Decades of Disconnect

The disciplines of executive

management and information management have taken totally different evolutionary paths. Is

it surprising, therefore, that the practitioners of each discipline have evolved unique

cultures, values and vocabularies even as they have attempted to coexist? The disconnect

is based on the perpetuation and even glorification of these differences.

That the disconnect has been

allowed-sometimes encouraged-to persist defies reason. Until recently, some organizations

had actually encouraged the creation and maintenance of a separate IT subculture immune

from the normal rules that govern the rest of the enterprise. These companies have

developed unique policies, career ladders and compensation plans for their computer

workers. It is as if an organization had a completely different set of standards and

expectations for the people in IT than for people in, say, Human Resources or Accounts

Payable. By applying a set of career paths and incentives unique to IT, organizations

isolated the IT function, ostensibly so it could perform its mysterious tasks better. Most

of these misguided efforts grew out of general technophobia and mistrust of computers.

In retrospect, it's not difficult to

see why the IT culture was so feared. Over the last three decades, computing and

communications technologies have become increasingly critical components to business

success. The community of technical professionals needed to support these information

technologies grew out of a population that had their own set of values, assumptions and

jargon-all of which were quite unfamiliar to those from finance or marketing-driven

corporate management. Because of these differences, IT and executive objectives have

gradually diverged and the gap between them has grown.

The isolation of information

technologists is the unintended consequence of the evolution of the data center in

traditional organizations. In the 1950s, when mainframe computers were first commercially

introduced, organizations were appropriately concerned about the physical environment of

these machines. Mainframes were large, expensive-they were among the largest capital

expenses in their corporate owners' histories-and mysterious. Companies were proud of

their latest acquisitions and, like the art collector displaying rare, jeweled Faberge

eggs, were quick to build glass display cases where these machines could be periodically

exhibited and then, for the remaining 364 days of the year, vaulted for safety.

Organizations erected these 'glass

houses'-so called because glass walls preserved the air-conditioned climate the sensitive

machines required-to physically protect the data processing machines from threats

environmental and human. But gradually the glass house and the values that developed

within its hermetically sealed walls diverged from the culture of the organization whose

mission it ostensibly supported. In some cases, the isolation of the data center was so

complete that the prosperity of the organization was totally unlinked from the fortunes of

IT. In the most extreme cases, an attitude developed that I can only describe as

parasitic. In these extreme cases, the legitimate relationship between the data center and

the organization was entirely reversed. The perception inside the glass house was that the

organization existed to ensure the data center's continued survival.

It is no coincidence that the

disconnect flowered at the same time one hardware vendor, IBM, overwhelmed the IT market.

Customers had few alternatives in the early days of proprietary mainframes. A dominant IBM

helped maintain the disconnect because it benefited the vendor to keep both CEOs and

technical managers passive and in the dark when it came to making IT decisions. The

proprietary account control system made customers so dependent on the primary hardware

vendor that for all intents and purposes they forfeited meaningful choice. In more than a

few data centers, incredibly, the hardware sales representative substantially determined

the organization's IT destiny. I remember visiting data centers where the IBM sales rep

even had his own office.

My intent is not to imply that IBM

was alone in this practice. Every hardware vendor-Burroughs, Honeywell, Univac (now

Unisys), NCR (acquired and subsequently divested by AT&T), IBM, Control Data-used its

proprietary lock-in to keep its customers dependent. These vendors kept a wedge between

executive and technical management precisely to maintain the vendors' interests. This was

known as 'account control'. It was perceived to be in the vendors' interests and the

vendors, quite reasonably, perpetuated it! Don't fault any of the vendors for this

practice. Had I been the CEO of any of those companies, I probably would have done the

same thing.

The overpowering influence of the

hardware vendors contributed to the disconnect in a number of ways. Most of all, it helped

keep people stupid. The most benign interpretation of account control is that to the

extent IBM played a reasonable enabling role, it relieved many executives and IT managers

of their responsibilities to be informed. It also, not coincidentally, robbed them of the

opportunity to work together for the unalloyed good of the organization. A less charitable

view is that account control was a massive conspiracy against computer users, a case that

the Antitrust Division of the Justice Department labored mightily to make.

Account control was a symptom of the

disconnect. Over the years, account control added hundreds of billions of dollars of

unnecessary expense to America's organizations. These funds could have been put to work

developing new products, introducing innovative services and building stockholder value

for a large number of organizations instead of enriching a small number of hardware

vendors.

The good new is that account control

is dead. The competitive world of commodity computing killed it. In the open systems

world, customers can exercise much wider freedom of choice in their hardware and software

vendors. This freedom of choice, customers found, represents opportunities for significant

savings. Hardware and software vendors must now find other ways of winning customer

loyalty.

Ironically, as the disconnect eases

in this particular area and freedom of choice replaces account control, hardware and

software suppliers are transforming the vendor-customer relationship into a strategic

partner relationship. Customers recognize the value of freedom of choice and will exercise

it if a partner screws up, but most customers prefer dealing with a small number of loyal

strategic partners. Stable relationships are in everyone's interests. The difference is

that the open market optimally aligns the interests of the strategic partners and doesn't

favor one over the other.

Many CEOs believed they were being

respectful of IT when they agreed to a different set of standards for IT, threw
accountability out of the window and threw up their hands at a situation perceived to be

unmanageable. They could not have been more short-sighted. Among all others, this attitude

of detachment most accounts for the deplorable situation that developed. The attitude,

unfortunately, is not completely unknown even today.

CEOs actually joked about how

unmanageable the situation was. Referred to as software nerds, computer jockeys or bit

heads, IT workers were perceived to be essentially out of control. Businesspeople

snickered at programmers with their white socks and shirt pocket protectors filled with

colored pencils. Underneath this teasing was a conviction, often grounded in some reality,

that executives didn't have the first clue about what kind of management programmers and

other technical professionals needed. Ultimately, this attitude equaled nothing less than

giving up.

The truth was that many executives

felt uncomfortable with their IT people because the executives were uncomfortable with

technology itself. After struggling to make sense of the situation, many CEOs quickly grew

frustrated and literally left the computer people to their own devices or, in

exasperation, assigned management of IT to the CFO, hoping that he or she could at least

kept the costs down. Predictably, the easiest thing for corporate executives to do was to

avoid the people in IT. To justify this practice, they rationalized that IT (pick one)

worked better without management, didn't need management or was impossible to manage.

Isolating IT and regarding it with a

mix of fear and mystery was supposed to be evidence of the supreme importance in which IT

was regarded, but in truth it had the opposite effect. By isolating information systems

from the fabric of the business, IT became marginalized and the objectives of the

technologists diverged even more from the objectives of the business leaders. By the

mid-1960s, the disconnect was in full bloom.



If the disconnect formed so early, why is it only now that we are feeling the pain? The
disconnect has always taken a toll on the health and wealth of organizations, but only

recently has the damage been obvious. Still, American business has lived with the

disconnect for three decades. What has transpired to turn a simmering evolutionary

accident into a threat that, unless corrected, will boil American business alive?



Two major forces explain why the disconnect is suddenly so inescapable. First, IT has only
recently emerged as an enabler than can single-handedly determine a company's competitive

edge. Thus the stakes have increased, as have the costs of failure. Second, global

competition has unleveled the playing field. If every player in the game is hobbled by a

similar disability, it's easy to overlook the common handicap. But the recent emergence of

global competitors that by and large have avoided the disconnect makes the handicap

impossible to ignore. Let's look at each of these forces in a little more detail.



Information technology as an enabler of strategic applications


In the dawn of the information technology era, the divergence of business needs and IT
resources was obscured by the limited role computers played and the general prosperity of

business in the 1950s and 1960s. Organizations had only one computer and its functions

were limited to back-office functions such as accounting and payroll. It was literally out

of sight, out of mind.



When computing was limited to the back office, it was easy for executives to ignore
computer problems. For many years, data centers served as black boxes into which a

corporate department such as the warehouse or Accounts Payable would file a request for a

computer application and later, sometimes years later, the black box would open and

deliver itself of a system that responded in some measure to a request made by a

department. With a little luck, the system would be reminiscent of the application the

department originally requested. More likely, it would be some anonymous system analyst's

approximation of what the department wanted. Argument was futile because there was no

appeal to the data center's conviction that it knew what users wanted better than the

users themselves. In any case, the point was often moot, because the passage of time had

so altered the requesting group's requirements that, in the most perfect event, the

department could immediately and precisely address the specific challenges that were so

critical 18 months back, but were now quite irrelevant to the business.

People were in less of a hurry,

competition was less intense, and since the organization had no clue as to how much IT was

actually costing, it was logical to deal with issues that were easier to measure. Why

sweat it when everyone was prospering? American business flourished in the 1960s. There

was enough to go around without justifying every little expenditure. Besides, every

corporation had more or less the same problem, so everyone was penalized more or less

evenly.

At the same time, senior executives

became more isolated from the operational details of their companies. Corporations

cultivated large bureaucracies of middle managers. Top executives began using middle

managers as cops, protecting them from IT and other unruly issues of the corporation.

Middle managers learned that power stemmed from hording information, not sharing it. They

became gatekeepers of information between senior executives and IT, filtering directives

on the way down and analyzing information on the way up. These filters perpetuated the

disconnect by obscuring from senior management just how much of a rat's nest the IT

situation resembled.

A number of overlapping economic

developments in the business world conspired to raise the level of frustration to the

breaking point. These themes-describing the shift of the developed world from an

industrial economy based on mass production to a knowledge and service-based economy

enabled by IT-are familiar to many readers. The role that these forces played in exposing

the liabilities of the disconnect are less well understood. These developments raised the

stakes to an alarming level, making the costs of the disconnect impossible to ignore.

DEVELOPMENT face="Arial, Helvetica, sans-serif" size="2">1. KNOWLEDGE OR LEVERAGED INTELLECT: The

disconnect is incompatible with knowledge economies. In an economy based on brain rather

than brawn, we pay homage to the 'information economy' as if it operated without the need

for human beings. The truth is that knowledge is created by human beings and consumed by

human beings. Computers can manipulate vast amounts of data and can often reveal patterns

that human analysts miss, but anything worth knowing is the product of human intelligence.

What we are really talking about is supporting knowledge workers networked to create

products and services for knowledge consumers.

As companies shift toward knowledge

work, the key assets of the new economy become intellectual capital focused on the

knowledge worker. Knowledge workers already outnumber industrial workers by more than

three to one. Knowledge is not simply another resource along with traditional factors of

production such as labor, capital and land; it is the only meaningful resource today. When

knowledge workers are an organization's greatest single asset, any hint of the disconnect

rapidly becomes debilitating because it short-circuits the exchange of information and

befuddles the decision-making process. In brief, the disconnect alienates knowledge

workers from their own power.

DEVELOPMENT 2. INTERNETWORKING: The

networked economy is short-circuited by the disconnect. Never have organizations been
poised to create as much wealth as that made possible by the networked economy. A shift in

the style of networking-from the centralized mainframe computer of the past to the widely

distributed networks of users based on the internet computing model-makes possible new

institutional structures that offer profound opportunities for profit.

The disconnect is at odds with the

attributes of networking. While the network is open, the disconnect is closed. While the

former relaxes or eliminates boundaries, the disconnect applies more mortar to rigid

structures. While networking encourages democratic and fluid relationships, the disconnect

favors hierarchical barriers and inflexibility. The networked enterprise, like the

internet itself, offers a domain in which everyone can participate and the total effect is

greater than the sum of its parts. In such as environment, the disconnect doesn't stand a

chance.

DEVELOPMENT 3. COMPETITION FOR

KNOWLEDGE: Squeezing out the inefficiencies of the disconnect. As demand for computer

applications increased, competition for finite IT resources became first intense, then

ridiculous. Application backlogs-the waiting time users had to endure before their

applications were even considered-often exceeded two years. User departments, fighting for

attention and priority, became curious about the management practices within IT.

Complaints were so loud and relentless that senior management had no choice but to peel

off the covers and take a look. Rarely was it a pretty sight. Prince Otto von Bismarck

once warned that one should always decline invitations to observe firsthand the

construction of sausages and laws; he could have added to that list the development of

information systems.

The disconnect played a crucial role

in making the process of developing and deploying new information systems so

time-consuming. By putting obstacles in the way of true teamwork and peer-to-peer

cooperation, it added years and millions of dollars to otherwise manageable projects.

Worst of all, it squandered opportunities whose benefits would have been incalculable.

DEVELOPMENT 4. TIME COMPRESSION:

Dismantling the disconnect to 'compete in time'. Business conditions became so volatile

that waiting two years or more for an application was a luxury users could no longer

afford. Having automated all their back-office operations, companies began to computerize

the strategic applications that leveraged emerging business opportunities. These systems

could not wait. Forget next year, users needed their systems next week. The windows of

opportunity was too narrow to allow business as usual in the data center. The disconnect

added time to every process it touched and in that way become untenable.

In a digital economy, immediacy

becomes a key driver and variable in business success. In the 1950s, technological

developments such as xerography or instant photography ensured a revenue stream for

decades. At the same time, designing an automobile took a decade from conception to

production. In order to succeed today, enterprises must operate in accelerated time

frames, continuously and immediately adjusting to changing business conditions through

information immediacy. Now it takes Chrysler two years, not ten, to design a car, although

even that is too long by a year. A significant percentage of my company's revenues comes

from products that didn't even exist three years ago.

DEVELOPMENT 5. DISAGGREGATION:

Leveling the playing filed. Disaggregation redefines the principal economic unit of the

economy. In the industrial economy, that unit was the corporation. Today, that basic unit

is giving way to disaggregated organizations and economic structures, in which many people

in many physical locations can be connected into collections that look like the

enterprises we have now. Distributed networks such as the internet make it possible to

divide functions that were formerly under one organization or physical roof into a cluster

of related activities carried out by different actors.

This process collapses the economies

of scale necessary to sustain large, monolithic companies. In the Age of the Internet, the

rules of economies of scale are stood on their head: products are made continuously better

yet cheaper. By virtue of the network that makes such a miracle possible, the

disaggregated enterprise is based on the individual knowledge worker who often functions

as a business unit of one. Motivated, self-learning, entrepreneurial workers, empowered by

and collaborating through new tools, apply their knowledge and creativity to add value.

The very structure of the organization accommodates these workers by providing

opportunities for dynamic, short-term relationships. Barriers of place and time are

eliminated. Interactions take place coast-to-coast as easily as they do

cubicle-to-cubicle. We don't have to meet in the same building anymore; nor do we have to

convene synchronously in time. Most of all, a modular world means we don't have to

assemble for the long haul, such as 10 or 20 or 30 years.

DEVELOPMENT 6. DISINTERMEDIATION:

Eliminating intermediary functions between producers and consumers. Watch out travel

agents, wholesalers, real estate agents, automobile salespeople and information brokers of

all stripes. Anyone standing between producers and consumers needs to move up the food

chain or risk being disintermediated. Anyone who occupies the space between a customer and

an information appliance that can fully meet a customer's requirements will eventually be

out of a job.

In The Road Ahead, Bill Gates

discusses the role of the internet in 'friction-free capitalism', a fast-moving, networked

business model. Disintermediation-the systematic elimination of informational middle

functions-is a key component of frictionless capitalism. Intermediaries don't make a

product or service themselves; they simply distribute it or connect the buyer with the

seller. They profit from information inefficiency; the less sellers know about buyers and

vice versa, the more value intermediaries can offer. The go-betweens whose job it was to

collect, summarize and interpret information are in jeopardy because the internet's world

wide web is becoming a perfect vehicle for direct electronic commerce between buyers and

sellers.

It's not a new process. Tens of

thousands of telephone operators were disintermediated when the public switching network

allowed consumers to dial their own phone numbers. More recently, bank ATM machines make

it possible for customers to take on the work-getting cash, checking balances, shifting

funds from one account to another-formerly handled by bank tellers. Automation such as the

public switching telephone system and computers eliminated tens of thousands of

intermediaries. But no force in history has changed the relationship between producers and

consumers as much as the internet. This is because unskilled clerical people are not the

only ones at risk.

Professional workers formerly

insulated from the march of automation are no longer secure. For example, the clothing

manufacturer Levi Strauss now has a process to take precise computer measurements of a

customer. Using the internet, retailers transmit that information directly to the factory

where automated systems manufacture a custom-designed pair of jeans for a perfect fit.

Federal Express delivers the jeans to the customer the next day. What's missing here? The

skilled tailor is no longer in the picture. Also disintermediated is an entire value chain

of store buyers, inventory workers, stock clerks and other functions because the

customer's needs can be fed directly to the production workers who can meet that need

without intervention by intermediaries.

DEVELOPMENT 7. DECENTRALIZATION:

Letting end users and those closest to the action take control. By the late 1980s,
centralization as an organizing structure was no longer in favor. Decentralization, the

seventh force putting pressure on the data center, encouraged customer server-oriented

companies to move resources closer to the customers being served. Although they resisted

mightily, data processing departments were not spared. Like the fabled Biblical walls of

Jericho, the glass walls came tumbling down in response to the raised voices of millions

of frustrated users. Though centralized facilities continued to grow, many new computer

resources were redeployed in factories, warehouses, departments and workgroups spread

throughout the organization. The disconnect that had for so long been quarantined by

centralization was suddenly exposed for everyone to see.

It was during this time that people

became aware of the lean-and-mean decentralized organizations that achieved excellence

through alignment of their business objectives and decentralized, highly responsive

information- processing units. These groups raised the standards for delivering products

and services. They were less hierarchical and therefore quicker; they were flattened and

demassified and therefore cheaper; and they were empowered to customize products and

services and therefore they won the hearts of customers. These decentralized

organizations, most recently known as virtual organizations, raised the bar for their

competitors. Good enough became not nearly good enough anymore.

DEVELOPMENT 8. DOWNSIZING:

Streamlining processes for customer focus. The hierarchical structures that organizations

evolved in the 1950s, like the disconnect itself, can no longer be sustained. A number of

forces, including global competition and automation, have made downsizing inevitable.

Every day, it seems, headlines are filled with news about companies eliminating positions.

That this downsizing is healthy on a macroeconomic level does not lessen the considerable

pain and disruption it causes in the lives of individuals. But downsizing focuses much

needed attention on how people and processes add value to the enterprise. Downsizing

encourages organizations to think about meeting customer needs through small work groups.

And it compels organizations to ensure that IT is aligned with the goals of these work

groups.

DEVELOPMENT 9. GLOBALIZATION:

Leveling the playing field through global competition. Competition is going beyond the old

boundaries. With the emphasis on expansion of free trade zones, the systematic elimination

of trade barriers, the portability of knowledge workers and the availability of cheap

information networks, a new form of competition is spreading across global markets. This

competition brings new threats as well as opportunities. Upstart entrepreneurs can

seriously disrupt established markets and set new standards. United States automakers such

as Ford and General Motors are just now recovering from the loss of market share inflicted

by Honda, Nissan and other Japanese offerings.

IT both enables, and is enabled by,

globalization. Computer networks enable smaller firms to collaborate in achieving parity

with larger, established firms. Remote distributed software development is enabled by the

availability of networks. The resulting software can then be distributed on the same

networks. Networks let companies provide 24-hour service, as customer requests are

transferred from one time zone to another.



Did no one see the danger?

The disconnect was predicted over

the years by a number of forward-looking people. Ever since the beginning of the

Information Age, there have been isolated voices begrudging IT's insatiable appetite for

resources. These individuals correctly anticipated a runaway expense against the bottom

line, but they were hobbled from demonstrating their case to senior managers because they

lacked the tools and methods to measure exactly how much IT was actually costing. Not

surprisingly, IT had failed to build auditing tools to monitor their activities in terms

that corporate executives could understand. Since there was no way to measure the impact

of the demands IT imposed on the corporation's resources, managers predictably attended to

matters that could be more precisely calibrated.

By the late 1960s, auditing firms

for the Fortune 500, such as Arthur Young and Ernst & Whinney (now Ernst & Young),

began to insist that the data processing function be made more accountable and auditable.

These firms, recognizing the unprecedented role of IT in the corporation, raised

persistent questions about the integrity, security and auditability of the corporate data

maintained by the IT resource. These questions-often posed to boards of directors-for the

first time initiated some high level inquiries.

During the same period, the attitude

that 'bigger is better' came under close scrutiny. This cultural change challenged the

concept of large, consolidated data centers that required centralized data processing

functions for their management. Forward-thinking corporate managers began to be troubled

by these isolated departments dominated by people with unimpeachable technical skills but

frequently limited management experience and occasionally massive indifference to overall

corporate strategies and objectives. By the late 1970s, some of these data centers were

perceived to be barriers to the departments they were supposed to serve.

When the glass houses were augmented

by decentralized computing, the disconnect went away, right? Wrong. While American

businesses moved resources around and certainly improved deficiency and accountability,

they failed to address the root causes of the disconnect: IT artifacts were physically

manipulated in a choreography of decentralization, but the root causes of the disconnect

were not challenged.

Excerpted from Techno Vision II



By Charles Wang


Published by McGraw-Hill


Courtesy: Computer Associates