SMU academic Steven Miller shares research from CIOs on the challenges in viewing business trends in a lifecycle framework.

By Steven Miller

In the business world, startup organisations are often viewed with great interest, especially if they represent a distinctively different approach or an alternative path for moving into the future. Part of the intrigue with startups relates to the inherent risk of the pursuit. Many, if not most startup organisations falter and either disappear or fall short of fulfilling their potential. However, the fact that some startups make it as sustainable organisations, and become economy-wide icons for alternative approaches for success or growth, is what leads people to take note of these embryonic organisations.

Startups in the university "sector" are much less frequent than in the business sector due to the complexity and cost of launching a credible and legitimate institute of higher education. Thus, the recent establishment of a brand new School of Information Systems (SIS) at Singapore Management University (SMU) is especially noteworthy. SIS is a startup organisation established in 2003 to provide research and education capabilities in the area of business-focused information technology, systems and application. It is the fourth and newest school within a relatively new university, since SMU started with its first school, Business, in 2000.

The advantage of being a startup is the ability to start with the proverbial "clean slate." In our case, this means the ability to map out a distinctively different approach towards education and research at the intersection of IT and business that will meet near term as well as long term needs. In order to build this roadmap, we have been holding intensive discussions with over 20 business user organisations and IT service providers, and soliciting their feedback on the key assumptions underlying the strategy and design of our programme, on our execution tactics, and on what a business-focused IT programme should be emphasising for both education and research. The people we have been talking to--CIOs or IT heads of business user organisations and senior level management of IT services companies--are the tier of executives with visibility of the local, regional and global trends that are important for 2004.

While these discussions were held in the context of helping the School establish a distinctive roadmap, the content provides an interesting sampling of the themes that are important to leading organisations in the IT community. Aside from being useful to us, we believe that the substance of these conversations is also relevant to executives working at the intersection of IT and business. For this reason, we are sharing the results with the readership of CIO Asia magazine. We have purposely removed references to the names of specific companies and individuals to preserve confidentiality.

Viewing important business focused IT trends in a lifecyle framework
In many of our discussions, we asked business IT leaders to use the framework shown in Figure 1 to summarise their views on important changes and trends in their organisations.
This simple solution lifecycle framework shown in Figure 1 encompasses all key phases of business-IT related activity, regardless of the particular software technologies and applications used by an individual company. The phases summarised in Figure 1 are:-
Phase 0: Enterprise level business and architecture definition;
Phase 1: Project level concept design and demonstration
Phase 2: Technical design, construction and deployment
Phase 3: End-user deployment
Phase 4: Post-deployment service delivery and support

A summary of trends that emerged from the discussions is shown in Figure 2. IT groups in end user organisations we spoke with say they are maintaining strong internal ownership of Phases 0, 1 and 3, and increasingly using various forms of external partnering and outsourcing for Phases 2 and 4.

IT groups in end user organisations continue to get more focused on making sure that technology and design choices meet the needs of line-of-business executives and business process owners. They are fulfilling increasing portions of the technical aspects of solution creation (Phase 2) and support (Phase 4) through external providers. Yet, even with increasing use of external resources in Phases 2 and 4, all of the IT leaders we spoke with representing end user organisations emphasised their own groups were still accountable for IT project results and overall IT service quality delivery. This led all of those interviewed to strongly emphasise the importance of being able to verify vendor technical solution and project proposals, and to manage vendor bidding and delivery efforts.

What is staying in-house?

There is an interesting irony in the result that business user organisations want to maintain strong ownership of Phases 0, 1 and 3. High quality performance of the tasks involved in these phases (see Figure 1) requires strength in what are often referred to throughout industry as "consulting skills." Yet, business user IT organisations are saying that the tasks in these phases are so strategically important to their company that major responsibility for this work cannot be fully handed over to external consultants. Business user firms often want to leverage the industry-wide perspectives and best-practice experiences of outside consultants and partners to help them during these phases. At the same time, they want their own IT and business professional staff to expand their competencies to include these consulting abilities so that the company can own the execution of these phases and make its own decisions.

It is noteworthy that enterprise-level business and architecture definition (Phase 0) is treated as a phase in its own right, and one that is distinct from individual IT application projects. Our initial versions of the lifecycle framework did not include this phase, since it typically falls outside the scope of software system lifecycle development frameworks such as the Rational Unified Process. Our ongoing discussions with both business user organisations and IT service providers made it apparent that this phase needed to be explicitly recognised, since IT and business people are increasingly spending time to collaborate on the tasks related to Phase 0.

Both business users and service providers emphasised the importance of industry specific domain knowledge. This type of knowledge is clearly essential to perform the tasks in Phase 0 and 1. Execution of Phase 1 tasks typically requires a team of analysts who can coherently pull together an understanding of the enterprise business architecture from Phase 0, a definition of a process model, a business case, user requirements, and initial solution concepts for architecture and design that reasonably anticipate the direction of the more detailed technical design work that will later be completed during Phase 2.

While business case analysis has always been important to business users, several IT service providers commented on how requirements for financial business case analysis are getting more complicated. As a regional executive of a global IT services firm explained, "Increasingly, customers want to know how to evaluate what will happen to proposed IT investment alternatives...and to both fixed and variable components of cost in light of possible expansions or contractions, or in light of other adaptive changes which could possibly be required."

What is worth noting here is that both the business user customer and the IT service provider want to understand what will happen to the financial model as customer demand moves either up or down. Prior to the dot-com bust, most customers and providers only wanted to know what would happen to the financial and solution model if demand increased.

An entrepreneur and venture capitalist investing in India-based software firms doing business process outsourcing for global clients summarised his views on skill needs for IT professionals in business user organisations. Given the expanding role and capabilities of outsourcing firms like his own, he believes that business focused IT professionals working for business organisations should be:-

+ IT savvy business professionals who are the marriage of an entrepreneur, a business process designer and an expert at executing the business process, which includes IT enablement

+ People who can go out and manage projects. These people need to be able to build the links between customer requirements and technical delivery. But they need to have the depth and experience needed to serve as this link between requirements and technical applications and technical delivery.

+ People who are able to:-

• Participate in creating the concept for the new business venture or new business process.
• Determine the user requirements, given the business concept and needs.
• Determine the solution concept.
• Determine what is needed to deliver the requirements and solution concept.
• Manage the teams that build the components and deliver the solution.
• Be able to measure the result.

+ People who are able to manage the programme and manage the business case.

+ Architects and designers who can shape and deliver the project, based on understanding of both commercial issues and technical issues.

We believe this list is a good summary of the skills required for IT professionals in end user organisations who will be focusing on doing the work of Phase 0 and 1, and who will also be accountable for the delivery of the results of Phase 2.

A regional healthcare provider who works with outside partners for technical delivery says that he has kept three major functions in-house. The first is IT planning, budgeting, and resource management. The second is architecture, including both enterprise architecture and architecture and design for specific projects (including functional and hardware design). The third area kept in-house is service delivery management, which includes IT operations management, service level agreement management with business end users, and vendor management with external partners providing solutions and ongoing service support.

Several organisations are increasingly focusing their efforts on data management. The regional healthcare provider mentioned above stressed the strategic importance of data management and administration in their industry. Other organisations spoke of their increasing emphasis on data definition, data warehousing and data mining. This naturally leads to increased emphasis on data storage, data recovery and disaster planning, and addressing data security issues in a hierarchical organisation. "A good data architecture design that meets user requirements and reduces system processing overheads is important. XML will also become more important in the future," says the head of IS Outsourcing and Vendor Management at a global bank.

Established organisations seldom have the option of building applications or infrastructure from scratch given the existing base of legacy systems. Legacy systems integration is thus a main focus at end user organisations. "Integration with legacy systems is always a key part of projects," says an executive of a regional bank. Planning and design for legacy systems integration are key concerns with Phases 0, 1 and 2.

Impacts of outsourcing on business user organisations

While the trend towards outsourcing is continuing in Phases 2 and 4, it is important to emphasise the wide range of hybrid models used by different companies. Nearly all firms we spoke with are using some combination of internal development staff, subcontractors, partners, and broader outsourcing relationships to deliver the tasks in Phases 2 and 4, with each firm taking its own approach to the appropriate balance of hybrid resources depending on its particular strategy and needs.

Because the IT staff of business user organisations are increasingly operating in a hybrid model for Phases 2 and 4, the emphasis in these settings is moving away from the role of the core technical specialists. For example, end user IT professionals have to know how to use XML for data management. They have to know the requirements based on the needs of their organisation's business processes. Rather than undertake the coding of the components of the solution, it is becoming increasingly necessary for them to verify what their specialised IT service provider partners are proposing, designing and delivering. As some of our business end user IT leaders mentioned, this is a major change in mindset for an IT professional whose career was built as the execution person who actually delivered the final code. It is a major undertaking to "re-educate" this type of experienced professional to play more of the verification role, and at the same time, handle more of the business process interface.

We came across a particular example of a change in a CIO's role in response to the trends in Figure 2 that we believe is especially significant, and likely to serve as a model of CIO role changes that will increasingly spread throughout industry.

Not so long ago, the regional financial services provider where this CIO works outsourced much of the work of Phases 2 and 4 to an external provider. While the outsourcing provider and other external partners may consult on work related to Phases 0, 1 and 3, the company chose to maintain strong ownership of these phases, due to their tight coupling with business strategy and overall business performance.

People kept asking him if the role of the CIO in his company had been weakened because of the transfer of a large number of IT professional staff and related execution responsibilities to the external outsourcing provider. While he had fewer headcount under his direct responsibility, he actually believed he had strengthened the influence of his IT organisation because of the leverage he and his group could exert on business value creation through sharper focus on the work of Phases 0, 1 and 3. In addition, he had more delivery power to leverage through control of the outsourcing contract for the work of Phases 2 and 4.

The really interesting part of this story is that the financial services organisation actually broadened the scope of his management portfolio. Recently he was given responsibility for business operations, in addition to IT. Now he has integrated, end-to-end responsibility for operational process execution, business process design, and the design and deployment of enabling IT to support the processes. In essence, this financial service organisation is attempting to fully integrate the way the operational side of the business and the IT people work together to create value for the organisation. The work of business professionals and IT professionals will increasingly intermingle and overlap as this organisation proceeds with current and future efforts related to Phases 0,1 and 3.

This new form of organisational structure would not have been practical to implement unless the responsibilities for execution of the work of Phases 2 and 4 were redistributed to an external provider.

This same CIO and head of operations emphasised the importance of vendor management skills in his organisation. He summed up the situation as follows. "We partner to build. We outsource to operate. And we need our own IT staff to be able to work with multiple vendors to deliver projects. As we outsource more, the internal IT people who remain on my staff are playing more of a consulting role. They deal with unstructured and dynamic situations, and they have to be the bridge between the business user, business process and IT solutions."

Another financial services organisation that had previously outsourced much of the work related to Phases 2 and 4 to a provider in India highlighted the skills required for the professionals who will lead IT-enabled process improvement in their organisation:- + Knowledge of the industry, which in this case is the finance service sector.

+ A good sense of business operations. This requires thorough knowledge of both operational process flows and system process flows, and the ability to interface process with the supporting technology.

+ Strong ability to interface with systems development professionals who work for the outsourcing vendor.

+ The ability to lead project management efforts for business process change and improvement, especially the ability to support the launch of new products and services by bringing operational process flows and system process flows into the necessary alignment.

+ Strength in project management skills, which includes:-

• The ability to balance scope, schedule and cost given the constraints and goals of a given business situation.
• The ability to influence the behaviour and actions of others, even without official authority.
• The ability to get things done without alienating people.
• The ability to deal with time pressure.

This example reinforces the point made previously that IT professionals remaining on the side of the business user organisations are playing more of a consulting role as they bridge between the business user, business process and IT solutions, especially when much of the core technical work of Phases 2 and 4 is done by external providers.

Many of the business IT leaders we spoke with stressed the increasing emphasis on verification and results management in their business user organisations, especially given the trends for using external subcontractors, partners and outsourcers in Phases 2 and 4. Of course, this raises an exceedingly difficult dilemma. How do you retain and even strengthen the skills required to verify technical solution designs and related project management plans as you decrease the quantity of "hands-on" core technical work performed by your organisation?

Given this situation, an IT executive responsible for application delivery in a regionally-based major airline says that even though they use external partners for most application development, she is looking for professional staff with strong coding and database design skills to validate both application and database software generated by external providers. Her organisation is also putting more emphasis on testing knowledge and skills (e.g. white box testing, black box testing and regression testing for applications, and well as performance testing for databases). In order to manage the hybrid development process with external partners, she also needs her technical staff to have a solid knowledge of contract law, to know how to deal with non-performing vendors, and more generally, to know how to manage complex, multi-vendor development projects.

The IT head of a global logistics services provider that is transitioning from mostly internal development to more hybrid development with external partners, agrees that his people are spending more effort on guiding, validating and managing the tasks in Phase 2. His business user IT group is still responsible for validating that the proposed architecture is a good choice, and that the proposed project plan is workable. Therefore, his group is increasingly focusing on the estimation of time, cost and risk of the tasks in Phase 1 and Phase 2. Given this stronger emphasis on verification and results management, his organisation's interest in IT and business process policy and governance, CMMI, service level management, and cost, benefit and risk analysis has significantly increased.

The executive vice president of a regional bank observed that "co-sourcing", that is, having partnerships with vendors who do part or all of the design and development for a specific project, typically leads to more complicated relationships. Both conflict resolution and project management get more complicated in a co-sourcing project, especially during Phases 2, 3, and 4. This has led her organisation to stress the importance of facilitation skills, systematic problem solving skills, and change management skills for those in project leadership roles.

About the Author: Practice Professor Steven Miller is Dean of the School of Information Systems (SIS) at Singapore Management University (SMU). He is responsible for launching and establishing the undergraduate, research, and masters and professional programmes of the SIS. He also chairs the SMU-Carnegie Mellon steering committee that manages the joint SMU-CMU relationship. He also sits on the Advisory Panel of Judges for the CIO Awards.

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