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December 20/27, 1999

Stretched To The Limit
Holiday E-commerce and last-minute Y2K preparations have left IT managers trying to do more with less

By Diane Rezendes Khirallah

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fter a challenging year, the next two weeks are shaping up to be the toughest ever for IT departments already stretched thin by the ongoing IT labor shortage. E-commerce sites are straining under the weight of record traffic, while managers scramble to put last-minute Y2K preparations in place.

Amazon.com Inc. has been so inundated by online purchases that even executives were dispatched to the distribution center to help get packages shipped on time. "Right now, the focus is on getting the stuff out the door," a company spokesman says.

At Crateandbarrel.com, the holiday crush has overwhelmed back-end systems, forcing the retailer to redeploy IT staff from other areas to the E-commerce division to input orders. Web-site manager Ruth Sachs is hanging tough. "I don't have time to talk," she says. "I'm sitting here with huge piles of orders. One does what one has to."

In addition to handling a flood of online sales, retailer Lands' End Inc. has set up a Y2K "war room," where the company is running mock crisis scenarios. IT workers will be on call around the clock for at least the first several days of January.

If IT organizations can make it through the next two weeks, things should get better. E-business services and consulting firms are moving rapidly to acquire the skills needed to implement new projects for companies struggling to do it on their own. Last week, Whittman-Hart Inc. agreed to buy USWeb/CKS Inc. for $5.7 billion in stock, creating one of the largest Internet-consulting and services firms. The deal caps a year in which E-services firms have been acquiring smaller firms to amass talent (June 7, p. 36; informationweek.com/737/services.htm). And the Y2K cloud that's been hanging over many businesses will soon pass, letting companies reassign Y2K specialists to other much-needed areas.

The pressure on IT departments is a blessing, of course. Nearly 9 million households are expected to spend $4 billion at E-commerce sites this season, according to projections by Forrester Research. But the IT labor shortage is making it a real challenge for some companies to cash in on the E-commerce boom.

Thor Wallace, CIO of Cybex International Inc., a Medway, Mass., maker of fitness equipment, and his staff worked long hours and weekends to get an E-commerce site up in time for the shopping season. The team completed the task by Dec. 9, when the company ran a national ad promoting the site. The IT staff went out for a quick celebratory lunch, then rushed back to the office. "We were too nervous to really celebrate," Wallace says.

Because the IT department was short-staffed, the site wasn't fully tested to see how much traffic it could handle, and Wallace wasn't able to merge the E-commerce site with an existing informational site. "We didn't really have enough skills or people,'' he says. But the new site received more than 150,000 hits in the first week-compared with 15,000 hits a month for the old one-and online sales are beginning to come in. "We were dealing with a very hard deadline, but we were determined to get the site up," Wallace says. "We had to."

The Dress Barn Inc. wasn't so lucky. The Suffern, N.Y., clothing retailer outsourced parts of its E-commerce project to three firms, but its site won't be up until after the holidays. "It came down to deadlines, and I wanted it done right, so we decided to wait," says executive VP David Jaffe. Taking the project in-house wasn't an option. "I needed my programmers to focus on our core businesses," Jaffe says. "And I couldn't have found the talent to design and run this site on my own."

The IT labor shortage isn't affecting only retailers. With E-business projects of all types becoming the No. 1 priority for many companies, the difficulty in finding qualified IT workers has reached near-crisis proportions. According to an InformationWeek Research survey of 375 business and technology managers released earlier this month, 72% said finding the right staff talent was the biggest obstacle to succeeding in E-business-bigger than finding the right business model or technology. "There's a skills shortage out there that threatens companies' abilities to realize their E-business goals," says Bob Cohen, senior VP of the Information Technology Association of America.

Businesses are having the most trouble finding skills related to front-end Web development, integrating front-end with back-end and legacy systems, and security, according to IT managers, recruiters, and analysts.

Larger companies say the growth of dot-com startups is a big problem, as dot-coms typically seduce IT staffers with stock options and the potential for instant wealth. Chuck Williams, CIO at Georgia-Pacific Corp. in Atlanta, says he's taken steps that have helped reduce the staff turnover rate from 30% to 8%. IT professionals are now paid 15% more than non-IT workers at the same job grade at Georgia-Pacific and receive salary reviews twice a year instead of annually. But the company continues to lose a few IT staffers to Web startups. "If you're willing to live on an airplane, work 100 hours a week, and not see your family, you'll make big money somewhere," he says.

Many companies are turning to IT services and consulting firms for outsourced help. The overall E-services market is expected to soar from $10.5 billion this year to $47.6 billion in 2002. The average budget for outsourcing is expected to double from $750,000 to $1.5 million in 2001.

For Praxair Technology Inc., a $5 billion supplier of industrial gases, outsourcing was the only way to get a full-featured E-business site up by December. "For us, it's a significant E-business undertaking," says John Hill, CIO of the Danbury, Conn., company. "We're rolling out an intranet to provide integration with our customers for all interactions they might have. But if we had to rely on internal staff alone, it wouldn't have happened."

About 70% of the IT help engaged in E-business at Praxair is on contract and 30% are employees. Hill would like to reverse that ratio, so he has IT directors investing about 50% of their time on staff-recruitment efforts, particularly for people with Java, Microsoft Internet Information Server, and Web-design skills. "We need people who understand enough about the newest software products, but who are also good at deeper architecture issues, like security," Hill says. "Even with good partners, there's still the learning curve that goes with using outside resources."

One of the biggest challenges with outsourcing E-business projects is finding one vendor who can do it all, says Roger Nokes, VP of business development at Harman International Inc., a stereo maker in Washington. Lacking an experienced Web staff and the time needed to hire workers, Harman outsourced E-business projects, including online support for 1,000 retailers and online consumer sales, to a small vendor, Proxicom Inc. "We needed a general contractor who could bring in other vendors as needed, coordinate their efforts, and provide us with a single point of contact and responsibility if anything went wrong, so there wouldn't be any finger-pointing," Nokes says.

A single point of contact is the best users can get today, as there's no one vendor that can offer complete E-services, analysts say. Businesses use an average of three vendors on out-sourced E-business projects, according to a recent Forrester Research survey.

But consolidation of the services industry could change that. When USWeb/CKS and Whittman-Hart complete their merger, they'll have almost 5,000 technology professionals and more than 2,100 strategy, marketing, and creative consultants. Analysts say the merger would give the company the people and geographic reach-70 offices in 13 countries-to put it on competitive ground with EDS and PricewaterhouseCoopers for E-business projects. "The consolidation in this market is directly attributable to a worsening shortage of skilled IT staff, and the insatiable desire of companies to quickly establish business-to-business and business-to-consumer Web operations," says Greg Blatnik, a VP with Zona Research.

Last week, Andersen Consulting and EDS launched separate venture-capital firms to fund Web startups. Their strategy is to finance dot-coms that can provide the consulting firms with the skills and technology knowledge they need to transform themselves into E-services powerhouses. EDS established an E-services unit in April.

For Harman's Nokes, these developments are encouraging. "Mergers and acquisitions are creating companies with a broader range of capabilities and will eventually mean users will have full-service providers to choose from," he says.

But Jeff Allen, E-commerce director at Standard Register, says outsourcing has its own drawbacks. "Even at consulting companies, it's very difficult to find people who have actually lived it and done it [implemented big E-business projects]."

The printing company, in Dayton, Ohio, processes online transactions of up to $200,000 a day for clients, and IT contract workers with large-systems experience aren't easy to find. "I need someone to get into the guts of Microsoft ActiveServer pages and tell me why I get this error message 10 times a day," he says. "There just aren't a lot of those people around."

While there aren't any simple solutions to the E-business talent shortage, most businesses are eagerly awaiting the end of their Y2K projects. Dress Barn outsourced its Y2K work to NaviSite Inc. The retailer's IT staff plans to celebrate its New Year's away from the office, but will wear beepers. "You can get as ready as you want for Y2K," says Chris Correia, MIS Web specialist at Dress Barn. "If it's going to happen, it's going to happen."

Many businesses say that if they can get through January without any major problems, they can divert IT resources back to their key E-business projects. Mirage Resorts Inc. CIO Glenn Bonner says some of the staff who worked on Y2K projects will be redeployed to intranet applications for payroll and benefits that were put on hold. The Las Vegas company is also looking forward to doing application upgrades that have been delayed because of Mirage's Y2K efforts. "There's going to be a floodgate mentality," he predicts. "Everyone who's been lusting after new applications will be coming at us with a vengeance." -with additional reporting by Beth Bacheldor, Larry Greenemeier, Jennifer Mateyaschuk, Marianne Kolbasuk McGee, Chris Murphy, Bob Wallace, and Clinton Wilder

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