John Hagel on Web Services and You

John Hagel, the author of Out of the Box: Strategies for Achieving Profits Today and Growth Tomorrow Through Web Services, argues that managers at the edges of an enterprise, who are under intense pressure to reduce costs, see Web services as an easy way to integrate with business partners. However, as Hagel recently told CIO Staff Writer Ben Worthen, the CIO is under equal pressure to control costs. And that can put the CIO in the uncomfortable position of saying no to technology.

CIO: Do business managers have the technical know-how to create Web services and access the databases that are needed for meaningful collaboration?

Hagel: A business manager confronted with a particular problem has somehow heard about Web services and is looking for ways to implement it and make sure that it is actually appropriate for the company. And typically they find a lot of ambivalence from the IT department within their own enterprise. Basically they are launching what I would describe as a skunk works initiative where they get sympathetic people in the IT department who are beneath the radar screen to help them drive the implementation. But, in large part, they try to keep a low profile since it is relatively controversial. That is one of the reasons that we don’t hear about these initiatives, since the executives who are driving them aren’t looking for publicity. They fear if they get too much attention, they will get shut down.

This speaks to another argument of yours, that CIOs are often the greatest impediment to the adoption of a new technology.

Not all CIOs. Part of it has to do with very legitimate concerns about the early stage of the technology. You have to look at the incentive structure that CIOs operate under. This is a gross generalization, but most CIOs aren’t going to have rewards for major new business initiatives that drive value to the company. But they have a high and increasing risk of being fired if projects fail.

Isn’t that an antiquated view of the CIO role? A lot of CIOs have business backgrounds and view themselves as business leaders. Shouldn’t that motivate them to want to help the business?

I do think there is a rather perverse incentive structure that has emerged over time and…it creates conservatism on the part of the CIO. I think a related piece is that CIOs in many cases were primary drivers of ERP and investments in websites, and as a part of the general backlash against that kind of spending, there is a growing skepticism about whether IT will be able to deliver value.

CIOs argue that Web services standards, especially security, are either immature or simply don’t exist. Isn’t this a strong argument for caution when it comes to deploying Web services?

I think these concerns are completely legitimate. At the end of the day, this is about trade-offs. If I can get significant near-term business benefit, I may be willing to take on a higher level of risk than if the return is speculative or long term. And I think that is the trade-off that line managers are making, partly from ignorance.