Market Management to Transform the IT Organization

In recent years, there have been calls and prescriptions for business transformation.1 There has also been growing pressure for radical change in how the IT function is organized and managed. Rockart et al. captured the consequences of an agenda for reform in the IT function, and Cross et al. proposed a possible model of a transformed IT organization.2 However, there have been no robust models or frameworks developed to guide executives in the process of transformation, that is, how to do it. We suggest that this is an important practical omission, not only because transformation of the IT organization is on many business agendas, but because it is an area that is probably always undergoing change.

Another reason for developing a process model for transformation is that organizations often seem to recognize crises in IT management, but their responses frequently only worsen the crisis or achieve little until the next crisis. Consider the scenario we witnessed in a well-known multinational manufacturing corporation:

In the 1980s, a large corporate IT department built a group infrastructure with common transaction processing systems for the company worldwide. In terms of best practice, technical robustness, and economies of scale, there was little to criticize. However, not unusually, the business units claimed that the IT department was not responsive to business needs, and that the common systems were a lowest common denominator solution that never quite matched local requirements. In response, the IT department personnel said that, in the absence of good business-led information systems strategies, they had been forced to provide the lead and that the business units did not recognize the value of a standard architecture and common systems in enabling business across divisions and by regions. When the whole company went through rapid decentralization at the end of the 1980s, the corporate IT department was downsized and the business units were given full responsibility for most aspects of IT.

Soon the units were identifying their own systems requirements but had no one to supply their needs and little experience in commissioning such work. Furthermore, they often did not want to be responsible for running an IT department. The company then decided to create an information services business from the old corporate IT department, which would be a profit center. It could supply services inside or outside the parent company.

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References

1. F.J. Gouillart and J.N. Kelly, Transforming the Organization (New York: McGraw-Hill,1995);

J.M. Stopford and C. Baden-Fuller, Rejuvenating the Mature Business: The Competitive Challenge (Boston: Harvard Business School Press, 1994);

S. Ghoshal and C.A. Bartlett, “Rebuilding Behavioral Context: A Blueprint for Corporate Renewal,” Sloan Management Review, volume 37, Winter 1996, pp. 23–36.

2. J.F. Rockart, M.J. Earl, and J.W. Ross, “Eight Imperatives for the New IT Organization,” Sloan Management Review, volume 38, Fall 1996, pp. 43–55; and

J. Cross, M.J. Earl, and J.L. Sampler, “Transformation of the IT Function in British Petroleum,” MIS Quarterly, volume 21, December 1997, pp. 401–423.

3. We describe elsewhere the transformation that has been achieved. See:

Cross et. al. (1997).

4. Reported in detail in Cross et al. (1997).

5. C.F. Gibson and R. Nolan, “Managing the Four Stages of EDP Growth,” Harvard Business Review, volume 52, January–February 1974, pp. 76–88; and

R. Nolan, “Managing the Crises in Data Processing,”Harvard Business Review, volume 57, March–April 1979, pp. 115–126.

6. F.W. McFarlan, J.L. McKenney, and P. Pyburn, “The Information Archipelago — Plotting a Course,”Harvard Business Review, volume 61, January–February 1983, pp.145–156.

7. See D.F. Feeny, B.R. Edwards, and K.M.Simpson, “Understanding the CEO/CIO Relationship,” MIS Quarterly, volume 16, December 1992, pp. 435–448.

8. J. Cross, “IT Outsourcing: British Petroleum’s Competitive Approach,” Harvard Business Review, volume 73, May–June 1995, pp. 94–102.