Do you remember the Pickett company? Before the advent of the electronic calculator, you may recall learning to use a slide rule, a clever mechanical device for performing a variety of mathematical functions. Invented in 1622, slide rules were the tools of choice for anyone needing to solve complex mathematical equations quickly. Pickett was one of the most successful slide rule manufacturers, producing a variety of models for everyone from students to doctors and engineers. But in 1968, the first electronic calculator reached the market. By the end of the 1970s, slide rules and Pickett were obsolete.

Was Pickett an inevitable victim of progress? A quick look says, Yes. Although slide rules and calculators perform the same functions, their design and manufacture are entirely different. Slide rules are precision mechanical instruments constructed of wood, plastic and metal, while calculators rely on electronics and computer chips. To build calculators, Pickett would have needed to invest in expensive new facilities and radically new skills. Worse, it would have to perform the switch at a time when its sales and revenues were plummeting in the dying slide rule market, and new competitors, such as Hewlett-Packard and Texas Instruments, had already established a commanding market lead. Unable to respond to these challenges, Pickett vanished.

Does this story line sound familiar? It should. It has recurred many times in many industries as part of the e-business transformation. It is also occurring within IT organizations today. The theme is simple. An enterprise continues to perform its business, following the same model that has proved successful in the past and fails to recognize and adopt new models in time. The result appears inevitable. But is it? Much depends on how the organization views itself. If we view Pickett solely as a manufacturer of slide rules, the transformation required was too large and the company’s demise was inevitable. But if we deconstruct Pickett using current business principles, we unearth valuable components that could have continued successfully in a post-slide rule world.

Corporate IT organizations are on the verge of a transformation that, over time, will be every bit as radical as the one faced by Pickett. Changing technologies, shifting skill bases, and new means of providing application functionality and IT services are conspiring to make traditional internal IT organizations obsolete. The organizations that take their place will provide very different services to their companies. Like Pickett, IT professionals face the choice of maintaining the status quo until the inevitable happens, or re-inventing themselves to take advantage of the coming changes and emerging stronger than ever before. This article explores why IT is not immune from its own e-business transformations, how those transformations are likely to affect IT organizations, and how to gain advantage from those changes. There is no reason to fear change. Just as calculators represented a major leap forward over slide rules, IT organizations of the future will provide even greater benefits for their companies and employees.

Why E-business will Change IT

Deconstruction is at the heart of e-business transformation. It takes a traditional organization, consisting of many intertwined components, and separates and recombines those components into new ways to add value. For example, instead of viewing Pickett as a slide rule manufacturer, the company could be redefined as a provider of mathematical solutions to a large customer base along with a precision manufacturing organization. Where Pickett as a whole would be unable to survive the onslaught of calculators, splitting Pickett in this manner would permit each component to take advantage of its value.

As a provider of mathematical solutions, Pickett's vast customer base was an extremely valuable asset. Pickett had excellent brand recognition and a strong reputation among its customers -- the same customers sought by the calculator manufacturers. This component of Pickett could have exploited its customer relationships to become the premier distributor of mathematical solutions, selling calculators manufactured by others, and even selling spreadsheets and other mathematical software. By abandoning the construction of slide rules, the manufacturing component of the company could have turned its attention to other precision manufacturing tasks on a contract basis, thereby building its own base of customers and exiting the mathematical solution business entirely. As a combination, the components could not survive, but separately they would have been free to create value.

The IT Value Chain

The same type of deconstruction can be applied to the IT world. The typical IT organization tends to provide a mixture of functions to its host enterprise. Some functions are clearly value-added, such as creating applications that generate revenues or provide competitive advantage. Other functions, while quite necessary, are far removed from the bottom line and thus viewed as overhead. This principle is best illustrated by examining a typical IT project

In this example, an employee discovers a way to save $10 million per year by redesigning the company's distribution system and processes. Over ten years, this idea has the potential to create $100 million in value. Developing this idea is a highly value-adding activity. To realize this value, the company must perform a series of steps to build and operate the new system. Some steps, such as developing the implementation strategy, may enhance the overall potential value of the idea by uncovering opportunities missed by the originator. The implementation translates the concept's potential value into actual value, but creates no new value of its own. By keeping implementation costs low, the company derives greater final value. The same principle is true for the operation of the new system. Implementation and operation are essential, but when decoupled from the value-creating idea, they are subject to very different management and economic pressures.

Figure 2 shows the breakdown of activities associated with the conception, implementation, and operation of the distribution system. The most value-creating activities are highly skilled and company-specific. The commodity activities at the lower end of the scale may be highly skilled, but they are not company-specific. Those skills are commodities (albeit valuable and often scarce) that can be obtained as needed from outside of the company.

Changing Core Competence

Following the IT value chain identifies possible areas for deconstruction, but areas of core competence determine where the actual deconstruction takes place. In Pickett's case, its core competencies were supporting mathematical calculations and precision manufacturing. Traditionally, the core competencies of IT organizations included project management, system analysis, system development and data processing operations. In days past, computer literacy was primarily confined to the IT organization, and companies tended to build most of their systems from scratch. Recently, the IT landscape has begun to change significantly. To illustrate:

• The number of technologies needed to support a modern business has grown beyond the internal support capacity of all but the largest IT organizations.
• Access to high-quality pre-designed software has grown dramatically. Companies can purchase desired functionality as components, software packages or as services provided by an Application Service Provider (ASP).
• Computer literacy within the company has evolved to the extent that many business units are capable of handling their own IT requirements. New generations of employees are even more computer-savvy.
• Competition for skilled IT professionals is intense, and internal IT organizations must compete against software companies and consulting firms that can offer very attractive work and compensation packages.
• Enhanced connectivity has lowered the barriers to off-site and offshore sourcing as a means of obtaining highly skilled resources at attractive rates. Skills formerly confined to IT organizations are core competencies to these services firms.

In this pressured environment, companies are rethinking their approach to IT. Outsourcing and other creative sourcing approaches are capturing the commodity end of IT services. While some IT organizations continue to develop new systems internally, more companies are opting to purchase needed functionality. Caught between increasingly computer-capable business areas and aggressive external providers, IT professionals cannot cling to their traditional competencies. IT can thrive, however, by shifting its focus and competencies up the IT value chain. Strategy and program management capabilities will be the core competencies of the IT organization of the future.

A Prescription for Thriving in the Future

Are IT organizations dinosaurs doomed to extinction? No! Just as calculators provided a more effective means of performing mathematical operations, new age IT organizations will provide faster, more effective services to their companies. All of the functions currently performed by IT will still be performed, but not necessarily within the IT organization. If you have little interest in your company's core business or want to be a pure technologist, a software company or consulting firm is likely to be the preferable career option. Going forward, most of a company's pure technology will be purchased externally.

As a future IT professional, your true strength and value is the ability to apply technology to your company's business requirements. You must have the business knowledge to understand those requirements, an understanding of available technologies and how to apply them, the ability to muster the resources to implement those technologies, and the project and program management skills to oversee the implementation.

Here are some useful tips:

1. Strengthen your business knowledge.

A solid understanding of your company's industry, practices, and business strategy marks the greatest distinction between you and the experience offered by outside providers. This knowledge enables you to identify and apply the best available solutions to your company's needs. Make a real effort to learn your company's business and develop relationships with people outside of IT. As a shared resource, IT offers connections into virtually every company function. As a result, you can develop a holistic perspective on your entire company and be in an ideal position to identify and exploit cross-organizational synergies. Despite the obviousness of this step, remarkably few IT professionals actually invest the effort to learn about their company’s business.

2. Keep up with a broad range of technologies.

The internal IT professional of the future needs a broad understanding of current technologies and trends in order to evaluate how those technologies can provide value to the company. Breadth rather than depth is the objective. Read white papers and industry publications, attend conferences, and consult analysts. You don't have to be a specialist in any given area; you need to know enough to see how that technology could bring value to your company. Remember that specialists in arcane implementation details can be obtained as needed from external sources.

3. Become a program manager.

Program and project management skills will become even more valuable. Major initiatives in areas such as e-business or enterprise resource planning require the coordination of many business and technical subprojects as well as the coordination of a variety of internal and external resources. While outside resources can manage their own subprojects, the company must manage the implementation of the program. IT professionals are used to managing these types of cross-functional efforts and can capitalize on their internal relationships and knowledge of company practices to guide projects past the inevitable roadblocks.

4. Become adept at offloading tasks.

Get away from the "not invented here" syndrome. Use the most expedient and effective resources to accomplish the tasks at hand. The goal is to make your company as successful as possible, not to protect ingrained structures. Don't build if you can buy, and develop the skills to identify and retain the best possible resources for each project. Over time, more and more of those resources will be obtained externally. Move up the IT value chain by concentrating your efforts on the tasks that create value for your company while offloading generic and commodity tasks to companies specializing in those areas.