When Bud Albers took the position of CTO at Getty Images in October 1999 he had to hit the ground running. The company's internal network needed improvements and Seattle-based Getty, which owns more than 70 million images and an estimated 30,000 hours of film, was in a major acquisition mode and on the verge of buying two competitors, The Image Bank and Visual Communications Group.
Albers was charged with helping Getty integrate those companies and getting them to make the same transformation that Getty recently had made: from selling photos through catalogues to selling digitised images online.
One issue Albers faced during the transition was how to manage and lead this radical change in Getty's business model from catalogue sales to online ordering and delivery. The IT department wouldn't just be supporting operations: it would be generating revenue. Today, the department's activities now are directly responsible for generating almost half of the company's revenue stream.
In the second quarter of 1999, Getty's e-commerce revenues almost tripled, reaching $US38.3 million and accounting for 44 per cent of sales in the quarter.
"It's not the same old IT environment," says Albers, who spent several years in what he calls a traditional IT shop. "I now spend a third of my time with the head of strategy and business development and the head of sales and marketing, because now all roads go through IT. It's an interesting situation because now the head of sales and marketing, when he's asked for revenue projections, will answer, Well, it depends on what functionality the tech guys can deliver'," Albers says.
Making a fundamental shift
Albers' expanding role is but one example of how e-commerce is reshaping the relationship between IT executives and their colleagues. CTOs and CIOs increasingly find themselves at the centre of high-level discussions about whether fundamental changes in business models should be adopted.
As more companies recognise that information technology is driving revenue growth, IT execs must move beyond the traditional technical support function and become leaders in strategic planning.
Unfortunately, not everyone is up to the task. Historically, IT execs have focused on control and cost: control the IT environment and keep costs down. That often led to a reactive mind-set and a cautious way of looking at project management.
Caution and change can collide, especially when an organisation switches suddenly to the Internet's high-change/high-speed environment, says Jim Highsmith, director of e-project management advisory services at Cutter Consortium, a US-based IT consulting company. "There are demands for continued high quality but also for speed. It calls for behaviours not traditionally seen in IT departments: you have to become more agile, follow the new technology more closely. It requires a degree of creativity."
As Getty Images changed, Albers saw the need to reshape his IT team. The department's project management skills had to be upgraded - changed to match the evolving expectations of Albers.
"At the management level, the change in our IT department has been considerable," Albers says. "I lean heavily on vendors and consulting people who think in terms of time to market." He's brought in people from Cap Gemini Ernst & Young and Hewlett-Packard. "It's much more like a software company than an IT shop. It's built around updates and release cycles," Albers says.
Another big change at Getty, which has 275 IT people spread across offices in Seattle, Chicago, Calgary, and London, is that the people in IT - and not just senior execs - now follow the financial aspect of their work much more closely.
"It's a foundational shift," Albers says. "My people want to know the endgame. In the old days, it was just sit down, shut up, and build this. Now we're working more closely with the business side, and the employees are more concerned about the bottom line."
But if that's true, then Getty may be an exception to the rule. In an era when there's so much demand for new IT staffers and so much outsourcing to contractors, fewer IT managers actually understand their company's business issues. And that number is continuing to decrease, says Cutter Consortium's Highsmith.
Yet if e-commerce is a crucial part of your company's revenue stream, then it pays to work internally on collaboration issues, Highsmith says. "It's not that business line managers can cede authority to IT. It has to be a collaboration," he adds. "And this is true not just at the CIO level, but all the way down the line."
Reshaping managing projects
In addition to increasing IT's stake in fundamental business decisions, e-commerce is also reshaping how the department manages projects.
In the past work was divided into either techies working on research-like projects or on mission-critical applications. Not today. Now they're expected to do both at once, Highsmith says.
"They're being asked to integrate CRM [customer relationship management] and ERP [enterprise resource planning] at the same time. It's transaction-oriented and they can't be dropping transactions all over the place. So the traditional kinds of project management approaches are not appropriate for these kinds of projects," Highsmith says.e-commerce has also drastically changed project time lines. Ask David Holden, manager of e-commerce applications and services at Eastman Chemical, in Tennessee.
"What we've noticed the most in the IT department is the speed of the environment," says Holden. "We are looking at very rapid development cycles. We'll be doing a lot less of the three-year-long projects. The technology could change on you in that time."
Forget years, think weeks. In fact, think six weeks. That's how long it took from start to finish for Holden to set up Eastman's own online auction site.
Implementation wasn't the only problem. Some people on the business side were wary of the auction concept, and it took a little bit of training, but it was fairly well received," Holden says. The auctions, for items such as rail cars of polyethylene, are conducted on Eastman's private auction site using Moai's LiveExchange software.
Eastman executives expect online revenue to account for 30 per cent of the company's sales by the year 2003. "One of the goals of the venture arm," Holden explains, "is [to] be involved in helping shape how the technology develops." The company has even invested in several of the vendors whose software it uses, including webMethods and Moai.
For some companies, the shift to business-to-consumer e-commerce isn't a great leap, yet the repercussions for IT are serious.
Lands' End, a direct marketer of clothing, already had a huge print catalogue sales operation, and was known for great customer relationship building. As Lands' End first dipped its toes online, the IT department wasn't even involved, recalls John Loranger, vice president of information services.
During 1993 and 1994 the company was experimenting with the Internet, interactive TV, and with putting catalogues on CD. The marketing department - not information technology - ran these initiatives.
The cataloger's first Web site went up in early 1995 as an experiment. At the time IT didn't have the staff to dedicate to this online venture: the project was outsourced to a company that had been working with the cataloger on other networking projects.
The site was launched: the online orders started rolling in. Lands' End wasn't prepared. "As you can imagine, we weren't that sophisticated about integrating this new order mechanism into our back-end processes," Loranger recalls. "We would just print them out, carry them over to our sales department, and key them into the order entry system."
This "unautomated" process did temporarily solve the problem of how to connect the Web orders with the company's legacy system for order processing. "But once we started getting as many as 1000 orders a day, rekeying became a huge manual task. So we started to build automated feed mechanisms to the order entry system, which is on a mainframe," Loranger says.
The in-house IT staff worked with the networking consultants to build that interface. "As the site continued to grow and we gained expertise," Loranger says, "we decided it was time to take control of support of the Web application development."
Retooling the department
Bringing that Web development in-house raised new issues for Loranger because his mainframe shop had little experience with Web programming. "The technology was so immature, it was very difficult to find anybody who had experience with Web sites. No one had five years' experience; they might have [had] six months," Loranger says.
Following an aggressive hiring and retraining program, today his department has a staff of 250, 30 of whom work on an e-commerce support team. That team works on the core US site, the international sites the company has set up, and the corporate sales of logoed merchandise. The company's online sales jumped to $138 million in fiscal 2000 compared to $61 million in fiscal 1999.
Friction can result when e-commerce gurus become a Web "silo" inside a larger legacy system. Loranger says Lands' End's IT management team tries to head off any such personnel problems.
"We would be foolish not to realise that this certainly could happen," Loranger says. "We have worked hard to provide opportunities for a number of our internal staff to move to the Internet team as they have expressed a desire to do so. Certainly, these moves must be planned and timed so as not to increase risk to other areas of IS."
Loranger believes his department works well precisely because it is not decentralised. If there is a Web component to something that involves merchandising systems or the call centre, teams are created that include both traditional IT staffers and e-commerce team members.
Loranger's IT department has grown considerably, fuelled by the cataloguer's online success. "Things have always moved fast in IT, but now it's moving at lightning speed," Loranger says. "It's an exciting time, but it brings a lot of added stress."
Keep IT in-house
The decision Loranger made to bring the Web development in-house was a tough one, but the right one, according to Cutter Consortium's Highsmith.
A lack of IT talent is a constraint, but the worst strategy, Highsmith believes, is to outsource everything. "Then you never get the agility, innovation, and adaptability."
The biggest problem with outsourcing a Web-based project, according to a recent survey by Cutter Consortium, is inadequate project management. Schedule delays plagued survey respondents' e-projects 79 per cent of the time. Once the systems were delivered, the survey found these delivered systems met business needs a mere 16 per cent of the time.
Which leads Highsmith to ask one unsettling question: "If IT is becoming a core competency, how can you outsource it?" The consultant believes that small project components can be outsourced, "but managing projects and dealing with your own business staff, you shouldn't outsource that."
Steve Danker agrees. The CIO of Musicland Stores faced a dilemma similar to Loranger's when his company, a music retailer with more than 1300 stores across the US, decided in November 1998 to try its hand at online sales. "We were a mainframe shop and didn't have the expertise," Danker says, "but we decided that through a combination of hiring and training we were going to do this back-end work in-house."
During December and January architectural and product decisions were made. And the sites, under the names SamGoody.com, Suncoast.com, MediaPlay.com, and OnCue.com, were developed from January to April. The sites were launched in June 1999 with enhancements made through the next five months.
Challenges remain for Danker. He is developing Web-enabled in-store systems and is shifting more inventory and purchasing processes to the Internet. "We've been electronically trading for years using traditional EDI [electronic data interchange] and we're eager to apply Internet technologies there as well. But we do most of our supply with five companies, the major record labels. It wasn't even easy to convince them to go to EDI, so we're not holding our breath for them to move to Internet technologies." He now has 30 people working on the Web storefront.
The more things change . . .
Explaining the Internet's impact on business to other executives can be a big challenge. Loranger spent a great deal of effort educating execs during the company's early e-commerce initiative. Lands' End executives needed help to understand that "while the front end of the site looked brand new and was a different way for our customers to do business with us, the key to success would be how well we did as a company to understand and incorporate this new Internet front end with all of our current core back-end processing (the core order-fulfilment processing and inventory processes)," Loranger says.
"There's a recognition here that IT can and is shaping new business models," says Eastman's David Holden, "and both IT and line managers have to be aware of that."
What that means, says Highsmith, is that IT must re-examine the fit between department capabilities and functions and the e-commerce mission. "We keep saying the Internet is going to change everything, but in IT some people don't seem to think it's going to change how they do work," Highsmith says.
Assess your capacity for change
Information technology and the move to an e-commerce model are bringing great changes to many a company. Often it is the CTO who leads this fundamental shift in the corporate revenue stream. Leading others through change means you must be able to make changes yourself.
Assess your capacity to change by taking the test below. The test and the description following are excerpted from Making change happen one person at a time by Charles H. Bishop Jr.
1) Think about the most recent instance in which your boss or organisation instituted a new strategy, program, or plan and it directly affected your work life. Did you respond positively, negatively, or indifferently?
2) Write down the three most significant changes in your work life over the past 10 years (eg, a new job, a new boss, your company was acquired, your job was phased out and you had to learn a new one). Which of the following words best characterises your overall reaction to these changes: excitement, cautious optimism, acceptance, scepticism, or hostility?
3) If you were asked to take on more responsibilities or additional roles in your current position, would you be excited about the chance to do more or would you be angry?
4) If you were asked to take on unfamiliar or difficult tasks that required you to acquire new skills and knowledge, would you be excited about this opportunity or resent that your new assignment required you to "stretch?"
5) Is there a work skill or task that you are particularly good at? If so, does it match up with what is increasingly needed by your group or the organisation?
6) Do you feel concerned or uncertain about your ability to perform well in certain situations? Is it possible that you might leave the company at some time in the near future?
7) Do you believe you have the type of personality that responds well in most changing situations, but has an Achilles' heel when asked to lead or participate in certain types of change?
The first two questions focus on change responsiveness, the next two on versatility, the fifth on strengths, the sixth on challenge/unanswered questions, and the seventh on change idiosyncrasies. Admittedly, this self-assessment is rudimentary and subject to your own reading of who you are and how you deal with change. However, if you are honest and perceptive about yourself, it will give you a way to calculate if you're a good leader or supporter of change strategies.
You could cover every surface in your office with how-to books on managing change, the phrase du jour. But one aspect of change management that often eludes IT managers is how to better influence corporate colleagues. If information technology drives business decisions, IT execs must communicate and be persuasive with other department heads on key project management issues. Here are a few ideas to get you started:
1) Become the teacher: Creating a Web-centric culture is an important corporate objective at Eastman Chemical. But creating a culture isn't an overnight event. "What usually happens is you have pockets of excellence, where the users might get out ahead of you, and [you have pockets of] others who are slower to adapt," says David Holden, manager of e-commerce applications and services. Almost every new technology introduction - and culture - starts that way, he notes.
Holden devotes department resources to the effort of getting other execs on board and to educate them about new business models. "We'll hold meetings with business managers and bring in consultants from outside or do a demo of something for them. The trick is not to mandate it, but to find champions," Holden says.
2) Talk the talk: According to Bud Albers, CTO of Getty Images, a digital image provider, the most important thing IT execs can do is talk in business language terms. "Be able to have a direct discussion about ROI and conversion rates that drive revenue. Put that front and center," Albers says.
3) Bring everyone up to speed: Also important is making sure IT workers understand the company's business cycles, says Richard Ligus, president of Rockford Consulting Group in Illinois. "One way to accomplish that is to develop detailed process maps and work instructions for each user such as those found in ISO manuals," he says. Once an IT member learns the users' work sequence and the company's cyclicals, that person becomes an invaluable resource to the user. Key to putting technology professionals on the path to business acumen is to develop and enforce an internal process that guides IT members to this methodology.
4) Collaboration: Perhaps the most important new skill area is collaboration. "Invariably it comes down to decision-making - not just getting [decisions] made, but how it happens," says Jim Highsmith, a consultant at Cutter Consortium, an IT consulting company.
IT execs need to be articulate enough to easily explain proposed solutions from an IT perspective and savvy enough to cooperate on compromises with people from sales and marketing, HR, and other groups. "It's not just empowerment," Highsmith says. "If IT people make the [technical] decisions and don't consult users, that's no better than the business staff making decisions without consulting IT."