Because, without the software, I can't make the change stick. The software piece is the easy piece. The hard part is taking that enabler and creating that business change."Stressed Out
The good news is that IT seems to be up to the challenge of leading the reengineering effort. The InformationWeek and Business Week survey found that 58% of IT executives say their staffs feel more empowered to engender change in the organization, and 76% say E-business helps cross-functional teams. The bad news is that 60% of IT respondents say the constant change wrought by E-business increases job stress.
"That sense of urgency pervades our IT function," says Jim Noble, global head of IT strategy at General Motors Corp. "We have to think in much shorter time cycles because the business wouldn't tolerate the latency we used to have."
Product cycles at GM used to run 36 months, but the automaker is working on getting some cars from drawing board to showroom floor in 24 or even 18 months. "We used to tell the business side, `Don't call us. We'll call you.' Now it's 30-day deliverables for E-business applications," says Noble. What's been cut out, he says, is a lot of the back-and-forth with written documents. "We have shortened that whole dialogue," he says. The IT group is also focusing its efforts on integration rather than creating applications from scratch.
For example, GM's Buypower site links a product configurator with locators for dealer inventory. Normally, GM would have written point-to-point interfaces with all those legacy databases. "That would be a monster to develop and support," says Noble. "Instead, we used middleware to glue these legacy systems together."
Reengineering is a tall order in any company, but integrating business and technology functions is especially difficult. Setting up cross-functional groups is easy; getting them to operate smoothly is not, says Siemens' Testa. "The challenges are enormous," he says. Different members of a group may have conflicting ideas about how to code certain documents and regulate access to them via the company's intranet or extranets. That's hashed out in committees, so every group's needs are met. "It requires a common view of the corporation from the perspective of the customer base."
To foster cross-functional operations, Testa says Siemens formed a hybrid group within the IT department late last year that has four full-time and six part-time staffers who have both technical expertise and business acumen. Each is aligned with various business functions such as fulfillment, supply chain, and finance, and works with process advisers from those areas to help leverage Internet technology to improve productivity. "You lose integrity of effort across the company if you don't have some cross-functional vision," Testa says.
Cross-fertilization between business and IT is happening at the most senior levels. FedEx's Redshaw says one of his deputies on the supply-chain project has a technical background but the other doesn't. Even the project's director of application development was pulled out of a business area. "Historically, you wouldn't see that," he says.
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