IT managers feel the cold wind of change

Are you an IT manager? Then there's something you should know: vendors are losing interest in IT managers because, five years from now, you aren't going to be the one choosing boxes and signing cheques.

As the line between technology and business continues to blur, business professionals will play a progressively larger part in the decision-making process at the expense of the IT manager. Successful ebusinesses will integrate technology and business so closely that there will be no need for an IT department as we know it today.

Here are the new rules you'll have to play by:

1. Strategic IT decisions will be made by people from business, not from technology.

When it comes to determining IT strategy, matters will be taken out of your hands. "Business units will make those decisions," says Kathy Harris, research director with analyst GartnerGroup. "IT will still play a role, but business managers will have the stronger hand."

Business units will be teams formed around business processes, such as manufacturing or customer service, rather than product or service categories. "These teams will be led by senior business people. Today's IT departments have fewer and fewer technical people and more business people," says Bobby Cameron, principal analyst with the Forrester Group and author of the cheerily named report, The Death of IT.

"The demands of ebusiness creates a technology management gap that IT can't bridge. The IT organisation as we know it will die," the report says, starkly.

Chris Edwards, professor of information systems at Cranfield School of Business, describes the historical role of the IT manager as a leader of strategy and a persuader of business. "Ebusiness has changed all that, and business people are now interested in controlling and owning IT strategy," he says.

Because of the stealth with which the internet entered most businesses, very few IT managers had control of early web decisions. "By the time the internet was seen as a strategic issue, it was out of the hands of IT and controlled by other departments," says Rolf Sackman, head of European systems integration at PricewaterhouseCoopers. "The same will happen in areas such as mobile computing, which is owned by sales departments more than IT."

To remain part of the decision-making process, an IT manager needs to think like a businessman. "Learn the skills and knowledge of the business manager," advises Gartner's Harris. "The successful manager in five years' time won't be a technology provider, but a business enabler."

2. IT departments will be dispersed throughout the business, working with business units.

As well as losing strategic decision-making powers, IT managers will be scattered throughout the organisation. The rise of ebusiness - as distinct from ecommerce - has brought the first stages of this shift already.

Because ebusiness involves every element of a business, it cannot remain purely an IT function under the control of the IT manager. "At that point, it is just another way of doing business," says Harris.

The shift was accelerated by the extent to which business managers controlled early web efforts.

"In the early days, marketing managers looked after the web because it was seen as little more than a fancy brochure," explains Edwards. "But as websites become more sophisticated, interacting with databases and multiple departments, those business departments are hiding IT people away to prevent fragmentation of data."

But some users challenge this as an efficient way of working. Health care provider Bupa has partially dispersed its IT department through a business systems management programme. "This places account managers in key business units," explains Bupa's group IS director, Uwe Natho. "These are IT people who are fully integrated with business departments and provide solutions for their problems."

Natho says he would be reluctant to extend this system and hand over control of strategy to dispersed teams. "Dispersal of the IT department makes IT inefficient," he says. "If every entity had an IT person, there would be anarchy in terms of design and skills."

3. IT managers will support this dispersal by controlling infrastructure in a small central department.

This dispersed network of technology workers will be supported by a central IT department that is far smaller than today's outfits. Within two years, management teams will hold responsibility for the company's information strategy, while the central IT department is merely in charge of implementing business-wide infrastructure.

It is not an enviable future

"This is the fate of IT managers who are reactive and lack business sense," says Forrester's Cameron. "They won't be leaders or decision-makers five years down the line, because the people they led and the decisions they made are in other people's hands."

4. Depending on their skills, IT managers will work for outsourcers or in small IT departments or business units.

So, what will happen to your job in this brave new e-world? That depends largely on what you can offer the business. If the answer is that you have no business expertise and average communication skills, chances are that you will work for an outsourcing organisation, doing much the same job as you do today.

If, on the other hand, you have strong infrastructure and communication skills, your future is in the central IT department looking after networks, data centres or mainframes.

If your skills are more specific - for example, in customer relationship management or accounting packages - you could migrate to a business department where you will apply technical expertise to business problems.

5. Procurement of competitive technology will be controlled by business units.

The erosion of the IT manager's responsibilities will extend to procurement, implementation and management. Business units will take over responsibility for the procurement of competitive business-led products, such as knowledge management and customer relationship management.

This business control of procurement will extend to new technology initiatives. "If a company relies heavily on mainframes, the business will leave decisions to the IT department," says Cameron. "But in the case of a new ebusiness initiative, that procurement will be taken on by the business."

6. Procurement of the infrastructure will be controlled by a centralised department.

While business units assume control of procurement for unique technology components, the IT manager will retain control of procurement, implementation and management of the infrastructure. In this sense, the central IT department is in-sourcing - it is a service provider to the main body of the business. This department will be staffed by highly skilled technologists with knowledge of the company's legacy systems.

"These people will look after those things that define you as a business, and that cannot be outsourced or controlled by non-technical people," says PricewaterhouseCoopers' Sackman.

The second business function that will have to be controlled by central IT is monitoring of service providers. These hard-core techies will see straight through an outsourcer's poor service levels or the product hype of consultants. "These will be highly skilled, knowledgeable people with the expertise that the businessman doesn't want or need," Sackman says.

Finally, the central IT department will be responsible for the smooth running of the network, platforms and operating systems, and will have the technical knowledge to optimise performance and processes for the rest of the business. For some companies, central IT will fulfil technology functions that are too business-critical to be outsourced.

7. Use of external providers for procurement, implementation and management will increase.

The cutback in IT departments and the move of many purchasing responsibilities to business units will lead to a massive rise in the use of consultants and outsourcers. Gartner predicts that 80 per cent of business functions in the typical enterprise will be outsourced by 2002, with demand for outsourcing outstripping supply by 20 per cent in 2005.

The functions that are most likely to be outsourced are at opposite ends of the innovation scale. Initially, outsourcing will grow in areas such as desktop management and network monitoring, where there is little competitive advantage and outsourcing offers economies of scale. These contracts will be between the central IT department and the external partner.

"Increasingly, IT decision makers will view the problem from a service sourcing perspective," says Brian Burke, vice president of enterprise stategies at Meta Group.

"The decisions made about platforms, operating systems and database management systems will be made by the service provider, whether it is the internal IT department, the application service provider or the outsourcer."

Not all companies are happy to turn buying decisions over to outsiders. Bupa's Natho ultimately controls all procurement negotiations himself. "I can get a better deal with any type of hardware than an outsourcer, through in-house negotiation," he says. "I have a lot of contracts where the vendor has the opportunity to buy the hardware, but the clause has never been used because I always got a better price."

Many consultants, including Andersen Consulting and Ernst & Young, have reselling strategies designed to sell software, platforms and networking products as a bundle. Obviously, these cosy consultant-vendor relationships could affect a consultant's judgement. Business people, unfamiliar with technical details, risk falling victim to a sales snow job.

8. A manager with technical and business expertise will oversee all of these departments and relationships.

The IT function in 2005 will be complex, with an internal core department, application hosting companies, multiple outsourcers and consulting relationships, and IT personnel working in dispersed business units. At the heart of this maelstrom, a real opportunity exists for the ambitious IT manager. Organisations will need a central manager responsible for sourcing and controlling the products and services.

"This is an opportunity for a senior IT executive to become chief operations officer," says Cameron. "This is someone who is at present an IT director or manager who is skilful at managing the business."

Referred to variously as the sourcing manager, commercial director or operations director, this manager is responsible for co-ordinating, rather than implementing, all the IT in the organisation - a crucial, powerful, position.

The IT executive, with knowledge of products and services, has a head start in the race for the position, says Gartner's Harris. "To buy the right products and services requires a degree of expertise that lies more with the IT department than the business professionals."

9. An IT manager taking on this role will need new skills and knowledge.

Forrester advises IT managers to start repositioning themselves today to ensure their long-term survival in the organisation. "Move technology to external providers and develop relationships with those people. Plot your own demise," says Cameron.

This role will depend far more on your personal skills as a leader and manager than on IT skills.

"You can always get a new IT manager," says John Everett, senior partner at Deloitte Consulting. "What's hard to find is a strategist with the ability to align decisions around a wide range of technology with a vision of the whole business."

Start by ripping up the mental picture you have of your organisation. "Think of horizontal levels of skill and knowledge, and not the traditional vertical corporate structures," advises GartnerGroup's Harris. Become the person who knows all about the capabilities of application hosters, consultants and outsourcers. "Learn how to work with those people now - that way you'll be indispensable to the business later," she says.

The skills you have gained as an IT manager will not suffice in the new organisation. "You need organisational skills, interpersonal skills and influencing skills, not the old skills of hammering out contracts and monitoring cost control," says Edwards.

Cranfield School of Business, where Edwards lectures, runs vocational courses for IT managers. The course on organisational and political skills in IT management is booked for the rest of the year.

10. This might hurt a little.

Fifteen years ago, the thought of an outsourcing renaissance could send a shiver down the spine of the most hardened IT manager. The experts promise that this time it won't be quite so painful, but the road to chief operating officer nirvana will still be rocky.

Edwards predicts that businesses will seek to own increasing amounts of IT strategy until they learn better. "After a few big blunders and a lot of wasted money, there will be a slowdown in the decentralisation," he predicts.

Even in the internet economy, vastly different from what has gone before, some things remain constant. Businesses will still rely on technology to offer competitive advantage, and will need IT expertise. But in the complex business landscape of the new century, this expertise is increasingly likely to lie outside the walls of the organisation.

The message is clear: either shape up for business, or ship out. You can no longer isolate yourself from the business side of your organisation. The world is changing, and the time to start acting is now.

Email sally_whittle@vnu.co.uk about how your role is changing, and your views on the future of IT.