1. Core IT Capabilities Within Organizations
Dr. Mary C. Lacity
The Tower of Babel by Pieter Bruegel the Elder,
1563 KbKunsthistorisches Museum Wien, Vienna

2. Session Objectives Understand 9 Core IT Capabilities
that should be kept in-house
Ensure
Value for IT
Spend to
Feeny, D. and Willcocks, L., “Core IS Capabilities for exploiting Information Technology, Sloan Management Review, Vol. 39, Spring, 1998, pp

3. Forces Shaping IT Function
Business
Reliance
On IT
Recessions
Competition
Force cost
reduction
In-house IT
Function
Core
Competence
Strategy
Maturity &
Size of
IT Providers
Feeny, D. and Willcocks, L., “Core IS Capabilities for exploiting Information Technology, Sloan Management Review, Vol. 39, Spring, 1998, pp

4. Feeny & Willcocks: IT Capabilities
Business Face
Governance
Face
Technical
Face
Supply
Face
Feeny, D. and Willcocks, L., “Core IS Capabilities for exploiting Information Technology, Sloan Management Review, Vol. 39, Spring, 1998, pp

5. Feeny & Willcocks: IT Capabilities
Business Face
Information Systems
Strategy
Information
Technology
Strategy
Governance
Face
Information
Management Strategy
Technical
Face
Supply
Face
Sourcing
Strategy
Feeny, D. and Willcocks, L., “Core IS Capabilities for exploiting Information Technology, Sloan Management Review, Vol. 39, Spring, 1998, pp

6. Feeny & Willcocks: IT Capabilities
Business and IT Vision
Business Systems
Thinking
Relationship
Builder
Contract
Facilitation IS
Leadership;
Informed
Buying
Design of IT
Architecture
Delivery of IS
Service
Contract
Monitoring
Technical
Architecture
Technical
Doer
Vendor
Development
Feeny, D. and Willcocks, L., “Core IS Capabilities for exploiting Information Technology, Sloan Management Review, Vol. 39, Spring, 1998, pp

7. IS Leadership Business and IT Vision Design of IT Architecture
Delivery of IS
Service
Feeny, D. and Willcocks, L., “Core IS Capabilities for exploiting Information Technology, Sloan Management Review, Vol. 39, Spring, 1998, pp

8. IS Leadership
Integrating IS/IT effort with business purpose & activity
Implements structures, processes, and staffing to fill
other 8 roles
Alignment of IS strategy and business
Fosters relationships with senior management

9. IS Leadership Fosters relationships with senior management
"I went to the city, I usually had one or two things to do. I made it
a point when I went in, I went up to the chairman's office and many
times his secretary was there when I'd get there. I'd say, 'tell the
chairman and CEO, tell Harry I'm in the building. Could I talk
to him? I'm available.' I went right down the hall to the president,
who at the time was Michael, and said, 'I'm in town for a week if
you have any questions about computing, I'd be happy to talk to
you about it.' I would also visit every senior vice president
on the executive floor. I would stick my head in the door
and say, 'hey I'm in town, what can I do to help?'" -- VP of IS, PETRO2

10. IS Leadership
What are the characteristics of good CIOs?
Business and People skills are more important than technical
skills:
“My advice to CEOs is this: Your IT function should be run by a great
general manager, not by a traditional technology manager…More and
more, business considerations rather than technical ones drive investments
in IT. Our businesses are asking, “Why not buy solutions rather than build
them? and “How can IT serve the critical needs of the business rather than
those narrowly defined by accounting and human resources?” Far too many
IT professionals don’t know how to frame questions like these, much less
answer them.” -- Gene Batchelder, CFO, GPM Gas

11. IS Leadership
What are the characteristics of good CIOs?
In a survey of 64 CIOs, Applegate and Elam found that 30%
had only a technical background; 33% had only a business
background, and 37 had a “hybrid background”.
Practice often prescribed:
Have the CIO report to the CEO to ensure the CIO has enough
authority and power to be effective.

12. Business Systems Thinker
Business and IT Vision
Business Systems
Thinking
Design of IT
Architecture
Delivery of IS
Service
Feeny, D. and Willcocks, L., “Core IS Capabilities for exploiting Information Technology, Sloan Management Review, Vol. 39, Spring, 1998, pp

13. Business Systems Thinker
Envisioning the business processes which technology makes possible
Focus on business process improvement rather than just IS improvement
“To serve customers well, companies need to be proficient in half a dozen
key areas: reduced cycle times, reduced asset levels, faster development of new
products, improved customer service, increasing empowerment of employees,
and increased knowledge sharing and learning. Information technology is a key
resource for accomplishing those goals” John Rockart, MIT

14. Business Systems Thinker
Not all IT managers are welcome in this role:
"The IS organization have a tremendous amount to contribute if they
ever get out of the back room and be perceived as having an opportunity
to participate in the resolution of problems rather than being one
of those problems." -- Corporate Planning Manager, Occidental Petroleum

15. Business Systems Thinker
Proven practices include:
IT representation on major business initiatives:
Business Strategic Planning
Operating Committees
Capital Budgeting Committees
Educate senior managers on IT capabilities:
"We'd make it a point that every one of our executives attended that four day class.
Every time we got as many as ten or fifteen people at the general manager level
who had not taken the course. I'd call to schedule the course. And we'd schedule
it and we'd get the CEO's signature saying, 'You've been selected to attend a
computer concepts class. Please be at the homestead on four o'clock on Sunday,
signed, Harry Thompson, CEO." -- VP of IS, PETRO2

16. Relationship Building
Business and IT Vision
Relationship
Builder
Design of IT
Architecture
Delivery of IS
Service
Feeny, D. and Willcocks, L., “Core IS Capabilities for exploiting Information Technology, Sloan Management Review, Vol. 39, Spring, 1998, pp

17. User-Business Relationship Builder
Getting the business constructively engaged in IS/IT issues.
Focus on ability to speak “business” language to gain credibility
Working with business community to understand cost/service trade-offs,
what technology can and cannot do
When a unit manager requested a new system that would save
$250,000, IT manager had to explain it would cost $500,000
to build.

18. User-Business Relationship Builder
Focus on ability to speak “business” language to gain credibility
“The senior managers within BAe and even more the managers within the business
units, by and large didn’t want to hear people talking pure IT. What they wanted was
to hear people talking their language, the language of making airplanes. And we
were able to do that, we were able to produce these people who talked their language.”
-- CSC Quality Manager (Transferred from BAe)

19. User-Business Relationship Builder
Often prescribed practices might include:
Dedicating systems analysts to specific business units to build
relationships and learn about business.
Cross-training users and IT
Governance Structures that include business users

20. Technical Architect Business and IT Vision Design of IT Architecture
Delivery of IS
Service
Technical
Architecture
Feeny, D. and Willcocks, L., “Core IS Capabilities for exploiting Information Technology, Sloan Management Review, Vol. 39, Spring, 1998, pp

21. Technical Architect
Creating the coherent blueprint for a technical platform that responds to current
And future business needs.
Defining architecture standards
Centralized computing environment
Distributed computing environment
Technology renewal (n, n-1, n-2?)
Technology replacement
Security
Disaster recovery management

22. Technical Architect "You shouldn’t outsource technical architecture.
[The suppliers] are going to take your architecture where
their business is going, not where you want to go. Those that let all their
technical architects go, and we have an exposure there because we let most
of ours go, and now as I skill up my group, I to build up an expertise that
can keep up. It’s probably most contentious in the mainframe area...suppliers
want vanilla, and customers want chocolate. And we even have discussions
on the supplier's standards. We want to run this security environment,
not their standard security environment for these reasons." --
Contract Administrator, PBS5

23. Technical Doer Business and IT Vision Design of IT Architecture
Delivery of IS
Service
Technical
Doer
Feeny, D. and Willcocks, L., “Core IS Capabilities for exploiting Information Technology, Sloan Management Review, Vol. 39, Spring, 1998, pp

24. Technical Doer: Making Technology Work
Rapidly Troubleshoot Problems
Technical work-arounds
Bypass political bureaucracy
What are the stereotypical characteristics of
a technical doer?

25. Outsourcing Roles Business and IT Vision Design of IT Architecture
Contract
Facilitation
Informed
Buying
Design of IT
Architecture
Delivery of IS
Service
Contract
Monitoring
Vendor
Development
Feeny, D. and Willcocks, L., “Core IS Capabilities for exploiting Information Technology, Sloan Management Review, Vol. 39, Spring, 1998, pp

26. process contract negotiation
Informed Buying
Business and IT Vision
Sourcing strategy, RFP
process contract negotiation
Contract
Facilitation
Informed
Buying
Design of IT
Architecture
Delivery of IS
Service
Contract
Monitoring
Vendor
Development
Feeny, D. and Willcocks, L., “Core IS Capabilities for exploiting Information Technology, Sloan Management Review, Vol. 39, Spring, 1998, pp

27. Informed Buying Develops a sourcing strategy
Analyzes external market for IT/IS services
Leadership of the tendering, contract, and service management processes
“If you are a senior manager in the company and you want something done,
you come to me and I will go outside, select the vendor, and draw up
the contract with the outsourcer, and if anything goes wrong it’s my butt
that gets kicked by you.”

28. Informed Buying Proven practices include:
Joint senior executive/IT manager development of IT sourcing
strategy
Creating RFP and inviting internal & external bids
Short term contracts
Detailed contracts

29. Contract Facilitation
Business and IT Vision
Ensures success of existing contracts
User/Supplier Liaison
Contract
Facilitation
Informed
Buying
Design of IT
Architecture
Contract
Monitoring
Vendor
Development
Feeny, D. and Willcocks, L., “Core IS Capabilities for exploiting Information Technology, Sloan Management Review, Vol. 39, Spring, 1998, pp

30. Contract Facilitation
Provide one-stop shopping for the business user
Develop user guides to the contract
Help manage user expectations of the contract
Assess and prioritize user demands
Determine if user demands will trigger contract excess fees
Determine if users are demanding too little

31. Contract Monitoring Business and IT Vision Design of IT Architecture
Protect business contractual position;
Monitor supplier costs
and performance vis-à-vis
the contract
Contract
Facilitation
Informed
Buying
Design of IT
Architecture
Delivery of IS
Service
Contract
Monitoring
Vendor
Development
Feeny, D. and Willcocks, L., “Core IS Capabilities for exploiting Information Technology, Sloan Management Review, Vol. 39, Spring, 1998, pp

32. Contract Monitoring Monitor vendor performance (service)
Review monthly bills (cost)
Solve disputes with vendor
Refine performance measures as needed
Benchmark existing contract against developing market
capability
Escalation procedures
Negotiate detailed amendments

33. Develop supplier relationship
Vendor Development
Business and IT Vision
Develop supplier relationship
beyond contract
Contract
Facilitation
Informed
Buying
Design of IT
Architecture
Delivery of IS
Service
Contract
Monitoring
Vendor
Development
Feeny, D. and Willcocks, L., “Core IS Capabilities for exploiting Information Technology, Sloan Management Review, Vol. 39, Spring, 1998, pp

34. Vendor Development Identifies opportunities for added-value:
1. Business value-added, in which the supplier applies their expertise
to help the customer exploit IT for business advantage.
2. Capacity value-added, in which the supplier infuses new skills and
technologies in an effective manner.
3. Utility value-added, in which the supplier provides cheaper IT services.
Focus on innovation and exploiting opportunities
Explores potential for new vendor services
“Yes, [the vendor] can achieve all the things that were proposed
---but where is this famous "added-value" service? We are not
getting anything over-and-above what any old outsourcer could
provide.” -- IT Services Director, Aerospace Company

35. Evolution in the Management of IT
Education
Informed Buyer
& right sourcing
Vision to transform
& right agenda
Service
Competence
& Right
Perception
DELIVERY REORIENTATION REORGANIZATION
Learning
Feeny, D., “The Five-Year Learning of Ten IT Directors,” in Managing IT as a Strategic Resource (Willcocks, Feeny & Islei (Ed), McGraw Hill, 1997, pp

36. Evolution in the Management of IT
Education
Focus on establishing operational
Credibility, project successes, CIO
Role always important, but technical
Roles also very important here…
Service
Competence
& Right
Perception
DELIVERY
Learning
Feeny, D., “The Five-Year Learning of Ten IT Directors,” in Managing IT as a Strategic Resource (Willcocks, Feeny & Islei (Ed), McGraw Hill, 1997, pp

37. Evolution in the Management of IT
Education
CIO role is key as is
Relationship Building
To help educate business
About strategic potential
Of IT. Then IT “allowed”
To become business systems
thinkers
Vision to transform
& right agenda
REORIENTATION
Learning
Feeny, D., “The Five-Year Learning of Ten IT Directors,” in Managing IT as a Strategic Resource (Willcocks, Feeny & Islei (Ed), McGraw Hill, 1997, pp

38. Evolution in the Management of IT
Education
Informed Buyer
& right sourcing
Rightsourcing,
With centralized,
Decentralized &
Outsourced portfolio
DELIVERY REORIENTATION REORGANIZATION
Learning
Feeny, D., “The Five-Year Learning of Ten IT Directors,” in Managing IT as a Strategic Resource (Willcocks, Feeny & Islei (Ed), McGraw Hill, 1997, pp

39. Capabilities & Skills in Emerging IT Function
Technical
Business
Interpersonal
CIO
Medium
High
Business Systems Thinking
Low/Medium
Relationship Building
Technical Architecture
Making Technology Work
Low
Informed Buying
Contract Facilitation
Contract Monitoring
Vendor Development
Feeny, D. and Willcocks, L., “Core IS Capabilities for exploiting Information Technology, Sloan Management Review, Vol. 39, Spring, 1998, pp

40. Core-Periphery Model Revisited
DEMAND
Information
Management
Information Systems
Information Technology
SUPPLY
CORE ?
Non-
CORE
STRATEGY ENACTMENT

41. Core-Periphery Model Revisited
DEMAND
Information
Management
Information Systems
Information Technology
SUPPLY
CIO
Relationship
Builder
Systems
Thinker
Informed
Buyer
Facilitator
Vendor
Developer
Monitor
Technical
Architect
Fixer
STRATEGY ENACTMENT

42. Conclusion Most critically, the core IT capability model
implies migration to a smaller IT
function, staffed by highly able people.