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I-manager survey By Interactive Week staff, 0 May 23, 2001 URL: http://www.zdnet.com.au/news/business/soa/I-manager-survey/0,139023166,120223379,00.htm
The damage estimates from the dot-com implosion and the ensuing economic downturn are still being tallied, but this much is already clear: The job of delivering successful e-business initiatives has become a whole lot more demanding than it was during the Internet's heyday. Today's I-managers--the business and technology executives charged with overseeing corporate Internet initiatives--are on the hot seat. I-managers are expected to deliver on the full value of business transformation. How are I-managers handling the economic downturn? To get a picture of the challenges they're facing, Interactive Week surveyed Internet and interactive decision makers on the state of their Net initiatives, budgeting, return on investment (ROI), and top technical and business obstacles. Not surprisingly, the survey found that managing budgets and project deadlines were I-managers' top two management challenges.
Focused on resultsThe damage estimates from the dot-com implosion and the ensuing economic downturn are still being tallied, but this much is already clear: The job of delivering successful e-business initiatives has become a whole lot more demanding than it was during the Internet's heyday. Granted, Fortune 1000 and Global 2000 companies, especially in industries such as chemicals, energy, financial services, manufacturing, retail and utilities, are still pushing ahead full-bore with entire portfolios of e-business projects. And according to a survey of corporate I-managers by Interactive Week, budgets for Internet products and services will continue to rise, in some large companies by as much as 20 percent. But the attitude in the corner office has changed. Once viewed by upper management as the silver bullet that would resolve any and all corporate shortcomings, the e-business equation has been changed by the dot-com meltdown and the associated backlash. "The recent failures in Internet dot-coms sobered up everyone a little about the payoff of e-commerce... and many of the anti-Internet dinosaurs are feeling emboldened," said Bob Otis, managing director at Atlantic Research Technologies, a worldwide executive search firm. Put another way, today's I-managers--the business and technology executives charged with overseeing corporate Internet initiatives--are on the hot seat. I-managers are expected to deliver on the full value of business transformation. "A lot of our clients are e-commerce executives in major corporations," said Tom Pullman, a senior analyst at Forrester Research. "Up until the fourth quarter of last year, they were given a lot of rope. Now with the downturn, traditional line managers and business unit CEOs are scrutinising e-commerce executives much more closely and holding them accountable to hard internal investment metrics." How are I-managers handling the economic downturn? To get a picture of the challenges they're facing, Interactive Week surveyed Internet and interactive decision makers on the state of their Net initiatives, budgeting, return on investment (ROI), and top technical and business obstacles. Not surprisingly, the survey found that managing budgets and project deadlines were I-managers' top two management challenges. "The future is going to be tough for a little while," said John H. Keast, who headed up Pacific Gas & Electric's ambitious e-business strategy and is currently executive vice president of operations and customer service at Asera, an e-business software company. "Senior management and shareholders aren't letting go of high expectations and of getting value for the customer. The challenge for anyone in a customer-facing [e-commerce] initiative is to unlock value and put together a really incredible set of processes that reflect what the customer wants to do." Forty percent of the I-managers polled were running customer-facing Web sites. But the survey also found that I-managers are rising to the challenge. And whether they oversee sites serving customers, trading partners or employees, successful I-managers have a couple of things in common, experts say. They have a good feel for their business, are able to leverage brick-and-mortar resources, can align information technology (IT) and Internet initiatives, and can focus their efforts on results. New formulas for success But Internet departments that don't meet the new mandate are being hit with layoffs. And the independent or semi-autonomous corporate e-business development and operations units that don't match up with the corporations' overall business strategy are being integrated into the corporate fold or, in some instances, shut down. "They're taking their cuts like everyone else," Keast said. But some cuts may be happening too hastily. The success of units like Delta.com is one reason many analysts still believe in Internet unit independence. Closing or integrating e-centres, as some organisations have done, may be an overreaction. "If an e-centre is very effective," Freeland said, "it doesn't make sense to integrate it prematurely. It can probably operate very effectively off to the side for several years," he said. One danger of bringing e-initiatives entirely in-house: Many organisations overestimate their ability to roll these initiatives out internally, Freeland claimed. "They often get bogged down in a business-as-usual attitude. Unless you get the organisation issues right, the effort is going to fail." To better their odds across the board, the Interactive Week survey found that companies are now placing a premium in e-business experience when they select senior managers to head Internet-based business programs. Most I-managers--two-thirds--have business management, as opposed to technical, backgrounds. In April, Dun & Bradstreet put its business-to-business e-commerce initiatives under Senior Vice President Steve Alesio. Before joining D&B in January, Alesio was at American Express as president and general manager of American Express' Business Services Group. With his background in business development, B2B marketing and strategic planning, Alesio was brought in to position D&B as a major player in B2B commerce. Back to Table of Contents Improving the oddsThere are a number of notable e-business success stories that can't be ignored. Tesco, the giant English supermarket chain, played off its brick-and-mortar roots, which led to its current success with multiple online programs. "Tesco is a very capable organisation with talented managers," Freeland said. "It has an incredibly successful record of rolling out e-commerce efforts." Involved in e-commerce since 1996, Tesco provides everything from books and brussels sprouts to bonds and insurance online. Unlike some of its American counterparts, its e-commerce strategy was to build gradually while leveraging its brick-and-mortar assets wherever possible. As an example, through Tesco.com customers can order groceries directly from their neighborhood retail store and have them delivered, an approach that quickly won the approval of store managers--who benefited from the program--and proved minimally disruptive. Today, Tesco accounts for more than 50 percent of all the online grocery sales in the UK, and has expanded its Internet-based offerings into Ireland. Tesco played to its strength. And while there is no surefire formula for success in pursuing e-initiatives, particularly in today's dicey economic climate, I-managers can certainly improve their odds by addressing several key issues proactively. First, e-business executives outside the information technology department can reduce political tensions within the organisation by reaching out to their counterparts in corporate IT. "The e-commerce people have seen that they need to be friendly with the information systems group to make use of the network infrastructure and databases," ART's Otis said. "The IS people have come to see that, all in all, when you're working with computers, you're all on the same team ultimately... In many companies, we've seen a gradual and natural fusion of e-commerce and IS staffs under a CIO [chief information officer] or CTO [chief technology officer]. In some of these places, it's like a baseball team with right-handed pitchers and southpaws--they're both seen for their special value and strengths, and function as members of the same team." A case in point, Computer Task Group, an international IT services firm, just named Alex P. Alexander, an executive with e-business experience, as vice president and CIO, reporting directly to CEO Darrell Jennings, and put its entire e-business portfolio under him. It was Alexander's understanding of Internet commerce, plus earlier experience as a regional manager at Electronic Data Systems, that served as a springboard to the new job. "The experience at EDS, where, as a regional manager, you're basically CEO of a small business, plus what I learned from the e-business side, allowed me to have the perfect fit for the CIO role," Alexander said. In his consulting work at CTG, Alexander said he "had been working with a lot of our clients, helping them create e-business strategies and actually running their e-business operations in some instances." In this role, Alexander had a bird's-eye view of the clients' IT infrastructure, as well as those of their customers and supply partners. "That allowed me to understand that, if the internal IT infrastructure is not in order, it is going to be very difficult to make the whole e-business thing happen. That's the CIO's responsibility, but many of them were focused on point solutions and didn't have a strategic plan they could point to." Wells Fargo, another organisation that has established a highly successful track record in launching e-business efforts, takes a centralised, integrated approach. "Wells [Fargo] has all of its Internet activities around one head, Clyde Ostler [group executive vice president of Internet Service]," said Steve Ellis, executive vice president of the Wells Fargo's Wholesale Internet Solutions Group. "We spend an enormous amount of time working with the business group heads on how we design and market the various products and how they fit into the service channel. This is a relationship business, not a technology business." Even so, Ellis' group works closely with the bank's internal IT group in evaluating vendors and consultants it may want to use in deploying a new business initiative. In addition, the technology and business people work as a team in implementing projects. "We decided up front, with our [internal] technology partners, that we needed to build fairly rapidly and be able to work with a lot of changing technology," Ellis explained. "As a result, the business and technology people actually sit right next to each other and function as a physical, not virtual, team." Using this approach, Wells Fargo has launched various customer-oriented e-offerings, including WellsExchange, a suite of B2B services that allow midsized and large corporate customers to perform a variety of domestic and international transactions, such as cash management and foreign exchange online. Already, 20 percent of the bank's commercial customers have signed up for the service, Ellis said. He expects that figure to be more than 50 percent by year's end. Another way I-managers can hedge their bets is to pay close attention to shifts in the corporate wind. If I-managers haven't done so already and are managing an autonomous or semi-independent e-centre--what Forrester's Pullman calls a "dot-corp"--they need to develop an integration plan, pronto. "Most dot-corps were established to function as temporary, transitional organisations," Pullman said. "But some companies are now taking a very soloed approach to everything relating to e-business." While keeping the dot-corp operation independent may be the best strategy for the long haul, some companies--especially those under financial pressure--may have to transfer their e-business back into the lines of business. I-managers who draw up a comprehensive integration plan well in advance of what Pullman sees as an inevitable transition are going to be better positioned to ensure that e-initiatives and their own careers don't get caught up in corporate red tape and inertia. Payback If you focus on the project that will produce a quick, six-month return, you may be looking too much to the short term, and placing expediency ahead of value, Pullman said. "The quick payback is, frankly, not always realistic," he said. Instead, Pullman recommended zeroing in on the longer-term projects that, in the end, are going to make a real difference. As for the need to show an ROI: "There are ways to structure large, two-year projects in bite-size chunks that have a real return," he pointed out. Jon Derome, senior analyst at The Yankee Group, also recommended taking a more modest approach as a way of dealing with cost-of-ownership issues. "For example, many B2B projects were originally going to connect to the entire e-marketplace," Derome said. "Now, a lot of these initiatives have been scaled back and are only connecting to a company's existing supply chain partners. People are also building on existing B2B capabilities today, such as EDI [electronic data interchange], rather than scrapping them and starting over from scratch. That's a more pragmatic, realistic approach." Indeed, for the near term at least, pragmatic and realistic might well serve as the watchwords for I-managers struggling to come to terms with the post-dot-com era. Back to Table of Contents Job challenges demand vigilanceWhen hackers launched denial-of-service attacks on the White House's web site, people noticed--especially executives in charge of corporate Internet initiatives. Given those attacks, as well as other assaults on high-profile Web sites, it's not surprising that security was the top technology concern of the Internet and interactive executives who responded to Interactive Week's survey of I-managers. Interviews with nearly a dozen I-managers from various sectors, as well as 882 responses to the survey, showed that issues like security, adequate infrastructure, access to data and enterprise systems integration continue to be the top technology challenges. "We hear from our customers that they are concerned about privacy," said Mamie Millard, senior vice president of product development at Travelocity.com, an online travel-booking company. To address those concerns, Millard said, Travelocity appointed full-time security officers at both of its offices to analyse new technologies and deploy security measures. "Security is a thing you worry about every day," said Asa Davis, vice president of information systems at American Power Conversion, a producer of power quality and power reliability products. "We are dealing with hundreds of hack attempts a day on our Web site. That won't ever go away." Security concerns can be complicated by the need to scale operations. According to the survey, the average amount of money directly controlled by each I-manager in companies with more than 5,000 employees jumped from US$16.8 million last year to $19.2 million this year, and most respondents expected a budget increase next year. In addition, 43 percent of the I-managers polled expected to increase their staffs this year. Slightly more than half of survey respondents said the size of their staffs would stay the same. About 4 percent expected to lose personnel. The staff under John Benzinger, vice president of information technology (IT) at online auction exchange FreeMarkets, has grown from two people to more than 100 since the end of 1998. And Benzinger is doing more than just hiring people. New product offerings at FreeMarkets have forced him to dramatically increase his infrastructure, the challenge that came in second in the survey. "In the last year, I've grown my server base five- or sixfold," Benzinger said. Plugging the whole That's particularly true at Exide Technologies, one of the world's largest battery manufacturers. Donald Curt, Exide's chief information officer, said he is working to integrate disparate IT systems in the wake of the company's purchase of GNB Technologies, another battery maker. The company is also trying to unify its worldwide operations, spread over more than 80 countries. Some of Exide's plants in Europe were "operated independently or were never fully absorbed," Curt said. To address that, Curt wants to "bring the entire organisation together into a common or integrated system." Exide is looking to Internet technologies like eXtensible Markup Language to simplify the process, but achieving that goal won't be cheap. Exide will spend about $40 million this year on IT-related items, Curt said. Within two years, he hopes to have the entire company, which had $2.1 billion in revenue last year, using the J.D. Edwards & Co suite of software for all of its finance, processing and manufacturing needs. Curt is also working on content distribution--another among our survey respondents' 10 top technical concerns. In April, the company relaunched its Web site in an effort to increase Exide brand awareness among consumers. The move toward the Web includes a much-needed effort to integrate Exide's Web-based battery parts ordering system into its Enterprise Resource Planning software. And within the next few months, Curt plans to launch a program that will allow engineers designing data centres to configure and order the battery systems they need on the Exide Web site. Although the company's sales staff is able to use the configuration software in the field, if engineers can directly access the software, "we can greatly streamline the process of how to build these orders," Curt said. Integration was also foremost in the mind of Dennis Fishback, senior vice president and CIO at Calpine, a fast-growing, independent power producer. As the company builds or buys new power plants or acquires natural gas suppliers, Fishback is faced with fitting the acquired software and hardware into Calpine's systems."The next big challenge for us is an enterprisewide systems integration," Fishback said. "We have to bring these different point solutions together, deal with it and present usable information to the company's decision makers so they can optimise their decisions based on our fleet of assets." Surprisingly, the survey found that hiring and employee retention continue to be concerns for I-managers. However, the tech slowdown and the end of year 2000-related upgrades have eased the problem somewhat. "With the dot-coms in trouble, it's a lot easier than it was a year ago," Travelocity's Millard noted. Fishback said Calpine is "a dot-com-like company, in terms of growth and stock potential, without the downside of many of the dot-coms. So it's been an attractive magnet for tech people falling out of the dot-coms. We are not having any problem." I-managers at smaller, private companies said their challenges are similar to those being dealt with at larger enterprises. At ClearOrbit, a company with 120 employees that produces software for large manufacturing companies, Chief Technical Officer Michael Palmer is trying to integrate new software into the company's Oracle-based system. The problem is data access, another challenge commonly mentioned by survey respondents. "We're trying to integrate our systems so our people can access the Internet and log on to our server with a virtual private network, so they can access their appointments or schedule through the Web," Palmer said. Along with all these other issues, I-managers must, of course, deal with the killer Bs: budgets and bosses. So it's not surprising that when asked to name management challenges, budgets topped the list of I-manager concerns. A few notches below that was the high cost of capital expenditures. APC's Davis confirmed that view. Last year, Davis oversaw the installation of new finance software from Oracle, as well as new sales and service software from Siebel Systems. The installations were expensive and time-consuming. "The thing I worry about now," Davis said, "is making sure we get the business return on investment that we expected, in order to justify those products and the money we spent on them." Back to Table of Contents Harmony on the horizonAs the profile of the Internet rises, corporations are apt to put one executive in charge of driving online initiatives. In many instances, the chief information officer or another technical manager is put on point. But, in other cases, companies are tapping executives from sales, marketing, customer service or other aspects of the business. Those executives often work independently of the information technology department, raising the real possibility of a turf war between the new I-manager and the old-guard IT executive. To avoid conflicts, some companies have created formal management structures. Other companies are relying on their executives to "play fair," and believe that, in the end, the focus will be on making Internet initiatives succeed, not on maintaining control. Gary Howorka, chief technology officer at Digital River, a company that hosts and runs Web sites on an outsourced basis, has to work with both CIOs and I-managers on a daily basis. Previously he served as an e-commerce practice director at Ernst & Young, helping corporations implement Internet initiatives. "There are some real battles going on out there," Howorka said, though he couldn't reveal any specific client names. "On one hand you have the marketing department trying to bring on and control e-commerce projects because they're responsible for revenues. But then the IT department feels like it's being shoved down their throats. When that happens, you get the CIO and the IT staff laying land mines all over the place." Howorka said that's not always the case, and in more and more instances he has seen forward-thinking CIOs and I-managers working closely to both develop and implement Internet strategies. "There are a lot of forward-thinking CIOs out there," he said. "It also comes down to the CEO. A good CEO will get everyone excited and working on the same page." In some of the newer technology companies, it isn't even an issue. At Handspring, a manufacturer of Palm OS-based personal digital assistants, Kendall Fargo serves as vice president of e-commerce. He doesn't have to worry about how to work with the CIO, because Handspring doesn't have a CIO--though there is a CTO. Fargo, who came to Handspring from Beyond.com, where he was vice president of corporate operations, has his own development budget. He works closely with CTO Glenn Noga, but Fargo owns the look and feel of the company's Web site and the accompanying development budget. And, he said, that's the way it should be. "I'm the one that has to do the cost/benefit analysis of the projects we do," Fargo said. "I have revenue goals to achieve, and I have to make trade-off decisions about what I think will give us the biggest bang for our buck." At the moment, Handspring achieves about 20 percent of its revenue through its Web site - $123.8 million in its latest quarter - a figure that Fargo hopes to push ever higher. "Our direct sales [through the Web site] is our highest-margin business and gives us a direct relationship to the customer," he said. "I want to grow it to as large a percentage as possible." Focal alignment United Parcel Service has been at the e-commerce game longer than most companies, and has developed a sophisticated system for both developing and driving Internet initiatives. Tim Geiken, vice president of e-commerce at UPS, is in charge of defining the parcel delivery giant's e-commerce vision and delivering new Internet-based tools and services to customers. To put Geiken's responsibilities into perspective, UPS serves more than 2 million customers, delivering about 13.6 million packages per day. Of those, about 85 percent come from orders generated electronically. Geiken reports directly to the vice president of marketing, who serves on an Internet executive committee that includes CIO Ken Lacy, and which in turn reports to the CEO. He says this alignment - reporting to the vice president of marketing and not the CIO - ensures that his team's focus will be on achieving business goals. "Our e-commerce goals have always been to better serve the customer and increase our value proposition, so there's a natural alignment with your customer-facing e-commerce activities and how they relate back to the delivery of products and services," he said. Beyond the link to the Internet executive committee, Geiken's group works side-by-side with UPS' general IT staff in the company's 235,000 square-foot Innovation Complex - dubbed the Innoplex - which was opened in Atlanta last year. So, as the 60-person e-commerce team develops Internet initiatives, it can work directly with the IT people building the applications. There are no separate ivory towers. "We like to believe that we've created a collaborative environment, where there is no final say, but a final consensus," Geiken said. Hotel chain Marriott International has developed a similar strategy for its Internet initiatives. In late 1999, Marriott President and Chief Operating Officer William Shaw formed the eBusiness Council to oversee the company's online efforts. The council is co-chaired by Bruce Wolff, senior vice president of marketing, as well as CIO Carl Wilson, and meets once per month. Shafiq Kahn, Marriott's vice president of e-commerce who reports to Wolff, also sits on the council. "It's been a great success in terms of developing a collaborative environment and in educating the entire company about what we're doing in e-business," Khan said. Khan is responsible for two primary channels of business at Marriott: the company's traditional electronic links to travel agents and airlines - channels that have been in place for some 25 years - and its Web presence, Marriott.com. At the moment those two channels are responsible for about $3.5 billion worth of business. Marriott.com currently generates about 4 percent of that total, but Khan thinks it could be as high as 10 percent a year from now. Khan said the areas of responsibility between his group and traditional IT are clearly defined to prevent conflicts. He owns Marriott.com and the other online initiatives, and is in charge of plotting strategy. But when it comes to making buying decisions, he works with IT to make the right choices. Back to Table of Contents An e-business forecastThe customer is king, or at least he will be if the near future plays out the way I-managers expect. "We are focused on meeting our customers' needs and doing what can we to satisfy them," said Bob Reiner, manager of enterprise Internet services at State Farm Insurance in Bloomington, Ill. "The next generation [of Internet technology and strategy] coming up will have a dramatic impact." For State Farm customers, that will mean things like the ability to make contact with the company at any point of entry and get the same, up-to-date information. "They will be able to come in through an 800 number or the Internet or by contacting an agent," Reiner said. "Our goal is to spread data across the enterprise, so that the call centre and the agent and the Web site work as a well-oiled machine." This quarter, State Farm is rolling out online tools for rate quotes, claims, and purchasing and changing policies. Many of the top trends for the future identified in the I-manager survey deal directly with customer access and service - including customer relationship management, universal real-time access to data, better user interfaces and personalisation - or will support the customercentric model in some way - including broadband, voice-over-Internet Protocol and wireless access. All will require some work before they begin to pay off on the bottom line. One challenge facing many large enterprises as they push business onto the Internet is getting all their parts to work together. "We're a complex business that is an amalgamation of many companies, and we have two different groups of customers," said Gary Dowdy, vice president of e-business at Cardinal Health, which already does $1.5 billion in business over the Internet. "We want to have one Cardinal approach, to present one Cardinal to all of our customers, but to do that, we need to first do things like extending adequate security to our heterogeneous software environments." Cardinal is focused for the next few quarters on using enterprise application integration tools to tie together its back-end systems, Dowdy said. "We're creating a common infrastructure that can move information without knowing what the back end is." He's less interested in one of the trendier technologies - wireless - at least in the near term. Wireless was the most popular choice as an up-and-coming technology in the survey, but Dowdy questioned the rate at which it will actually be adopted. "We're looking at it, but it is not a priority," he said. "There is a question of expense vs. benefit. Our customers would benefit, but can they afford the devices needed to generate ROI [return on investment]? Security is another issue. Wireless is the next big thing, but it's mostly hype right now." As important as any technology to the development of an I-manager's plans will be the continued development of a culture that can support e-business processes. "Process is job No. 1 into the future," Dowdy said. "It's not just about buying technology; it's change management and behavior modification. Now you're into human psychology, and that's more complex." Said Reiner: "Our seniormost management is involved in the cultural issues, and we have avoided getting stuck in the muck and mire of middle management, but there are still pockets of disbelievers that need to buy in." One other thing about the future: It may not get here quite as fast as once expected. In the post-dot-com world, doing things yesterday is out and doing things right is in. "Our mantra is to learn quickly, think big, start small and scale fast," Reiner said. "We are taking an incremental and methodical approach, and we have a lot of other priorities as well - they are all customer-facing, but they may involve areas other than the Internet." Back to Table of Contents I-Manager profilesNoah Garden Noah Garden is in charge of helping Major League Baseball hit a home run on the Internet. The league manages a Web site, MLB.com, as well as e-commerce stores for each of the league's 30 baseball teams. The league sells more than 6,000 products from its sites, and has begun offering subscription-based audio broadcasts of games. Garden spoke with Section B Editor Mel Duvall. What kind of revenue is your site bringing in?
You rose up through marketing and sales to assume your role. Why is that an appropriate route for a vice president of e-commerce? Whom do you report to? Jeff Marshall As chief information officer of The Men's Wearhouse, Jeff Marshall manages the IT operations for 600 brick-and-mortar stores in the US and Canada, and is also in charge of the company's Web initiatives. He spoke with Senior Writer Robert Bryce. What is your biggest challenge these days? As a retailer, our two greatest assets are people and inventory. Controlling that, understanding what it is, where it is and how much it costs us is critical. We have systems that know the answers to those questions. But integrating the systems and making the systems work is part of the responsibility of a good IT shop. So how do you plan to do that? Anything else that's a concern? Robert DeRodes In his role of chief information officer at Delta Air Lines, Robert DeRodes oversees a staff of 2,400, making sure the airline's computer systems function smoothly. He must also work with Senior Vice President for eBusiness Vincent Caminiti to implement Delta's electronic commerce initiatives. DeRodes spoke with Section B Editor Mel Duvall on how he works with Caminiti to achieve Delta's e-commerce goals. What is the difference in your roles? I like to say Vince does a great job of catching the bear, and we do a great job of skinning it. How would you resolve a conflict? I see my role as the enforcer of architecture and standards, more than a selector of packages. What is the ideal relationship between a CIO and vice president of e-commerce? Back to Table of Contents I-Manager stats
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