How IT Departments Are Responding to the Challenges of E-Commerce

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New information technologies bring new business threats and opportunities with them and it is the business impact which generally captures management attention. However, each wave of new technology also brings new challenges for the IT function, not only in responding to newly perceived business needs (the demand side) but also in the way the IT function has to work (the supply side). From time to time the combination of new business drivers and new technologies and techniques forces the IT function to undergo fundamental change or transformation. This happened in the early- to mid-1990s and led to new agendas being proposed (Rockart et al, 1996), new models of IT practice being developed (Cross et al, 1997), and to reassessment of the core purpose and capabilities of the IT function (Feeny and Willcocks, 1996).

Business exploitation of the Internet and the World Wide Web, which we perhaps can label the “era of e-commerce” or “the dawn of the new economy”, would seem likely to provoke yet another transformation of IT practices in the early years of the new millennium. Popular books on e-business often suggest that a key to success in this era is a robust and comprehensive IT infrastructure on the one hand and a capability to rapidly develop and implement new e-business applications on the other hand (Hartman et al 2000).

Thus in the summer of 2000 we examined how IT departments were responding to the era of e-commerce. In particular we surmised that the apparent need for rapid construction of a new generation of IT applications which were becoming the channel, product or core processes of e-business, and which also had to work reliably, represented a substantial challenge for traditional, established IT departments. Indeed e-commerce might be stimulating a paradigm shift in IT practices and methods, from “old IT” to “new IT”.

In order to sample the possible continuum of new or innovative practices, we studied boutique e-commerce application development providers, dotcom start-ups, spin-off e-businesses and new E-IT departments or groups in incumbent companies. 24 firms in both the UK and USA were studied, deploying interviews with IT and business executives and collecting documentation where feasible. We set out to examine whether the context for IT departments had changed and what new practices were evolving. Beyond this descriptive endeavour, we then sought to assess whether any emergent new practices made sense not only for e-commerce work but also for the more traditional work of the IT function.

We have concluded that the context and purpose of the IT are becoming quite different from the past, that quite new practices and procedures are evolving and, perhaps most important, that at least four newly emergent practices could be candidates for best practice, or even new principles, in e-commerce ventures and perhaps in traditional IT departments as well.

The New Character of IT

In our interviews, we invited respondents to describe today’s context for IT practice, to highlight any significant differences from the past in the purpose and spirit of the IT function, and to suggest keywords which capture the experience of responding to the demands of e-commerce. Seven changes in the character of IT were identified and are captured in Table 1.

“We are the Business” The key change in the role of the IT function in the “new economy” is that it has become the builder of the business. As distribution channels become electronic, business processes become systems-dependent, products become digital and information becomes the source of innovation and future value creation, the fixed fabric of e-business is IT. The platform of e-commerce is technology; thus IT is not only on the critical path of business development, it is the critical path. As the CIO of a spin-off e-commerce venture put it, “We have gone from being a service supplier to the business to being the business”.

One important consequence of this shift is that there must be partnership between the IT department and the rest of the business of the highest order. Indeed, in dotcom start-ups and many e-commerce spin-offs there is generally no organisational or physical divide between IT and other activities. As we shall see, continuous teamworking, co-location and minimal demarcation of who does what in business development are the norm.

“Back to Craft” For the last 40 years or so; IT has become something of an engineering profession. Development of IT systems has become increasingly structured, formalised, partly automated and guided, quite rightly, by generally accepted standards of best practice. The intent has been to build reliable, industrial strength systems and robust infrastructures using efficient, disciplined and routinised processes.

In the dotcom world, at least so far, IT practices are more akin to craft than engineering. There is much learning by doing and a spirit of don’t be constrained by rules of the past. “Let’s knock something up and see it”, “let’s keep changing the design to reflect new ideas and requirements,” “let’s try it out, maybe even let it go live” and “when we look back at early versions of what we built and took to market we shudder” are phrases and quotations which typify this craft ethos. It is partly inevitable when new technologies are being exploited, but it is also explained by the common e-commerce development imperative of getting new products and channels to market quickly.

It may also be a short-term consequence of the need for different technology skill-sets to work together. Indeed some of the logic of creating separate E-IT departments in incumbent companies and of spinning off e-commerce ventures has been to encourage rule-breaking and new ways of doing things. However, our study companies know that some of the engineering mentality will have to return.

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