Harmony on The Horizon
As the profile of the Internet rises, corporations are apt to put one executive in charge of driving online initiatives. In many instances, the chief information officer or another technical manager is put on point. But, in other cases, companies are tapping executives from sales, marketing, customer service or other aspects of the business. Those executives often work independently of the information technology department, raising the real possibility of a turf war between the new I-manager and the old-guard IT executive.
To avoid conflicts, some companies have created formal management structures. Other companies are relying on their executives to "play fair," and believe that, in the end, the focus will be on making Internet initiatives succeed, not on maintaining control.
Gary Howorka, chief technology officer at Digital River, a company that hosts and runs Web sites on an outsourced basis, has to work with both CIOs and I-managers on a daily basis. Previously he served as an e-commerce practice director at Ernst & Young, helping corporations implement Internet initiatives.
"There are some real battles going on out there," Howorka said, though he couldnt reveal any specific client names. "On one hand you have the marketing department trying to bring on and control e-commerce projects because theyre responsible for revenues. But then the IT department feels like its being shoved down their throats. When that happens, you get the CIO and the IT staff laying land mines all over the place."
Howorka said thats not always the case, and in more and more instances he has seen forward-thinking CIOs and I-managers working closely to both develop and implement Internet strategies. "There are a lot of forward-thinking CIOs out there," he said. "It also comes down to the CEO. A good CEO will get everyone excited and working on the same page."
In some of the newer technology companies, it isnt even an issue. At Handspring, a manufacturer of Palm OS-based personal digital assistants, Kendall Fargo serves as vice president of e-commerce. He doesnt have to worry about how to work with the CIO, because Handspring doesnt have a CIO though there is a CTO. Fargo, who came to Handspring from Beyond.com, where he was vice president of corporate operations, has his own development budget. He works closely with CTO Glenn Noga, but Fargo owns the look and feel of the companys Web site and the accompanying development budget. And, he said, thats the way it should be.
"Im the one that has to do the cost/benefit analysis of the projects we do," Fargo said. "I have revenue goals to achieve, and I have to make trade-off decisions about what I think will give us the biggest bang for our buck."
At the moment, Handspring achieves about 20 percent of its revenue through its Web site $123.8 million in its latest quarter a figure that Fargo hopes to push ever higher. "Our direct sales [through the Web site] is our highest-margin business and gives us a direct relationship to the customer," he said. "I want to grow it to as large a percentage as possible."
At other corporations, however, i-managers and CIOs are forging some interesting ties.
United Parcel Service has been at the e-commerce game longer than most companies, and has developed a sophisticated system for both developing and driving Internet initiatives. Tim Geiken, vice president of e-commerce at UPS, is in charge of defining the parcel delivery giants e-commerce vision and delivering new Internet-based tools and services to customers.
To put Geikens responsibilities into perspective, UPS serves more than 2 million customers, delivering about 13.6 million packages per day. Of those, about 85 percent come from orders generated electronically.
Geiken reports directly to the vice president of marketing, who serves on an Internet executive committee that includes CIO Ken Lacy, and which in turn reports to the CEO. He says this alignment reporting to the vice president of marketing and not the CIO ensures that his teams focus will be on achieving business goals. "Our e-commerce goals have always been to better serve the customer and increase our value proposition, so theres a natural alignment with your customer-facing e-commerce activities and how they relate back to the delivery of products and services," he said.
Beyond the link to the Internet executive committee, Geikens group works side-by-side with UPS general IT staff in the companys 235,000 square-foot Innovation Complex dubbed the Innoplex which was opened in Atlanta last year. So, as the 60-person e-commerce team develops Internet initiatives, it can work directly with the IT people building the applications. There are no separate ivory towers.
"We like to believe that weve created a collaborative environment, where there is no final say, but a final consensus," Geiken said.
Hotel chain Marriott International has developed a similar strategy for its Internet initiatives. In late 1999, Marriott President and Chief Operating Officer William Shaw formed the eBusiness Council to oversee the companys online efforts. The council is co-chaired by Bruce Wolff, senior vice president of marketing, as well as CIO Carl Wilson, and meets once per month. Shafiq Kahn, Marriotts vice president of e-commerce who reports to Wolff, also sits on the council.
"Its been a great success in terms of developing a collaborative environment and in educating the entire company about what were doing in e-business," Khan said.
Khan is responsible for two primary channels of business at Marriott: the companys traditional electronic links to travel agents and airlines channels that have been in place for some 25 years and its Web presence, Marriott.com. At the moment those two channels are responsible for about $3.5 billion worth of business. Marriott.com currently generates about 4 percent of that total, but Khan thinks it could be as high as 10 percent a year from now.
Khan said the areas of responsibility between his group and traditional IT are clearly defined to prevent conflicts. He owns Marriott.com and the other online initiatives, and is in charge of plotting strategy. But when it comes to making buying decisions, he works with IT to make the right choices.