Amicable Split

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- #Learn how to build a Web team without ruffling legacy feathers - #See how hip Websters can work side by side with traditional IS staffers - #Find out how to integrate Web and legacy functionsCompanies are dividing IS staffs to better compete in the Internet race. Their Web teams may be cool, but they better stay connected to their legacy pals.

Climb to the second floor of Staples' spacious headquarters just outside Boston, and you encounter two identical doors. Choose the one on the right, and you enter a traditional IS department with symmetrical grey cubicles, programmers and systems analysts working quietly at their desks or strolling intently down hallways. The tapping of keyboards interrupts a hum from the fluorescent lighting.

Open the door on the left, and a jolt of laughter and activity nearly knocks you over: Twentysomething employees in black T-shirts and jeans lounge at a coffee bar, while others, sporting goatees and hair gel, take a foosball break. A vibrant red ticker banner flashes news about Staples.com across the room. Walls are painted bright yellow, and mosquito netting separates a lounge area from a maze of open cubicles where khaki-clad hipsters type Java code. Suddenly, you feel very old.

Meet the Web team.

To attract IS talent, focus staff on Web initiatives and get their Web sites up to speed as quickly as possible, many companies - including Staples - are choosing to split their IS groups in order to form lean and mean Web divisions, even if it means coping with some grumbling from those left behind to maintain legacy systems. "Why don't we get beanbag chairs?" some are moaning. Still, there's often no way to get around the divide-and-conquer strategy as large companies take their first e-business steps. "If you can get an organisation to move faster by creating a separate group, then you should do it," says Brian Farrar, chief operating officer at the Chicago consultancy Xpedior. For IS leaders and their counterparts in the dotcom arena, the trick is to keep the groups connected by developing joint projects, offering training in Web technologies for those who want to make the leap and reinforcing the mantra that legacy systems remain crucial to a company's IS shop - and are increasingly integrating with the Web anyway.

At Staples, a company whose claim to fame is selling products that help keep businesses running smoothly, 13-year IT veteran Mike Ragunas - who was appointed CTO of Staples.com last year - meets weekly with Staples CIO Brian Light. The purpose of these meetings is to coordinate projects, staffing and strategic planning between the dotcom unit and the traditional IS department. There's healthy competition between the two units when it comes to attracting talent, but Light and Ragunas insist cooperation is key to dotcom success. More than 30 of the 95 employees at Staples.com have come from Light's IS department, and the two groups have been working together to perfect an Internet kiosk program recently installed in some Staples stores. "If we want to compete with Internet startups, we need a focused team," Ragunas says. "But we don't see it as black and white. We work closely with people in the IT infrastructure across the whole enterprise."

Staples is an example of a company creating a startup-like atmosphere, complete with dotcom decor within its four walls, in order to galvanise its e-commerce presence. With no rule book available on how to organise staff for e-commerce, companies are trying everything from creating closely integrated Web groups to independent spinoffs miles from company headquarters. In many cases, IS departments are split, and in others, entirely new units are formed, led by people from the business side. Creating some sort of separate group dedicated to promoting a company's Web presence allows brick-and-mortar companies to attract IT talent and move quickly to establish themselves on the Internet, many analysts agree. Some caution, however, that splitting up an IS group can hurt morale among staffers left off the Web team and may actually get in the way of creating a unified Web strategy.

As a result, some smaller companies are deciding to forgo the autonomous Web group in an effort to avoid morale problems. While they are feeling the same pressure as large companies to improve their e-business offerings, smaller companies - with smaller IS departments and fewer resources - are finding that they are able to create momentum without splitting up the IS department. Mikron Industries, a US manufacturer of custom-designed extrusions for the vinyl window and door industry, is beefing up its Web presence with its 14-member IS group and help from outside Web consultants. The company is working to transform a static Web page into an e-business offering that aims to cut costs and allow customers and suppliers to do business with Mikron online. "Our current development group understands our core manufacturing business," says Steve Christensen, the company's CIO. "It wouldn't make sense to leave anyone out as we develop our Web strategy."

The ultimate winners in e-commerce will be the companies that successfully integrate their online and offline businesses, à la Charles Schwab, industry experts say. So when you go ahead and create that separate Web SWAT team, remember legacy talent goes a long way to help break down the wall between a Web site and customer fulfilment. "As companies develop B2B strategies, they are seeing that the Internet is more than a presence on the Web," says Renee Sommer, a principal at Semeron, a Seattle consultancy focused on e-business. "Legacy talent is critical to the integration needed to make these new strategies work."

As the following three stories of companies reorganising their IS departments illustrate, there's more than one way to effectively use your technical talent to build and operate your e-commerce group. In order to jump-start their Web initiatives, all three of these companies opted to form separate Web divisions separate from the IS group. But they're also all working on ways to integrate Web and legacy tasks in order to keep their staff happy and to better define an enterprise-wide Internet strategy. And throughout the process, they are mixing IT with business strategy to create a new balance of power that is hoisting IS leaders alongside their business counterparts. "We're not talking about a set of technology issues," says Xpedior's Farrar. "We're talking about a business revolution based on technology. If your organisation can create new opportunities for technologists, you're on the right track."

Avoiding Splitting Headaches

Made2Manage Systems, a provider of e-business applications and ERP systems for small and midsize manufacturers, prides itself on consistency and discipline - not on making bold moves. Open fields and farmland aren't far from its headquarters in an Indianapolis office park, where software engineers painstakingly build systems that help their clients take orders and keep their books. "You'll take a company's business down if you screw it up," says Gary Rush, vice president and CTO. "We don't tend to hype things. If anything, we're culturally too conservative."

Thousands of miles from coastal dotcom Meccas, Made2Manage started contemplating its Internet strategy last year in a fashion akin to its own culture - cautiously and deliberately. During the last half of 1999, the company began to monitor how the Internet was affecting its customers. And last December, officials brought in a dozen high-level executives from among its customers across the country to find out firsthand. What they heard gave them a jolt. One customer spoke of losing a long-time client to an offshore provider after coming up short in a reverse auction.

That executive and others were looking to Made2Manage to help them do business on the Web and quickly.

Responding to the sense of urgency from customers, senior managers at Made2Manage decided to pull a dozen people out of the 80-member IS department to form a separate "Eport" group. Their mission: to work at full speed to launch and maintain m2mEport.com, a Web site housing Made2Manage's Web-based tools and services. "Ultimately, for the intensity and focus we want, and to unleash an entrepreneurial spirit, the best thing was to put together a self-contained team," says Christopher Clapp, vice president and general manager of the Eport group.

Made2Manage created the separate Web team in order to foster a faster-paced, experimental spirit that was foreign to its core business. So far, results are encouraging. Eport launched its site on March 1 and doubled its traffic in two months. By the end of May it had 1400 total customers, with around 600 returning each week. "We would do it again the same way," Clapp says. In fact, the small group has worked so well that the company has decided to restructure the entire IS department into smaller groups in order to push some of that entrepreneurial energy into project teams working on the legacy ERP product. To ensure that these small groups, including Eport, cooperate with one another, the company recently created the new position of chief technology officer to oversee and coordinate the groups at a high level. "In the end, the technologies will have to be coordinated, and I think that will happen soon," says Rush, who used to oversee the group responsible for the more traditional client/server enterprise applications.

Eport's inception didn't come without some serious pain, however. When the staff first heard of the split, hallway discussion and watercooler whispering centred around the new group. "People here were asking, ‘Are we really working on the coolest thing right now? Does this mean we aren't as important on the legacy side?'" says Michael Hussey, director of product development who oversees 40 ERP applications. "The trick is to talk to people and let them know that what they're doing is still important."

The Eport division is based in the same office complex but in a different building from the rest of the IS staff. The blue-grey cubicles are identical, although the Eport staff did go out to Wal-Mart to buy a beanbag chair to add ambience. Salaries are comparable to the main group, ranging from around $US60,000 to $US120,000 a year, although hours have been longer to ensure the Web site got up to speed quickly. The average Eport employee is in his 20s, compared to upper 30s for other IS employees. "The atmosphere is alive and electric and passionate," says Helen Follett, manager of site development at Eport.

To dispel the notion that Eport folks are getting more attention and having all the fun, Rush and other senior managers have worked to make it clear that those on the legacy side will be encouraged to work on Web-related areas such as browser-based products and site servers. "It's not like Eport is the only cool Web stuff we're doing," Rush says. "It wasn't like the cool stuff versus the boring stuff."

In the beginning, those on the legacy side were curious about the new separate group, says Chris Lenzo, a business systems architect who works on the company's legacy systems. "It was more a question of What is Eport? than Should I be a part of Eport?" Lenzo says. He adds that senior management made it clear to their staff that legacy products weren't going to be abandoned and that partnerships Eport develops will rely on back-office technology.

"The company went through a radical change, and there was a period of transition," says Follett, who now works up to 60 hours a week instead of the typical 50 hours she worked on the legacy side. "But I think people are excited about the pace of change now. There's still a passion and energy, and we're trying to figure out what we need to do to keep it going."

Chasing the New Economy

Several blocks from the midtown Manhattan headquarters of Chase Manhattan, Ameet Patel is working with the 120 staffers at Chase.com to push the financial institution into the Internet age. Chase.com's offices don't look much different from those in the company's Park Avenue headquarters, however. The beige cubicles are similar, and neckties are scarce in both organisations now. "The mental atmosphere is very different though," says Patel, Chase.com's CTO, who until last April was head of systems architecture in Chase's national consumer services organisation. "There's a definite energy and sense of urgency. It may look like a bank floor, but it's very much like working in a dotcom environment."

Chase.com as a division of the company (not the site itself) was launched in June 1999 in a move to accelerate Internet ventures in the bank's old-line business units and to invest in Web-related business ventures. Led by Denis O'Leary, former Chase CIO who is now executive vice president in charge of Chase.com, the Internet group isn't functioning alone. It's working to change the way business is done in the entire company. Though housed in a separate building, those at Chase.com stress they are working constantly with the consumer and institutional business groups in order to put both consumer and institutional products progressively onto the Web.

When deciding how to build a staff for the dotcom arm last year, Chase used a hybrid approach that included internal transfers and outside hires. Chase.com now has about 40 IS employees out of the thousands in Chase's worldwide IT organisation, and job mobility is encouraged between all of the different IT groups. So while the Web team is separate, its ultimate goal is to integrate the Web into all levels of the bank's business.

"Initially, a lot of people thought this was a special Internet group," Patel says of traditional IT. "They soon realised they would have to play a role in our Web strategy as well, by re-engineering back-end capabilities and improving customer service and fulfilment. Everyone here has a vested stake in making our Web presence successful."

Keith Hunter, who has worked in Chase's data centres for the past 16 years, says the dotcom group held some allure for back-office staffers but that he personally wasn't tempted to switch over. "I wouldn't mind being in the dotcom world," says Hunter, senior vice president of US operations for The Chase Manhattan Bank. "But I don't feel held back here because I believe massive back-office operations are needed to support the Web applications."

Chase has an enormous and complex IS shop, with about 18,000 employees worldwide. Three CIOs individually oversee the bank's consumer organisation, the institutional (or wholesale) side and a group called eTech, which is responsible for the bank's e-mail backbone, corporate network and overall internal infrastructure. While Chase.com was getting ready to launch its consumer Web site, staffers from the two business groups were also brushing up on their Java, XML and Oracle skills. "Everyone has to learn the Internet languages because that's where the bank is going," Patel says.

Chase.com, which will remain separate into the foreseeable future, plans to move into new offices in the coming months, replete with lounge areas and brightly coloured furniture. But the bank has avoided an us-and-them attitude when it comes to the Chase.com team by emphasising Web technology training across its massive IS group. It has also found that not everyone wants to sip cappuccino and work until midnight. "The dotcom experience was cool six months ago," Patel says. "Not everyone's built to get into a dotcom type of world."

The Dotcomers Down the Hall

Staples recognised that selling pencils and Post-its to small businesses might not be considered sexy to the under-35 dotcom crowd. So the company created a separate Web team and issued shares last year specifically tied to the division's performance. These so-called tracking shares, Staples officials say, have helped the company attract and retain key talent and put it on an even playing field with dotcom startups.

Just across the hall from Staples.com, however, those in the traditional Staples IS department sometimes raise their eyebrows at their trendier colleagues. The dotcomers, after all, have ping-pong tables and lounge areas - and stock-related compensation plans. In a bid to head off the potential of internal strife, Staples is now giving dotcom stock options to those on the brick-and-mortar side as well. "We don't want to create artificial lines between the two sides," says CIO Light, who jokingly admits he sometimes steals cookies and iced tea from the Staples.com offices. The ultimate goal, he adds, is to gain support for the e-commerce initiatives across the company by integrating Web projects.

Staples is planning to take Staples.com public in the near future, market conditions willing, and will keep a 70 per cent stake in the dotcom subsidiary. Though Staples.com is just down the hall from its brick-and-mortar counterpart, an IPO would make it all the more autonomous. Despite the separate entities, Light and his counterpart at Staples.com, Ragunas, stress they are maintaining close ties in order to boost morale and foster a harmonious coexistence. So IS employees on the brick-and-mortar side are learning Web technologies, and some are jumping to the dotcom side. "Early on, the separation can help with focus and speed," Ragunas says. "But as you grow, there is more and more of a need to integrate the two sides."

When Ragunas started working for Staples 13 years ago as a management trainee, he was fresh out of college at a fledgling company. He helped build the company's first Web site in 1995, and he remembers when Staples.com started out in a couple of cubicles. When the company's e-commerce site was launched in November 1998, the IS departments were still integrated. Quickly, Ragunas and Light both saw that in order to stay competitive they needed to build an IS department tied to Staples.com.

The typical antagonism between the trendy and the stodgy hasn't been as severe as it might have been in an older company, since 14-year-old Staples doesn't yet have much of an old-school mentality, Light says. Still, IS leaders have worked to make the jobs supporting the retail and delivery groups attractive by making it clear that e-business goes far beyond the commerce focus of Staples.com. For example, those outside Staples.com are working on the company's intranet site and intranet portal, putting benefits and job openings online and creating a portal for vendors. "Our selling point has been that every part of the IS group is doing e-business," Light says. "That includes order processing, call centres and package tracking."

Kenneth Miller, who reports to Light as senior manager of technical services, says he hasn't noticed a lot of jealousy on the legacy side because people there understand the importance legacy systems play in supporting e-commerce. "I wasn't really tempted by the dotcom allure myself," Miller says. "I've always been a technical analyst type of person."

IS employees from Staples.com and their brick-and-mortar counterparts will be increasingly working together as the company develops new ways of doing business, even though the dotcom arm will remain separate.

"Our management team sees the importance of technology and how it can potentially change the structure of our business," Light says. "Everyone can play a part in that."

Crossing the Channel

IS staffers may sometimes look at their dotcom counterparts as a breed apart, but the two sides are increasingly casting aside prejudices and working together. Case in point: Staples' in-store Internet kiosks, which are the result of months of collaboration between Staples.com employees and a group from traditional IS, as well as some staffers from the catalogue division.

A total of 32 employees - 10 from Staples.com, 15 from the corporate and store systems, and seven from the direct catalogue business - got together just after the launch of Staples.com in November 1998 to put together a kiosk program they hope will boost customer loyalty, brand identity and overall efficiency. Twenty Internet kiosks were installed in Staples stores in June, allowing customers to order products they can't find on the shelves. After a pilot period, the company expects to install kiosks in more of its 1000 stores, although the exact number ­hasn't been determined. "The goal is to recognise customers no matter what channel they shop," says Scott Floeck, vice president of Corporate Store Systems in Massachusetts.

The kiosk employees worked in different offices within the same building but met regularly to hammer out their strategy. While Floeck's team was in charge of creating a master plan, the team from the Web group focused on user interface design and identifying integration points necessary to hook up the Internet with the catalogue.

For their part, the catalogue employees have been coordinating their AS/400 systems with Staples.com. "It's an immense cultural change for Staples," Floeck says. "People have tended to work within their own silos here. In this case, we're truly working across channels to deliver something."

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