Agents of ex-change

To survive the impact of B2B e-commerce, IT managers will need skills, courage and charismaWhen IDC senior vice president John Gantz was casting around for a word or phrase to describe what the new digital marketplaces will do to IT departments, movie titles about asteroids threatening the Earth kept coming to mind.

Armageddon. Deep Impact. To Gantz, writing in US Computerworld recently, either seemed to sum it up well enough.

IDC believes the thousands of digital exchanges or digital marketplaces that started popping up last year - and which favour neither supplier nor buyer - will account for more than 50 per cent of B2B e-commerce by 2004. And the company says that will produce big headaches for IT, to say the least.

"Did you think implementing a commerce Web site was tough?" Gantz wrote. "Well, what happens when you have to serve up your whole inventory to dozens or hundreds of such exchanges? Or let people track their orders or settle payments? It will be like running the back-office settlements for a brokerage."

"Meanwhile, your colleagues in marketing, sales, production and finance will be going nuts trying to keep the company alive as business models change at the speed of light. Do you think you'll be immune?"

Gantz seems to have no doubt that earth-shattering change is imminent, although we're too close to the asteroid to predict what will really happen. To survive the impact Gantz reckons IT managers will need the skills, courage and charisma of Bruce Willis.

But what exactly is the threat, and where will it come from? It seems one of the least predictable aspects of all is the effect of moves into such digital marketplaces on those senior IT professionals. Will Australian IT executives play a central role in forging their organisation's trading exchange initiatives and general e-commerce strategies, or will they be ultimately marginalised as e-business chiefs move to the fore?

It's taken years for IT to win a place at the board table. Now some analysts believe IT may be about to lose its seat once again as CEOs, CFOs and business managers take over strategy considerations to do with B2B.

There certainly seems to be a new breed of managers evolving in some sectors of corporate life - the e-business managers.

Their role has already proved so central to the forging of digital marketplaces that Peter Watkins, e-commerce director for KPMG Consulting, doubts many of the exchanges existing today would have evolved had it been left to CIOs and IT managers.

"If you look at CorProcure and the mining and minerals exchanges for example, these are a direct result of work done by e-business managers like Don Carroll at BHP and Jon Wood at Coles Myer, and many others," Watkins says.

"These managers are recognising the need for young bright minds in their companies and are developing e-business teams to focus on e-business opportunities not only within the company, but also within their industry and beyond."

Watkins has watched such 'e' managers emerging in some of Australia's leading companies over recent times, including at Australia Post, Telstra, Qantas and National Australia Bank.

But if IT executives are largely being locked out of strategy development, certainly global research by Arthur Andersen suggests IT still has a critical role to play.

Arthur Andersen partner Darren Rock says that as the e-business function emerges in organisations, some companies are choosing to create an independent 'entrepreneurial' unit unconstrained by the existing structures. Others are looking at radically altering their own existing organisations and potentially weaving consideration of e-business into everything they do.

"Some of them are an extension of the IT group, others are primarily business driven," Rock says.

But, he says while IT is still usually involved in the process, particularly in looking at the technical considerations of forging alliances and partnerships, ultimately business people need to drive the organisational trading exchange initiatives.

E-business managers are best equipped to focus on the strategic benefits available from alliances, and can most effectively evaluate their structure and alignment with the organisational strategy, he says.

And he says in most organisations it's only after this work is done that IT people are getting involved to design the technology to make them happen.

So are IT executives in danger of being marginalised? They're certainly under threat, says Rock. On the other hand, he can see a few Bruce Willis-like IT heroes on the horizon with the skills and nous to pull themselves and their organisations out of trouble.

"The opportunity is there for those CIOs with the vision and capability to place the IT department (or e-business group) firmly into the core of an organisation," Rock says.

"CIOs have always struggled to keep their place at the executive table and not find themselves consumed with the day-to-day operations of maintaining systems and running infrastructures. Research we've carried out indicates that CIOs are now very focused on e-business and what the associated technology can do for them, not just from a cost reduction perspective (although that is still important), but also from a revenue enhancement view and often even more urgently as a competitive strategy."So just how real is the threat that e-business managers will supplant CIOs and IT managers to play the crucial role in forging such exchanges? As director of the industry and government initiative, Pharmaceutical Electronic Commerce and Communication (PeCC), Patrick Gallagher has been active in building Australia's first industry-wide B2B Internet trading community. Eventually he hopes to oversee the revamping of the entire health supply chain to deliver substantial efficiencies to every participant, but especially to publicly-funded hospitals.

In that role he liaises regularly with Australian organisations at the forefront of what he describes as "this mystery tour" - including Coles Myer, Woolworths and Pacific Dunlop. And he says without exception they agree that the drivers of change for B2B e-commerce are not the CEOs - they barely understand e-commerce. But nor are they the CIOs or even the business unit managers. But then again, it doesn't seem like e-business managers are getting a universal look-in either. Instead, Pat Gallagher says, the bean counters will have the most influential role of all.

"Ultimately it's the good old accountants, the CFOs, who are driving these initiatives," he says. "Why is that? Because they can say to the board 'won't it be bliss if we can have a perfect accounts payable or perfect accounts receivable and we don't have to chase any cheques? Well, the promise that others and I are trying to bring about is exactly that'."

But does that mean IT executives will inevitably be left out in the cold, returned to a lesser role of building infrastructure and locked out of business strategy discussions altogether?

That depends on the individual IT executive concerned, Gallagher, a former IT company CEO, says.

The kind of IT executive who is indistinguishable from the IT vendors who service his company's needs has always been in trouble and is still in trouble now, he says. But the kind of IT executive who knows how to drill down and provide solutions where "the superhighway is connected to the dirt-way system" - in other words solutions that can connect truck drivers and shop assistants and nurses to the Internet, will become more important than ever.

Actually that may not be the complete picture. In the e-business world, says senior account manager Cash Management & Transaction Services Neil Williams, the role of technology shifts from process automation to business model innovation and the key drivers of change depend very much on circumstances.

Where organisations are reacting to an existing CoBAM (Consortium of Bricks and Mortar Enterprises) or forming a new one, CEOs are the drivers, as they were with Covisint and corProcure.

If the aim is to cut costs via an e-business trading hub, CFOs are the drivers.

But if the goal is to build an e-corporation, CEOs and CTOs are the drivers.

IT people can have a significant influence on all kinds of activities out of their "traditional role", Williams says, but they are not being involved.

"For example, in order to create value, I need to build alliances and have speedy execution capability. IT can and should be involved in alliance formation from the start because if it would take a lot of effort or cost to make the two systems hook up at the basic level, then, to me, the value proposition of the alliance may not be realised properly in the e-business world.

"While enterprises and senior managers are starting to recognise the importance of information technology from the point of view of value, competitive advantage, and the like, still, they are 'doing' e-business, not 'becoming' an e-business. Hence, the effectiveness and value of IT managers is dependent on a 'doing' vs 'becoming' approach."

It's clear some IT organisations in the New Economy are evolving into business service providers.

Boeing is a prime example. Once one of the largest buyers of IT products in the world, Boeing these days is a member of a consortium of aerospace companies planning to link thousands of suppliers into a single digital exchange.

But as part of that deal Boeing will soon begin providing IT services to all the companies that make up its supply chain in an effort to create a digital infrastructure.

Suppliers using Boeing's IT services will also be working with hundreds of other companies with which they will need to integrate. Since most of the suppliers that provide parts to aerospace companies have been providers of parts to the automotive industry, both Boeing and General Motors will want to provide them with as many IT services as possible to lock them into their supply chain.

In future, some analysts say, most organisations in Fortune 500 companies can expect to evolve from simple providers of IT infrastructure into business service providers. IT organisation in smaller companies will evolve in similar ways on a lesser scale.

And it's that kind of realisation that prompts another Gallagher, this one a consulting principle and head of B2B practice with Deloitte Consulting, to agree that IT organisations won't be marginalised at all.

Rod Gallagher says there is such a huge amount of work involved in the integration of suppliers and creation of the on-ramps for organisations that IT will retain a critical role far into the future.

Rod Gallagher argues that organisations wanting to join an exchange have to consider a host of issues to do with connectivity and also decide whether the exchange will confine itself to online ordering or extend itself to conduct collaborative product research and development.

"And because most organisations will be joining a number of exchanges, IT people have a phenomenally critical role," he says.

"Since organisations will end up joining a number of different exchanges, the adherence to open standards will be quite critical to that objective. You don't want to be building On Ramps for half a dozen different exchanges and then maintaining those."

But will IT executives, just starting to become comfortable with business strategy issues, go back to being mere service suppliers?

Geoff McLaughlin, a headhunter with executive search from e-people Australia, says in most Australian companies the strategic direction of a business is not driven by the CIO or IT manager and perhaps it shouldn't be.

McLaughlin says CIOs should be focused on gaining acceptance for new technological changes, developing new systems, responding to maintenance requirements or system enhancements, and managing the personnel within the IT team.

"The CIO can only contribute to the strategic direction of the business when part of a senior management team which focuses on developing strategies," he says.

"Even then, the CIO's training, background, and perception of the role of the CIO by other senior managers means that the CIO can only really contribute in terms of stating what technology is possible and what approximate timeframes they will take to deliver in order to achieve a strategic result.

"There are a whole raft of other considerations to be made (such as financial, marketing, shareholder acceptance, manufacturing, logistics, supply, and many others) in determining the strategic direction of the business which is quite outside the realm of a CIO."

McLaughlin says most CEOs are generally skirting around e-commerce because they don't understand it. The notion of developing an e-commerce Web site becomes a problem that tends to be postponed for as long as possible.

He argues an e-commerce Web site development is essentially the development of a whole new business that most CEOs can't comprehend. And that's where the right CIO may yet come into his own, ideally equipped to head up the new e-commerce business because of his understanding not only of the business, but also the Internet and how Web-based technologies can value to the business.

So just when you thought that the age of the Internet meant that we could all get by knowing less technology, it turns out that this is just the beginning of a future where whoever knows most about what's going on inside the Internet may ultimately rule the day. And that might even be worth losing a place at the board table for.

CIOs and IT managers, take heart!

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