Not dead, just metamorphosing
I enjoyed your article, On the death of IT strategy (Information Age, July 2003). Your conclusion echoes my experience of working with leading companies around the world – IT strategy has not died, but it is clearly metamorphosing into something very different.
My company’s own research shows that the core of traditional IT strategies – IT architecture – has been widely superseded in companies by an intense focus on IT operations and service management. This ‘make sure it works, make it efficient’ stage is vital in companies where it is needed, but is not the end of the strategic journey.
As you say in your final paragraph, the final stage of the IT strategy metamorphosis is all about how a company applies IT to yield strategic (and operational) advantages, not what the IT consists of, nor how it is run. These fully matured IT strategies bear little or no resemblance to traditional ones, and equally demand a very different kind of strategist!
From a CEO’s perspective it may well be that the technology itself doesn’t ultimately matter, but how well it works, how much it costs and most importantly what people do with it to create both strategic and operational value most definitely do.
The lure of offshore (Information Age, June 2003) provided an excellent picture of how the boards of most companies are sending clear signals that an offshore-based IT strategy has got to be seriously considered. However, what we are seeing across different market sectors is a huge diversity of approaches to implementing offshore outsourcing policies, and each sector is at a different stage of maturity in successfully demonstrating where real benefits can be obtained.
At a recent conference in London, Outsourcing 4 Retail, it was clear that UK retailers are only just starting to prove how large legacy system replacement projects can be undertaken at economically viable costs. Indeed, it was suggested by the leader of the panel debate, John Davison from GartnerG2, that the entrance of the large retailers into IT outsourcing will probably force further improvements in the way outsourcing vendors manage an outsourcing deal at the negotiating table.
One interesting, and very significant trend that I believe you did not report is the dramatic shift towards ‘captive’ or ‘insourcing’ units. Looking at the US as an indicator of how Europe will be moving in the next few years, IT/software exports from India to the US via subsidiaries has more than doubled between 2001 and 2002 – from $0.54 billion to $1.20 billion out of a total of $7.5 billion [source: Express Computer Magazine].
Clearly this growth can be attributed in part to early adopters, such as GE, Citigroup and American Express, starting to reap the benefits of their large scale investments, but we are also seeing increasing numbers of customers in the US who have built up knowledge and experience of offshore development with large vendors and who now wish to make the next step. I see no reason why Europe will not follow.
Cost pressure is clearly the main trigger for the continued migration, but the European customer confidence you describe in your article is starting to translate into a new drive, both in large and small organisations, to make long-term organisational changes to enable the ownership of an offshore development centre (ODC).
As a result, new service providers and consultancies are being set-up that are competing with the traditional large scale vendors offering much lower cost start-up facilities that can address the key issues, such as skills retention, IP ownership and management control. Our organisation represents this emerging group of suppliers who are focused on building and operating client operations using an innovative incubation model called Global InServe.
The impact of this trend on IT in Europe will be sustained and long-term. I believe the large Indian suppliers will gradually adapt their product offerings to secure long-term customer benefits, even if the margins will not be as lucrative as the current business model. Customers have already been able to put pressure on suppliers to reduce rates, but this can only go so far before the traditional model breaks. It is likely that next time we see those executives who are currently sitting in the lobby destined for a whistle stop tour of India they will be heading for their new offshore office touchdown suite!
EMEA business development director
Beware of whole truths
I am writing in response to your article, On the death of IT strategy (Information Age, July 2003). One classic mistake that management scientists (is it a science?) make is to refuse to believe in cause and effect, only in correlations. So, the study quoted in ‘Less is really more’ (Harvard Business Review, May 2003), may simply ignore the fact that companies that do well, probably do many things well and one of those things might be the management of IT costs. You don’t get competitive by spending less on IT in itself, but well run companies just manage their costs well across everything.
The insight about ignoring the ‘I’ in IT is a very good one. Carr is obviously applying product lifecycle models to IT, or perhaps technology lifecycles. But information is neither. Clay and stone tablets, palm leaves and parchment have all declined in popularity, and the market share of papyrus is declining. But are books, newspapers, magazines and journals dying out, or are they proliferating?
HBR is often thought provoking, but its statements should not be taken as truths. Unfortunately, many managers haven’t the time and so they either don’t read it, ignore it or just swallow it whole without thinking. Thanks for a good article.
Dileep Damle, MSc MBA
Re-writing OLAP history
I write with reference to your article on Panorama (Emerging companies, Information Age June 2003). Your article says: “At that time [in 1996, when Microsoft bought Panorama’s OLAP server technology], there was no prominent business intelligence tool for collating and analysing data in a Windows operating environment.”
I would have thought that Gentia, Express, Holos, Arbor/Essbase, Pilot and numerous others, that had been operating in a Windows environment since the early 1990’s, would have qualified as prominent. Microsoft got into the market much later, and Panorama fitted the strategy because it built on SQL Server. Your article also does not seem to mention that Microsoft does have a front-end tool – Data Analyzer – bought from another Israeli company.
The fact that the UK has fallen in the rankings of this year’s Information Society Index should come as no surprise (Insider, Information Age, July 2003). Despite the high profile promotion of broadband over the past 12 months, the government’s attitude remains that so long as the population gets cheap and fast online access, the UK will become a more technology-driven economy.
But in the rush to create Broadband Britain, I believe that we are in danger of setting our sights too low and of descending into a price war over basic connectivity. Although cheap broadband is great for home users, businesses need to look beyond the price and explore the new ways of working that broadband enables. Too often, this technology is being either mis-sold or under-sold.
Companies shouldn’t be encouraged to regard broadband as just being about low cost, high speed connections – rather, broadband should be seen as a gateway to the type of flexible and collaborative working practices vital for companies to remain competitive in the 21st century. The onus is on service providers to help promote this vision by offering managed broadband-based solutions, such as packages for remote or mobile working.
Leading telecoms analyst group Analysys has recently issued a report highlighting the need for service providers to add value to broadband connectivity services, predicting that the managed broadband service market for SMEs will be worth EU10.3 billion by 2008, from just EU1.1 billion euros this year. This is a hugely lucrative market for forward-looking service providers.
If the government is to develop the UK as a world leader for ebusiness, its focus should be on encouraging SMEs to take advantage of the business benefits enabled by broadband, not on promoting a price war between service providers. The result of the former will be a more dynamic business environment. The result of the latter will be a bloodbath, with service providers squeezing their margins to undercut each other, and ultimately sacrificing customer support.
VIA NET.WORKS UK
The reality behind real-time
I read with great interest your Business Briefing on ‘Strategies for realising the real-time enterprise’ and was amazed by the level of importance given to the need to be real-time.
So many companies get caught up in the hype surrounding a certain technology that their initial requirements are not fully considered in the final decision process. Today, few companies can afford to spend unnecessary money on a product that will fail to show an ROI in the near future.
You might be concerned your competitors are already using real-time reporting solutions. However, are they using the functionality they offer? Are they processing and analysing their data immediately? The answer is most likely no.
Many companies could save themselves a lot of money buying a solution that is not as resource hungry, and offers 90% of the functionality for 30% of the price.
Do the maths and buy the solution that fits your requirements, not your aspirations.
VP International Operations