Reference no: EM13946535

Case study 1.2

Has corporate IT failed to deliver?

This article highlights some of the disappointments with the implementation of corporate IT. The reasons for these disappointments are explored. As you read through the article, evaluate whether you think reasons given are accurate.

In the use of technology to transform business, something has gone badly wrong.

Computers and the internet were meant to put business on a new footing. Newly available informa- tion would make everything smarter, from corporate supply chains to the strategic decisions of senior executives. Entire new business models would be made possible: any company that failed to adapt risked extinction.

It has not worked out quite as planned. Despite all it has promised - and in some cases delivered - the explosion of information technology has failed to live up to the hype. Corporate information systems have become complex, ungainly and difficult to manage.
Somewhere in the 1990s, amid the flowering of high- tech innovation, something seems to have gone awry.

‘It's almost as though the technology took over', says Irving Wladawsky-Berger, general manager of International Business Machines' lastest corporate computing initiative, known as e-business on demand. The recent backlash has been powerful. Instead of being an area that corporate executives looked at to give them a competitive advantage, IT has gone back to what it was before the 1990s boom in wishful thinking: a management headache.

Big IT projects are complex and difficult to make work, with a frighteningly high failure rate. Corporate spending on IT has again become an expense to be reined in, not indulged. And the maturing of the wave of technology that arrived with the internet has left companies asking what they got for their money.

The latest symptom of this malaise has been a questioning of the strategic significance of technol- ogy to business. What real competitive advantage can be gained from technology, runs this argument, if it is equally available to your competitors? Like electricity and the telephone, it may be a necessity; but also like them, it may have little impact on a company's real competitive position. ‘IT doesn't matter', claimed a recent provocative article in the Harvard Business Review.

Faced with this scepticism, the technology indus- try is preparing for its next big push. The real transformation of business still lies ahead, according to this view. It will happen when corporate IT systems operate flawlessly and work together seamlessly. And while the technology itself may not confer an instant competitive advantage, its effective application is vital to business success.

But can technology companies overcome the shortcomings of the past to fulfil this promise? And how will corporate buyers of IT, still dealing with the after-effects of their last wave of spending, react to the claims?

First, consider the sources of the problem. Perhaps the biggest was the arrival of a new computing architecture that liberated users from the tyranny of the mainframe, but exposed a failure in technology management.

This client-server architecture brought new con- trol to the individual user in the shape of a desktop PC. It also handed power to IT managers, making it easier to develop department-level applications to run the processes that seemed vital in the new internet era. But in the process, the larger corporate picture was lost.

‘It was good at the departmental level but it didn't do much for the enterprise', says Mr Wladawsky- Berger at IBM. Liberated from the data centre, IT managers ‘wrote code that was fine if it lived alone', says Bob Napier, chief technology officer at Hewlett- Packard (HP). The trouble was, it did not live alone but had to fit into a complex system. ‘For some reason, when the internet came along we forgot all the pain of the past' when adapting to earlier gener- ations of computer architecture, acknowledges Mr Napier. ‘We discovered we'd left all the management tools behind us.'

A second source of the problem has been the incompleteness of the technology. While individual applications have proliferated, the tools needed to knit them together have been lacking. ‘The compo- nents are advancing very rapidly, but critical elements are not there', says Mr Wladawsky-Berger. ‘That's a major gap.'

The third reason for technology's disappointment has been a failure to align it with business manage- ment. Technology companies tend to blame customers for failing to understand how deeply new IT systems impact their business processes, while the users blame the technology for being too rigid.

‘Most people point at the technology as the thing that's slow to change, but usually it's the business process architecture', says Ann Livermore, head of HP's services division.

These forces have combined to create the many headaches that companies have when trying to make modern IT systems live up to their promise.

One symptom has been the high failure rate of IT projects. ‘Too many projects are taken on without the basic project management being put in place', says Mr Napier at HP. ‘The number of projects that fail is scary.'

Another symptom is the low utilisation of corpo- rate IT assets. During the boom, many companies added servers and storage every time they introduced a new department-level IT application. ‘Servers were growing like bacteria', says Mr Napier. As a result, considerably less than half of this IT capacity is actually used.

Still another symptom is the high cost of maintain- ing corporate information systems. ‘The proportion of the IT budget involved in just keeping the lights on and the business running is far too high', says Amnon Landan, chairman and chief executive of Mercury Interactive, a software company whose products measure the performance of IT applications. More than half the money big companies spend on IT is used to employ an army of technicians.

What is the answer to this crisis in corporate computing?

The IT industry's prescription rests on a number of promises. They are aimed at taking the hard work out of building and managing IT systems, freeing companies to concentrate on using the technology to its potential. ‘We want to make the technology much more transparent', says Mr Wladawsky- Berger. Though simple in theory, it is likely to take years to achieve.

The main features of the promised new generation of corporate IT systems are:

Integration. The need to knit together the disparate applications is the most pressing issue facing chief information officers.

Much rests on the development of industry-wide technical standards that allow different IT systems to inter-operate. In the past, tech companies have focused much of their effort on developing and maintaining their own proprietary technologies - a strategy that was seen as essential to maintaining high profit margins. Most now claim to see the world differently.

‘This is a very different industry', says Mr Wladawsky-Berger. ‘Until the internet took over, vendors, including IBM, thought about control points and outmoded ideas like that. Now it's clear that this technology is more valuable when all this stuff works together.'

For buyers, the emergence of standards is having another desirable effect. ‘What most companies want to do is reduce their dependence on any one supplier', says Gary Reiner, chief information officer at General Electric. ‘That's why everyone is moving to open standards so aggressively.'

Automation. The key to keeping down the soaring headcount in corporate IT departments revolves around creating technology that can maintain itself. ‘We need to make everything as automated as possible', says Mr Wladawsky-Berger. ‘If not, the costs will go up and up. Let users say what they want, and let the technology figure it out.'

Virtualisation. By using the internet to link corporate IT assets together, it may be possible to tap unused computing or storage resources more efficiently. Turning all these assets into one giant ‘virtual' machine holds out the promise of sharing work out where it can be handled most effectively. The grid computing architec- ture that is making its way out of academia into the corporate world is at the heart of this effort.

Utility computing. Once IT systems have been better integrated and virtualised, it will become easier, in theory, for companies to tap into specialist utility companies to supply some or all their computing needs. Then companies will be able to decide whether they want to stay in the business of building and maintaining technology or whether this is best left to outside suppliers.

All of these efforts are geared towards one end: to make IT serve an enterprise's interests better. ‘It's almost back to the future', says Mr Wladawsky-Berger. ‘That's how IT got into business in the first place.'

Most big buyers of information technology will be hoping that this time around, the promises do not prove to be as hollow.

Questions

1 What are the problems in deploying IT in corporate environments that are referred to in the article?

2 What is suggested are the main causes for these problems? How do the descriptions of failures with IT relate to technology, people and information resources used to support business information management summarized?