InformationWeek

Such demands are changing the dynamics of the systems integrator industry. "We're seeing a lot more fixed-phase, fixed-price, penalty-if-late contracts and a lot less traditional time-and-materials billing," says Wayson. "E-business clients don't want to hear that a project took two more hours or days or weeks. They just want to hear that it's done."

The eGM unit has grown to 150 people since its inception last summer, including IT architects, product and program managers, and lead developers. But that's not nearly enough to accomplish eGM's goals. All operations and most tactical activities are contracted or outsourced to a wide range of service firms. eGM uses A.T. Kearney for overall strategic consulting and coordination of E-business; Modem Media handles marketing research; IBM and EDS share data-center operations and Web hosting; and all application development is outsourced to several companies, including Interwoven.

GM isn't alone. Of the surveyed companies that use service vendors, every one uses them either for application development now (66%) or plans to in the next 12 months (34%; see chart, p. 64). Other top duties for service vendors, current or planned, include Web-site or application design (94%), staffing help (86%), network infrastructure assistance (78%), and security help (75%).

For application development chores, E-business is pushing Tricon Global Restaurants Inc. closer to a "when in doubt, farm it out" philosophy. "Frankly, custom development is not our core competency," says Bart Perkins, CIO at the Louisville, Ky., spinoff of PepsiCo Inc. that owns the KFC, Pizza Hut, and Taco Bell chains. "The role of our IT organization is shifting from building applications to enabling capabilities. I'm not going to scare Burger King with a better general ledger app. Our job is to facilitate online communications and knock down the barriers of time zones and oceans."

Tricon hired A.T. Kearney earlier this year to help it revamp overall IT strategy and to formulate and implement an E-business strategy. Perkins chose A.T. Kearney over more specialized, Web-focused consulting firms because of its broader spectrum of experience. "We're looking at all opportunities, not just E-business, even though we believe most of the opportunities are E-business," Perkins says.

Tricon's E-business strategy will include applications for business-to-business, business-to-consumer, and a third category critical to its industry: "B-to-F"-business to franchisee. As the company begins to build those apps, Tricon will look to other companies for specific technology skills, including the Extensible Markup Language, Visual Basic, SQL, Web-site design, and expertise in Web security, authentication, and payment processing.

But the No. 1 skill that Perkins is looking for is project management. "It's just very hard to find in general," he says. "Poor project management is usually the main reason why projects fail or are late. It's rarely the fact that the technology is wrong."

SaskEnergy Inc., a $1.15 billion natural gas utility in Regina, Saskatchewan, is increasing its dependence on the Web-and on its service providers. SaskEnergy plans to let its customers plan for and order their gas online. IBM Global Services and EDS will provide consulting and systems integration with the company's legacy databases, while local Web developer Vercom Systems Inc. will write the transaction-processing applications.

The company frequently revisits the issue of expanding its internal IT staff, but finds that outsourcing is faster and more cost-effective. "E-business is a natural extension of our business and a natural extension of our relationships with IBM, EDS, and Vercom," acting VP of IS Colleen Huber says. "Outsourcing provides us with flexibility on new initiatives. We can acquire IT skills when needed, as needed."

That's a common refrain among E-business converts, and even some of the pioneers. Three years ago, Goodyear Tire & Rubber Co.'s North American Tire unit launched its Xplor extranet, which is used by 4,000 Goodyear dealers and partners in the United States for logistics, ordering, tracking, and billing related to Goodyear tires. Dealers can get information about pricing and availability of products, as well. The information available online via Xplor is similar to the kind of information dealers can get by talking live to a Goodyear call-center rep; in fact, the two systems are integrated.

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