Postmodern Manifesto: Goodbye Service-Based IT; Hello Innovation

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In one respect, the distributed services supply chain model is actually creating more work. As pieces of the IT supply chain break off and become more specialized, the need for coordination of the pieces increases. That means the number of internal jobs dependent upon external people is increasing. This shift is reflected by the new emphasis in IT departments on relationship management and project management.

Economists call these kinds of skills tacit work, which requires the ability to analyze information, grapple with ambiguity and solve problems, often based on experience. Tacit interactions are complex and require interaction (such as managing a software development project) rather than being simple and solitary (fielding help desk calls with a script, for instance).

Tacit jobs have been growing three times faster than employment in the entire national economy, according to consultancy McKinsey, and they make up 70 percent of all U.S. jobs created since 1998 and 41 percent of the total labor market in the United States. These roles track pretty closely with the categories where the Department of Labor says IT employment has made the biggest gains since 2000: application engineers, systems engineers and network analysts.

For CIOs, the challenge will be to design and manage global IT supply chains that link various skill sets (including tacit work) and multiple components of IT work into logical units. "In the future, IT is going to need to be able to work as a global team to tap into different capability pools to serve the business better," says Andy Maier, CIO of Zurich in North America, which is creating a more global IT function in response to a global business reorganization. "The thing is to find expertise—underwriting, for example—around the world and centralize it along the business value chain rather than according to geography. I don’t care if an underwriting specialist is in Dayton or Zurich, I just want to be able to access that person’s skills from anywhere." The glue that Maier is using to link his IT supply chain is common application development processes and tools, along with globally shared repositories.

As Maier suggests, the growth of this supply chain means that fewer employees will be fixed in a particular project or geography. "You may only have a couple of people assigned to a particular project from beginning to end," predicts Diane Morello, research vice president for Gartner. "The rest will come in and out as they are needed, based on their competencies."

If the supply chain gets gummed up, the CIO and the IT department will be accountable for the entire sticky mess. Rebecca Rhoads, CIO of aerospace and defense contractor Raytheon, says, "You may have a lot of different providers in the model, but at the end of the day you have to make sure the processes and services are reliable and accessible. If there’s a break in the chain, you will be responsible. Where the break is and who caused it isn’t going to matter much to the business or the user."

In the Postmodern IT Department, Rhoads says, "What’s going to make us successful is our ability to manage end-to-end services."

6. IT ROI will become even more difficult to prove.

The increase in the number of tacit jobs in the U.S. economy in the coming years has both good and bad implications for IT. Tacit IT is not about automation—the meat and drink of IT since its inception and the route to easily measured ROI. Tacit IT is all about decision support, knowledge management, business intelligence and artificial intelligence. That’s a tough row to hoe for CIOs trying to justify their existence. More and more, businesspeople want information rather than systems, new capabilities rather than automation. In a 2005 survey of IT and business executives, McKinsey found that only 29 percent of business executives believed that automating business processes was the best route to improving operating efficiencies, while 43 percent of IT executives highlighted it. Those numbers speak to a significant disconnect between what business executives want and what IT executives think they want.

But there is, in fact, room for more process automation. According to a survey by consultancy Accenture, fewer than 10 percent of customer interactions and 13 percent of supplier interactions are online. CIOs said they could triple those numbers.

Eventually, however, the shift to tacit work means that opportunities for automation could disappear. And the pressure will be on vendors to make technology think, rather than automate. As the McKinsey report states: "Machines can’t recognize uncodified patterns, solve novel problems, or sense emotional responses and react appropriately; that is, they can’t substitute for tacit labor as they did for transactional labor. Instead, machines will have to make tacit employees better at their jobs by complementing and extending their tacit capabilities and activities."

The good news is that structuring and supporting tacit relationships using technology is still very new and virtually unexplored. For example, McKinsey found that companies in the top quartile of growth in labor productivity between 1998 and 2004 spent $6,200 per employee on technology for tacit work and $38,200 for transactional. There’s a lot of room to shift that investment as more transactional work starts going out the door. The bad news is that decision support technology is difficult to build and the results difficult to measure.

7. The entry-level IT job will disappear.

The Postmodern IT Department will be looking for people, but CIOs won’t be able to find them. For Nancy Markle, former president of SIM, the impact of the talent gap will rival that of the technology gap the United States became aware of when the Soviets launched the Sputnik program in the late ’50s. "The technology-rich innovators are going to be the economic leaders of the world," says Markle. "Other countries are moving ahead because they have government-sponsored programs. We need to have government-sponsored programs that target every level from elementary school through college."

In 2005, when SIM researchers asked IT leaders which skills they felt might disappear from their departments by 2008 because those skills would become obsolete, automated or outsourced, the top ranked were: programming (except for "new" programming skills like Java, .Net and Linux), operations, desktop/help, and mainframe/legacy skills—the kinds of skills that used to keep personnel busy hiring entry-level employees.

Yet when the SIM researchers asked IT leaders which background they valued most in entry-level employees, the vast majority chose computer science. And the core of most computer science programs in this country is still programming—precisely the skill that IT leaders told SIM they don’t value anymore.

Not surprisingly, students are reading those tea leaves. The number of kids who are choosing to major in computer science has plummeted by nearly half since its peak of 3.7 percent of freshmen in 2000, according to the Higher Education Research Institute at the Graduate School of Education and Information Studies at UCLA. Just 1.4 percent of all incoming freshmen in 2004 said they would select the major, and the number of women interested in computer science has dropped to its lowest level since the ’70s. Meanwhile, fewer foreign students are choosing to remain in the United States after graduation because job opportunities in their home countries have improved dramatically.

A few schools in the United States have responded by offering combined business and IT curricula. But the kinds of skills CIOs are looking for in their employees—project management, communication, expectations management—are difficult to teach in the classroom.

Some schools are making internship programs a larger part of their curricula. Kevin Gallagher, assistant professor of management information systems at Florida State University’s College of Business, has increased the number of internships for students in his mixed IT and business program. But Gallagher is limited by the time necessary to set up the internships and by the budgets of local businesses. Indeed, though many CIOs have internship programs, most are for only a few positions—not nearly enough to fill gaps that will arise. "I think the universities and colleges will not produce enough people to keep up with demand, and the same goes in Europe," says Zurich’s Maier.

8. CIOs will have to step up.

CIOs who faultlessly deliver services of the traditional variety—infrastructure, application portfolio and support—should expect to be under pressure to do more, or soon they can expect to be looking for work. "IT organizations that focus on managing infrastructure and back-office applications may be good candidates for outsourcing," says Forrester’s Laurie Orlov, VP and research director of the IT Management Team. "Those organizations are thought of as cost centers."

"The concept of providing a secure, stable infrastructure is merely the price of admission today," says Jeffrey Campbell, CIO of BNSF Railway. "[To survive], you have to be a transformational CIO."

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Copyright © 2006 IDG Communications, Inc.

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