The end of the IT department as we know it?

The role of IT is changing, which could be bad news for the unprepared
Written by Andrew Donoghue, Contributor

If you're a techie with no business acumen your days are numbered - that's the rather stark conclusion of analyst firm Gartner. The group's latest musings will make sober reading for anyone working at a purely technical level in an IT department. The gist of the document -- entitled IT Driven Investment is a thing of the past -- is that IT's role isn't simply about implementing technology anymore but 'brokering services and shaping business demand'.

If that sounds a bit woolly, that's because it is. But despite the clunky management speak, the analyst group claims to have identified some unambiguous changes affecting the industry. As IT becomes more vital to the overall performance of a business then consequently business will become a more fundamental part of IT, the theory goes. Companies can now live or die by their IT decisions - just look at Sainsbury's, which is rolling in the doldrums thanks in part to some dodgy management but also to the spectacular failure of its supply chain systems.

With this much riding on technology decisions, the concept of a closed IT department providing IT services to the rest of the company is slowly being eroded. Gartner maintains that those businesses that understand how to generate real advantage from fusing technology, business process design and business relationships will outperform those that do not by at least 15 percent per year.

"We predict that by 2008, 50 per cent of IT organisations will refocus on brokering services and shaping business demand, rather than delivering IT services directly," says John Mahoney, Gartner vice-president of IT Services and Management.

You may question how anyone can quantify these kinds of shifts so accurately but you can't ignore the underlying message. Other analyst firms concur with this fusion between business and IT and its impact on the hiring policy of some of the largest companies. Marianne Hedin, an analyst with researcher IDC, says companies like Accenture and IBM used to be more content to hire tech specialists separately from business consultants, but now they're looking for broader skills and more versatile workers.

"What they are looking for is a professional who can understand the technology issues that a company faces...and also understand what the business issues are, and be able to link the two," she says.

Gartner also maintains that this fundamental shift away from straight technology provision to business performance will also see 60 percent of IT organisations reducing their in-house workforce by at least 50 percent by 2008 compared to 2000. You'd think that if IT is becoming more business critical then there'd be a greater need for more in-house expertise but there are other factors at play here. There is a basic shift occurring away from internal IT departments deploying vendor technology directly, to renting from service providers such as Salesforce.com.

The idea of renting applications on demand isn't new but it finally seems to be taking hold with Oracle, RightNow Technologies, Salesnet, and Siebel Systems doing good business with hosted services. Salesforce.com announced at the beginning of this month that companies subscribing to its service now number 12,000 -- a 62 percent leap from last year.

But it's not just the need for application maintenance skills that are leaching out of enterprise IT departments. The rise and rise of outsourcing and off-shoring is having a considerable impact on internal requirements. For example, travel site Lastminute.com, which claims to be doing some of the most innovative Internet development in the UK currently, opted to outsource a big chunk of its database and OS management to Argentina. Although Lastminute.com is growing its overall IT team around 12 local tech jobs were lost as a result of the outsourcing shift. Not a huge amount but significant enough, with Lastminute.com's chief technology officer Chip Steinmetz predicting further outsourcing in the future.

"This is different to outsourcing the way other people have done it, which is 'I have got a bunch of shitty processes I don't care about so I'll just dump those and try and do it for half the price.' We took a high-tech approach and changed the processes and outsourced an area that most [companies] probably don't do yet but it will be a trend though," he says.

IT has become a victim of its own success. The idea of computing specialists isolated in their own little cave providing technical support to the rest of the organisation just doesn't stand up anymore. These kinds of services can be bought in more cheaply and with greater flexibility from external suppliers.

But the fact that IT has gone from a backroom function to impacting business performance and direction at a fundamental level means technologists are going to have to carry increasing responsibility for the overall success of their company -- which can't be a bad thing. The question is -- are you prepared to make the change?

CNET News.com's Ed Frauenheim contributed to this report.

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