Williams-Sonoma Shakes Up IT Mix for E-business

SAN MATEO (03/27/2000) - When San Francisco cookware vendor Williams-Sonoma Inc. got e-religion last year, Sean McHugh, the new manager of e-business, had a major sales job on his hands.

"We wanted to create an environment completely separate from corporate IS," says McHugh. "[Corporate IS] is a completely different world. It is the CIO's domain."

So before he got down to building a secure business-to-consumer e-commerce system, McHugh's first job was to convince the IS team that no one on the corporate side should have access to the new infrastructure.

"It was easy to sell this to the CEO," says McHugh. "It was much harder to get the Unix systems administrator to accept a reduction in control."

But, McHugh explains, it was necessary. "When we started, e-business was part of IS. That turned out to be completely unworkable."

Now there is a firewall between McHugh's systems and corporate IS. This kind of partition, which would have seemed radical only a few years ago, is not at all unusual now, and it underscores the fundamental difference between the roles of the CIO and the CTO.

McHugh says the difference is best understood in terms of revenue.

"While I don't have the formal CTO title, that is really what I am. I run a profit center," explains McHugh. "This means I pay very close attention to the profits of the company and those of my [e-business] division. The CTO drives technical direction, always keeping an eye on revenue generation -- the top line. The CIO, on the other hand, only needs to think about cost control. It is the fundamental difference between a profit center and a cost center."

Before this distinction was fully understood, McHugh was building the company's first e-business venture in early 1999 within the IS department, a wedding registry site. But the differences between corporate IS and the new venture quickly became apparent.

"At the time, I was also the network manager," says McHugh. "I was running a set of Novell, NT, and Unix servers."

He found himself so busy with internal operations that critical e-business development work got shoved aside. Management saw what was happening, and although McHugh didn't attend the meeting where the decision to split e-commerce and IS took place, he has a pretty good idea of what went on.

"We had seen what other companies were doing, essentially establishing new e-commerce units that function inside the organization as independent start-ups," McHugh explains.

So that's what Williams-Sonoma did. McHugh says that loss of control wasn't the only thing that made this a bitter pill for the vice president of IS.

"We took the best and the brightest people in IS and moved them to the e-commerce project," he adds.

Across corporations, IS departments can expect to see more of this maneuvering among departments taking place, McHugh explains.

"More and more, those who drive e-commerce initiatives are leading, and the traditional IS folks tend to follow along," he says.

The reason for this is simple and gets right to the heart of the new role of the CTO vs. that of the CIO or IS manager, according to McHugh.

"Our [project] dates are published," he says. "Analysts, stockholders, and customers knew that we were going live with our e-commerce site on Nov. 1. If we miss that date, the entire business suffers, the stock goes down, and we lose valuable customer relationships. If IS misses an internal systems upgrade, on the other hand, no one knows about it."

None of this should be construed to imply that CIOs and IS managers will go the way of the dinosaur. In fact, McHugh thinks quite the opposite. But more traditional IS professionals can expect big changes.

"As the CTO role becomes more critical," says McHugh, "I think the same techniques will be applied to the corporate side of technology systems. As that happens, you will start to see us merge together again. IS will function more like [e-commerce divisions] -- it will become a profit center, too."

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