It's time for enterprises to rethink their IT infrastructure and consider implementing a service-oriented architecture (SOA). SOA is a collection of services that can communicate with each other, but aren't necessarily dependent on each other. Like the early years of spreadsheets and PCs, SOA is still "below the radar" for most organizations. However, it won't stay there. Its potential is too great, and it is likely to mature rapidly over the next few years. For instance, the senior principal engineer at a leading Web-based retailer believes SOA is destined to reshape IT on every level. "It's comparable to the dramatic transition in how things were manufactured and sold that occurred in the 19th century," when the transition from craft to mass manufacturing and distribution began, he says.

According to Gartner, Inc., the Stamford, Conn. - based think tank, SOA represents a crucial step in moving toward what Gartner calls the real-time enterprise, able to respond faster to changing business requirements and to react to events in real-time. "Until now," said Massimo Pezzini, vice president at Gartner, in a statement published in 2004, "service-oriented architectures have only been implemented by a few leading-edge enterprises due to high costs and the level of technical skill required." However, he observes, Web services are now making it both affordable and possible from a skills point of view. The open nature of Web services means that any bit of code can potentially be reused and shared as needed. In addition, consolidation of security technologies and maturing standards for Web services mean security is no longer a stumbling block. Gartner predicts SOA adoption will be a mainstream phenomenon in Global 2000 companies by 2007.

While the idea of SOA has been around for many years, it did not have much impact. Now, with the advent of Web services, there's a nearly complete correspondence between the goal of SOA and the means to implement it. In fact, the biggest difference between SOA and Web services is that the latter has usually been implemented point-to-point where there was a complete understanding of the infrastructure.

What's more, the potential for reuse means software costs could begin to drop. By reusing services, IT doesn't have to spend money to create the same functionality over and over again.

SOA can help with many other aspects of business, some of them not obvious at first glance. For instance, compliance with the Sarbanes-Oxley Act and other regulatory mandates is easier with SOA because it provides a real-time view of who's accessing specific applications or data.

SOA also allows companies to be more agile by making it easier to change functionality to match business requirements, fosters information sharing, and discourages individuals and organizations from maintaining separate databases because resources are easier to share. But while SOA is exciting, there are factors that could slow its adoption. For IT organizations, there are cultural challenges in shifting away from traditional software paradigms. SOA requires contracts, policies, service level agreements, security, authentication, identity management, upgrades and governance.

How can a company capture attention in this, the age of the distracted customer? What happened to knowledge management? What's next for ERP? Thomas Davenport shares his insights.

Tom Davenport has been around the IT block. One of the pioneers of process reengineering, he has been instrumental in the development of our understanding of how businesses use information to compete. A seminal thinker in the field of knowledge management as well, he has recently focused on the critical field of attention-management. His latest book is

The Attention  Economy: Understanding the New Currency of Business.

EL: One of the things you say in your book, The Attention  Economy, is that, "understanding and managing attention is now the single most important determinant of business success." What is the attention economy and what are its implications for companies and then individuals?

TD:The attention economy overall is an economy in which there's way too much information and knowledge floating around for the brain cells that humans have available. So it becomes an economy where attention is really scarce and hence really valuable. And getting attention for your ideas, your products, and your information is a critical prerequisite for any kind of business success. If people don't know that your products exist and spend any time  cogitating about it, you don't stand a chance. A great example is "The Blair  Witch Project" -- $750,000 making the movie, $30 million marketing it.

At an individual level, you say something about "there can't be too many  initiatives at one time."

I see that as more of an organizational thing, but it certainly impinges on  individuals. And ultimately, any organizational initiative that's successful  comes down to individuals changing their behavior. But if they're not paying any attention to what the initiative is about, its objectives and so on, they're not going to change their behavior. Getting real change to happen in  organizations becomes a matter of individual attention. Every individual has to look at him- or herself as a consumer, and you want to be a very intelligent consumer and consume only information that's going to benefit you, your family and your organization. And you've only got so much to give out, so you've always got to be making this calculation: Is this the best use of my attention right now?

That's why so many employee newsletters fail, because there is so much  useless information.

EL: You note that there are different types of attention and certain  teams are dominated by certain types ...

TD: We identified, based mostly on psychological research, three overall dimensions and six types. There's front-of-mind and back-of-mind -- what you try to do there is push as much as possible to back-of-mind through repetition and practice so you can free up your front-of-mind for other things. That's one of the dimensions with the Attentionscape tool that we've developed. There's front-of-mind versus back-of-mind, voluntary versus captive, attractive versus aversive. What we argue is that you really want to try to maximize all of those six types because you're getting a maximum amount of attention if you're hitting on all of them at the same time.

EL: You also discuss the critical success factors there are for  getting the attention of CEOs. Can you talk about that?

TD: I wouldn't say CEOs -- I'd say executives. We looked at what managers, white-collar workers, and professionals pay attention to. We first asked what sort of media they pay attention to -- it turns out email is the  most attention-getting medium in our research.

Then we asked what attributes of the message would make it most likely to receive a lot of attention. We found out that personalization was the single most important factor. Second was keeping it short and concise. Third was emotion, having either positive or negative emotion being evoked by the message. And the fourth one was making it come from a trustworthy source. The first three are relatively easy to manipulate. I say easy, but it's actually a lot of hard work, because personalization takes a lot more effort than sending out a big group distribution email.

EL: What are the lessons we should learn from the online world? How do you capture and sustain attention online -- or even offline?

TD: Actually, the biggest attention industry, if you look at how much attention goes to it, is television. People watch it for three hours and 26 minutes a day on average in the United States. They're not online quite that much. We had a whole chapter on e-commerce and the Web. But for those industries like television, the movies, publishing and advertising -- out of each industry or sub-industry, we tried to abstract some of the lessons. So for television, it's the power of narrative. They always tell stories, make it easy to get in and get out, have a predictable time schedule, and they don't let technology get in the way.

For movies, we talked about age segmentation and the captive setting. We tried to point out some circumstances where people had taken some of these lessons and moved them across industries. For example, we looked at Gamesville, a Lycos entertainment Web site, and how they start new games at the top of the hour, much like a television schedule.

EL: Let's shift to ERP. In terms of strategic use of ERP, you are the expert. Recently, I've heard from some database gurus that ERP systems are what has really allowed companies to take all their various sources of data and normalize them, allowing for one common method of talking to each other.

TD: I'm pleased that you say that, but the world didn't seem to be that interested in a strategic perspective on ERP, at least at the time. I had hoped that after the Y2K thing, people would go back and say, "Gee I spent all this money and I should optimize it and get a lot of business value." But the fact is that they did not do that. They basically moved from Y2K to e-commerce. And now people are just trying to figure out how to cut costs. I'm glad I did that work on ERP -- I think it's very important. But it (Mission  Critical) certainly wasn't the most popular book I ever wrote.

EL: But you still have to fulfill everything, you still have to do  the back-office stuff -- ERP isn't going away.

TD: Exactly. SAP in its advertising now, they call it, "Solutions for the New New Economy, the one where profitability matters." Certainly, you found some pretty small e-commerce companies were putting in ERP because they knew they had to do fulfillment and be able to promise inventory, and so on. People are still doing it -- Oracle, SAP, and PeopleSoft are doing pretty well as companies. For a while they were doing extremely well. I think there's still a valid question: For any given piece of functionality, do you want to do it in an ERP system, which optimizes the integration of it all, or do you want to do it for the "best of breed" thing, which may optimize specific functions? I think it's certainly still a valid question.

EL: What about taking the data captured in your ERP system and extracting it and turning it into knowledge that can be acted on? Are companies finally getting better at this?

TD: I think they're getting a little bit better as the tools from the ERP vendors get better. But it's still not great. Too many people still only do the transaction side and don't manage the business any differently.

EL: Would you say that the road for ERP in the future is going to be  optimizing B2B buying and really looking at that?

TD: Certainly, that's part of it -- hooking up front-office and back-office stuff so you can do e-commerce and actually fulfill your orders, make your customers happy, and so on.

EL: What about the ASP model, in which everybody hooks into a system that's hosted somewhere else so all your suppliers can be on the same ERP system? Or a marketplace, where everybody is trying to collaborate? How do you manage the challenge of ERP talking to ERP?

TD: There's a huge integration challenge. I think it's fair to say that few companies or industries have solved it yet. What you're getting into is inter-organizational reengineering, and it's very time-consuming and very expensive. And I think that's one reason why a lot of these B2B exchanges, and so on, are going out of business.

They don't have enough capital to afford to do that kind of integration across multiple companies. Frankly, I think there will be a fair number of these consortiums, e-marketplaces and the like, that won't be able to avoid it either. It's already clear that it's taking a great deal longer than anybody thought it would to be able to do transactions without a huge amount of human intervention.

EL: What about companies like enterprise application  integrators?

TD: I think there's an appeal to being able to keep a lot of your existing applications and integrate them through some means other than one big system. It's a complex world, and even if you end up only integrating pieces of the business that you've acquired, there would be a perfectly good role for software like that. I think we'll end up using a lot of that stuff for integrating across companies. You're not going to find very many industries where every company has SAP or Oracle.

EL: Knowledge management turned into business intelligence and then it turned into CRM and then supplier relationship management, some even say competitive intelligence. What's going on in knowledge management these days?

TD: Well, the bloom is off the rose on pure best-practices sharing. But I think there is more energy now than there has been in business intelligence and I think it was a good thing to think about business  intelligence from a knowledge-management standpoint as some companies are  starting to do, because that means that you don't just assume that some  technology does it all. You don't assume that because you have some sort of data mining software, that these great insights are just going to jump out of your data.

The smart companies realize it takes a lot of very bright human beings around in addition to the software, and that's sort of a knowledge-management-oriented insight.

CRM is probably going to focus now more on customer knowledge. For some reason, companies were very slow to put customer knowledge into their knowledge-management initiatives. And what could be more important than that?

EL: I think your book, Process Innovation: Reengineering Work  through Information Technology, is once again required reading . Do you see a second wave of re-engineering, brought on as companies try to transform themselves using Web technologies?

TD: The word re-engineering does seem to be coming back into favor a little bit. We're actually doing some work with high-end knowledge workers and how you make their work more effective. High-level scientists and product developers, software architects, investment bankers, and consultants -- their work has not been touched much by reengineering.

EL: What are you seeing there?

TD: We're looking at many factors. One is technology, which is probably the least exploited thus far. Workplace design is a pretty hot issue, and more people are probably doing things with it than with technology. And then organizational design, probably the single most important factor if what you're interested in are things like innovation and creativity, and so on. We were just out at Ideo, probably the most successful product design firm. They hardly use any interesting technology, their workspaces are kind of fun but not particularly unusual, but they have a  really great culture that emphasizes innovation. And I think that's why they  succeed.

EL: So it's really a people thing; almost how you manage people's  spirits.

TD: Exactly. If you want employees to think creatively and share their  ideas and so on, you have to work on that kind of stuff.

EL: What do you think about what's happening with convergence? What are some of the trends you see developing in that marketplace?

TD: The Internet is still there, and companies are still quite interested in how to take advantage of it more effectively. We're just at the beginning of thinking about how we change our processes and our cultures and our governance structures to do anything differently with it. It takes a huge amount of time. We've had ERP for 20 years, and only a small fraction of companies have started to change the way they manage using the systems. I think that will be true of the Internet.

Right now, we're sort of in a period where there's no really big new ideas, and a lot of managers, employees, and organizations just want to take all the ideas that have come along for the past several years and put them together, integrate them, simplify them, and get some value out of them. They're all looking to extract some value from their existing infrastructures and, at  this moment, cut costs from their existing infrastructures.

EL: What about online communities? It's almost as if an online community does three things: it gets attention, it sustains attention with user participation, and it encourages knowledge sharing of the kind where a novice can learn from an expert. Do you see companies embracing the concept of communities -- internally with their own employees, and externally, with customers, suppliers, and other partners?

TD: I think online communities are great and they have a number of positive attributes. But I think a lot of companies try to do them on the cheap, and they don't really take experts and put them in roles to facilitate communities. It's a huge amount of work to facilitate an online community. Ultimately, within companies, we'll see online communities as kind of another  unit of organizational structure. You'll say, "Well, I'm in the accounting department, but here are the online communities that I'm really active in." And that will give you some sense of a person's view of the organizational structure.

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Christian Sarkar is Editor-in-Chief of christiansarkar.com. You can  see more of Christian's work at onewwworld.com.

Chaos! That's the best word to describe the roar of shouting traders on the floor of the Chicago Mercantile Exchange (CME). The largest futures exchange in the U.S., CME handles more than $2 trillion in trading values both on the floor and through its electronic system.

Jim Krause, CME's CIO, has the daunting task of making sure his IT staff of 500 employees keep the more than 2,500 servers running at top speed around the clock. About 1,000 of these servers power the front-end of the trading system. In addition, Krause has to keep up with providing technology to an organization that's growing at 400 percent a year. Providing excellent customer service has become Krause's first priority.

EnterpriseLeadership.org sat down with Krause to find out how he manages his priorities, how he handles the key sectors of the public with whom he deals, and what factors can change the nature of the futures business overnight.

EL: What is your IT vision?

JK: Understanding what the impact of a change might be for the customer has to be your first priority. The most important things for our customers' satisfaction include reliability, speed, and performance. Functionality plays a role, but it's not number one until these first three are delivered.

EL: You're wrapping up a major Linux deployment. Why Linux?

JK: We will run 1,000 out of 2,500 servers on Linux, with 10  terabytes of storage.

We intend to run Linux on the front end of our electronic system --  getting the orders in and out of the system, and getting market data out of the system to the market vendors and to the traders.

One of the key factors in our decision to go with Linux included speed, and the second factor, cost. The ability to scale quickly at a reasonable cost while we're  improving performance was the driving factor.

We're deriving millions of dollars in cost savings by expanding with commodity-based Intel servers. A Sun server costs more than 50 percent more than a comparable Intel-based server running Linux.

EL: Where are you with the Linux deployment?

JK: We're about three quarters of the way done. We first did all of the things we could do quickly, such as import Java-based applications. We're taking more time to deploy our C applications. Here, we need to have some quality assurance and to make minor changes.

EL: How do you look at speed advantages?

JK: We use milliseconds to measure the speed of our trading activity. In fact, every millisecond counts. When we rolled out Linux to most of our  environments, we saw that just by changing hardware, we gained about a 30 millisecond reduction in throughput. We don't tend to overload servers. Reliability and performance are key. If we're 50 percent loaded, and we get two or three extra milliseconds, we'll add another server and make it 25 percent loaded so we don't incur those extra milliseconds.

EL: Given the nature of your business, what types of IT governance do  you have going on?

JK: We don't say “IT governance”; this is the company business we need to do in order to stay competitive. Our management team goes through the budget process routinely. The team agrees on the priorities for each project and makes adjustments as necessary. So, the competitive nature of our business drives which IT projects get done.

EL: How do you manage people, vendors, and customers?

JK: They don't call me Grumpy for nothing. Just joking; I try to lead, not manage. I show my staff what we have to do and what I expect from them. My goal is to develop people to make the right decisions. So, my management style is to be part of what they do and then let them do it.

As for vendors, we stick with a minimum of two vendors for a particular type of product. Our server vendors include HP and Dell, and some Sun. We want to get the best deals for our company. We've no problems developing a strategic, long-term relationship with a vendor to ensure that we get extra support when we need it.

Customers' concerns will always be my prime priority. How can IT be customer-focused if no one ever talks to a customer? I work with our Projects and Services group to go out on customer calls. We also have a User group comprised of our customers. We routinely hold forums in which we talk about the status of our products, and give customers solutions for fixing problems. We also do customer satisfaction surveys. Everyone in IT has a chance to get in front of customers, either through the forum meetings, or just by talking to customers on the telephone.

EL: Do you have quality programs such as Six Sigma in  place?

JK: Not really. I couldn't tell you all of the tenets of Six Sigma. However, quality is important. We've a fairly extensive quality assurance process which involves the business side of the company.

We don't have really big implementation projects such as taking three years to get SAP up and running. If we do have a project that's going to take a year or two, we break up things into phases and carry out each phase within an allotted time period. We do go back and validate the other phases.

Our business has grown as a result of global competition. By doing things in smaller, manageable time increments, we can react quickly to a business process or business change, in order of priority.

EL: Have you carried out process automation, or do you plan  to?

JK: Our quality-assurance initiatives include regression tests of a specific functionality, such as bootstrapping a server, to make sure we didn't break anything that was new. We have some development methodologies that we use for automating processes.

Since my budget is a big part of the organization’s budget, we're under a lot of scrutiny. The speed and reliability of our electronic trading dominates most of what IT does. We have to make sure we've got the capacity to handle  growth of 400 to 600 percent every year.

EL: What external forces drive your market conditions?

JK: Ten years I would've told that the Chicago Board of Trade was our key competitor. Today, we're both in the futures business, both trading electronically, and both seeing a lot of global competition. For example,  our global competitors include Euronet Life owned by the London International Financial Futures Exchange and a Euronet from Paris, and Eurex, the German futures exchange.

Perhaps in the future, we'll see some consolidations, such as Nasdaq and  Instinet.

EL: What disruptive technologies are you considering?

JK: If our central order book, which holds all of our bids your offers, gets too big, we have to scale vertically as well as horizontally. So, we're looking at blade servers. We're also doing putting forth some extensive research and development efforts to predict what the technology will look like three or four years out. For our switch infrastructure, we're considering gigabit updates in order to scale vertically. Everything right now is 100 megabit port speeds. Grid computing fascinates us. However, we don't know if it will be able to scale vertically.

The current client-service architecture everyone loves still has about two  years of life for us.

The regulatory side of electronic trading means that we have to do a lot of  analysis and real-time review of activity.

EL: How do you spend your free time?

JK: I try to play golf once a week and spend most of my free time with my family. I work six days a week. The exchange trades 24 hours a day, starting up Sunday afternoon and closing on Friday night. We continuously expand, and upgrade users. We've got rigorous quality requirements which requires that we check everything, even it's a process that is automated.

EL: To be successful in your IT department, what characteristics do  employees need?

JK: Employees at CME need to pay attention to details. They also need to understand what has to be done and to make everyone stay focused on those priorities. Some technology folks like to work with technology only; however, capabilities, such as redundancy, fault tolerance, and backup, enable us to keep the customer trading while we fix systems in the background.

Our customers include the largest banks and other financial institutions in  the world. Liquidity drives the commodities market.

The exchange started by traders buying membership. And these folks are still making markets. With electronic trading, you also have a new breed of customer who comprises a trading arcade. These folks make money by trading our products.

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Elizabeth Ferrarini is an IT consultant and free-lance  writer from Boston, Massachusetts. Elizabeth can be reached at elizabethferrarini@yahoo.com.

During her 20-year climb up the corporate ladder at SAS, the world's largest privately held software company, Suzanne Gordon, SAS's CIO, developed a strategy for how IT could work in lockstep with the business units to reinforce the company's success. A roadblock stood in the way of selling her idea to management, and she decided to move out of IT and into the sales-consulting side of SAS. It was there that she got to see IT from the customer's perspective.

When the CIO position came open at SAS, which develops and markets business analytics software, Gordon was ready to turn her vision in a reality for her staff of 310 employees. In fact, in 2003, Computerworld recognized  Gordon's leadership talents by including her in the list of Premier 100 IT  Executives for that year.

Gordon recently talked with EnterpriseLeadership.org about how she carried out the realignment agenda for IT, how IT carries out the role of sales champion and beta tester, and how she develops and mentors her staff and young women interested in technical careers.

EL: What is your vision for IT at SAS?

SG: It's a people vision of getting the IT staff and the business unit leaders to work harmoniously together in carrying out the company's strategy. To accomplish this task, we need to correct any relationships that don't work as efficiently as they should, and to improve processes so we don't spend money on things we don't need.

EL: Describe the biggest risk you took in your IT career and what you  learned from the experience?

SG: I left IT because I wasn't happy with my boss. I loved what I did, but my boss and I were going in different directions. So I went over to SAS Consulting where I worked directly with customers.

The move gave me an entirely different perception of SAS -- how customers viewed us and how our customers viewed their IT departments. I became a customer of our IT department. I worked closely with our sales people, who are a different breed from IT folks. The experience taught me the value of communication. When the CIO position became available, I was better prepared for it than if I had stayed in my previous job.

EL: Can you describe how you realigned IT with the business  units?

SG: When I headed up applications for the MIS group, I wanted us to set up an IT governance council to meet quarterly with the business units. My boss at that time didn't like the idea. When I came back, this was the first thing I did.

I put together a list of all the projects we were working on. I then selected those projects that I knew everyone would be interested in, that were important to the business, that everyone would understand. The list went to the executive staff, who forwarded it to their directors and vice presidents of the various business units. These second-tier executives really understand how the company operates.

Since 2003, we have been meeting quarterly to discuss proposed new projects. Prior to each meeting, our business analysts in IT go over the proposed projects with each business unit executive. The business analysts do a rough executive summary of what is going to be involved and a rough guess about what resources that each project will take. During the meeting, we talk about each one of the projects, deciding if it is something we all agree needs to be worked on immediately, and ranking where it sits in the present priorities. Some projects get killed.

EL: Apart from deciding on projects, what other favorable things have  come out of the quarterly IT government meetings?

SG: The meetings show how well colleagues can cooperate with each other and do things for the good of the company, not their business unit.

The IT department no longer comes off as the bad guy.

I asked a Gartner Group analyst if other companies have good collaborative working relationships between IT and the business units. He said they work on "if you vote for my project this quarterly, I'll vote on yours next quarter."

I should add that cooperation and collaboration reside at the heart of SAS's culture. Also, the company's strong employee retention rate help to reinforce the willingness of everyone to work together.

EL: Do you have quality programs, such as Six Sigma, in  place?

SG: We haven't carried out any specific quality program. We've gotten some ideas from Six Sigma and the IT Infrastructure Library. We're always looking at how we can improve our processes.

EL: Can you give me an example of a concept you carried out for IT  that flowed out of a Six Sigma or ITIL?

SG: We've been trying to do more project management, but didn't want to be overwhelmed by assigning dozens of graduated levels to each project. We, instead, came up with a concept called, "just enough" project management. The degree of project management depends on the project's scope. For example, if it's a small project, we might do three things for it. We might do more things for a larger project.

EL: Do you get involved in beta testing SAS products?

SG: I have a dual role. In fact, I tell my staff, "We don't want to be the best IT organization, we want to be the IT organization that helps SAS be the best at what it does." In addition to the traditional IT tasks, we take the time to help test and to use new products for the business units. Finding and documenting bugs can take time away from scheduled IT projects. At the IT governance council meeting, we always discuss project delays. Business unit executives understand that what we're doing provides our customers with better quality software. We also use our software in-house.

EL: Can you go into more detail about how you work with the business  units that are testing these products?

SG: Our IT staff works with the research and development (R&D) staff who are writing the product, and the managers from the business unit. IT provides feedback to R&D staff on such things as how well the product was installed, and how easily it could be brought back up. The business unit evaluates the product's features.

EL: Since you use SAS software in house, do you help SAS sales  representatives influence prospective customers?

SG: Yes, in a couple of different ways. We set up a backend system that enables the sales representatives to demonstrate our enterprise software via the Web. Sometimes we go on sales calls or talk to customers on the telephone. We often meet with customers who come to our offices. We show them how our products work at SAS. We maintain a Web site that has data on all of the different SAS products we are using in-house. The site tells how we are using them and whom to contact as a product reference.

EL: How is performance and/or quality measured for IT?

SG: We don't measure performance or quality in a very analytical way. We tend to focus more on customer satisfaction. We do customer satisfaction surveys both on handling requests, problems, and then follow-up to projects.

EL: How do you develop your staff to be better at what they  do?

SG: We offer many on-site technical training courses. Our training budget enables our staff to go offsite and to learn new skills. We also do many workshops in interpersonal skills, such as team building. Informal coaching helps employees to work on the areas they need to improve.

I like to visit the front-line meetings and get a feel for what problems aren't getting up to me. Acting as a facilitator, I try to remove any obstacles that keep individuals for getting their job done.

EL: You have a B.S. in math and computer science and a M.S. in statistics. Outside of SAS, you participate in educational activities that help to promote technical professions to young women. Can you talk about what you do?

SG: I sit on the Board of Trustees at North Carolina State at Raleigh, where I graduated from. Various departments at the college frequently call upon me to speak at workshops, such as Women in Business sponsored by the MBA program.

EL: Larry Summers, president of Harvard College, took a lot of heat in the media when he said that women don't have the ability to do well in a math and the sciences. Comments!

SG: Summers' comment could easily bruise the confidence of a young woman who wants to pursue a career in a scientific or technical field. We need more women in these areas. Women bring a different perspective on things, especially human relations. Women tend to facilitate conversation. They tend to be concerned about getting the job done, not on proving they're always right.

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Elizabeth Ferrarini is a free-lance writer and IT consultant from  Boston, Massachusetts. She can be reached at iswive@aol.com

Can dreamers and discipline coexist and create new business value? A  lot of smart business leaders say yes

Chances are you've at least heard of Cingular's Rollover Minutes plan, which lets the North American wireless carrier's customers hang on to precious calling minutes from month to month. Since its inception, the program has been an overwhelming success. And why not? From a consumer's perspective, it seems like a fair deal -- and a simple one.

But it's hardly simple to Thaddeus Arroyo, CIO of Atlanta-based Cingular. "Rollover Minutes is a massive record-keeping project," he says. "We're tracking minutes across billing cycles, which gets complex. And we have to provide flexibility for customers to move between [various Rollover Minutes] plans and, of course, the transition from one plan to another."

Thus, what looks intuitive to consumers is actually a hugely successful but complex campaign jointly created by Cingular's marketing and IT groups in an effort to differentiate the company from its competitors. As for simplicity, well, as Thornton May, a futurist and the dean of the IT Leadership Academy in Jacksonville, Fla., puts it, "The great ideas are always the monstrously simple ones."

Busting Out

Don't look now, but innovation is making a comeback. For several years, the post-Internet bubble business climate focused -- with grim determination, some would say -- onoperational efficiency and cost-cutting. These are both worthy goals, to be sure, and were sorely needed after the Internet- and Y2K-driven flurry of IT spending that marked the 1990s.

Nevertheless, to business and IT leaders who enjoy nothing more than using technology to solve problems, all that efficiency tasted a bit like a side of spinach. "The trauma of it all," says May, "is that a whole generation of IT has grown up without innovation."

Now, with outlooks improving all over the world, new attention is being paid to creativity and innovation. "For a long time, the only question was, "Can you get this enterprise software deployed?" May says. "But the zeitgeist is changing. CEOs are now asking, "Can we change the game?"

This is not the "Cost is no object!" Toy Department IT mentality of the late 1990s, but rather a more disciplined effort to introduce bold ideas to the business -- if, and only if, they contribute to business goals. Can innovation and discipline coexist? A lot of smart people, and respected companies, think so.

TALKING POINTS

After years of IT focus on cost-reduction, innovation is back in global enterprises -- and technology is playing a leading role in creating new business value. This edition offers tips for fostering innovation with leading-edge technologies such as:

• Information Lifecycle Management
• Service-oriented architecture
• Virtualization

Hand in Glove

As in Cingular's case, much of that innovation is enabled by technology. Indeed, it's difficult to imagine a breakthrough business idea today that doesn't rely on IT. Supply chain innovation, lean manufacturing, deeper connections with customers, breakout products -- they all go hand in glove with technology.

Recent customer service changes at Cingular exemplify the shift from cost-cutting mode to innovation. "We've been doing a lot of thinking about customer self-service," Arroyo says. "Historically, enterprises thought about that strictly as a cost reduction. What we're doing, on the other hand, is examining the way our customers choose to interface with us. What are their preferences? How do they want to communicate?"

For example, the most common question among wireless customers is how many minutes they have left before they're hit with surcharges. "Folks want easy access to that information, and they usually don't want to talk to a customer-care rep to get it," Arroyo says. Cingular's response: a simple key combination that immediately provides customers with the status of their minutes.

No Longer "Moving Bits Around"

If there's one key adjective to describe the new innovation in technology -- and, in particular, to distinguish it from earlier eras -- it's "discipline." The cost-consciousness of the past several years has created an atmosphere in which IT initiatives must be justified before they're green-lighted.

"Yes, IT is definitely getting more creative," says Gil Amelio, former CEO of both National Semiconductor and Apple Computer. Amelio -- who knows a thing or two about innovation -- is now a venture capitalist, chairman of the board at SiVault Systems (a hot company in the transaction-processing area) and a sought-after speaker. Until fairly recently, he says, a lack of standards made it difficult for technology spending to translate into productivity.

"In the 1990s, all the application software being written [by vendor companies] was essentially custom," Amelio says. "But because there were few standards, a lot of it was merely moving bits around so that applications could work together, without really increasing productivity."

Sometimes, choosing the right standard is in itself innovative. In 1998, the global relief organization UNICEF selected Internet Protocol as its only networking standard -- a nearly unprecedented move at the time. But a few years later, with IP far more mature, it would be the key technology when UNICEF created a satellite communications program, dubbed Fly-Away VSAT, that allows the organization to set up complete relief centers in areas ravaged by disaster, such as those hit by the devastating tsunami in December.

In 2000, when UNICEF asked providers about running IP traffic over a satellite network, people scoffed, according to CIO Andre Spatz. In 2004, the system was honored by Computerworld magazine as a "Best in Class" IT  leader.

"The term "innovation" was thrown around a lot in the late 1990s," says Jack H. Cage, senior client partner, technology markets, at Korn/Ferry International. Cage is a veteran recruiter of senior technology executives and has seen the demands on those executives shift. "Today, when businesses talk about technology innovation, they use the term in a very focused way," he says. "They are seeking technology that helps the company meet its business goals."

That shift was long overdue, and has helped establish the CIO as a bona fide member of the strategic decision-making team. There's no reason to expect enterprises to go back to the practice of signing blank checks for technology projectsthey don't understand. Rather, experts believe the building wave of innovative technology projects will borrow elements from both eras of the recent past: the envelope-pushing technology of the 1990s coupled with the fiscal discipline and pragmatism of the early part of this century.

Innovation Pays

Intriguingly, research indicates that the enterprises implementing the most innovative technologies spend less on it than do their less advanced counterparts. The Hackett Group tracks IT spending at hundreds of large businesses and studies factors that separate leaders -- that is, enterprises whose IT expenditures can be proven to help meet business goals -- from the pack.

"The leading companies spend about 18 percent less on IT, and 28 percent less on infrastructure," says David Hebert, Hackett's IT practice leader. "And they have 36 percent fewer technology employees." That translates into efficiencies on commoditized IT services, and "frees up money to spend on R&D and value-add projects," he adds. Indeed, Hackett's research shows that the same innovation leaders that spend 28 percent less on infrastructure spend 25 percent more than their counterparts on planning and strategy. Moreover, they dedicate a whopping 40 percent more to application management than do median companies. "That's important because the application layer is the interface between IT and business," Hebert says.

Some experts believe that the keys to IT-driven innovation in the near future are refinements of existing technologies, such as service-oriented architectures, virtualization and collaboration tools. The intersection of these technologies will increase agility and tighten the feedback loop, predicts John Hagel III, an author and management consultant.

"The hardwired, inflexible platforms of the past limited companies to "big bang" innovation that took years, and to which they could only guess at business benefits," says Hagel, who, with John Seely Brown, the legendary former director of Xerox Corp.'s Palo Alto Research Center (PARC), has cowritten The Only  Sustainable Edge, a new book about finding fresh ways to achieve competitive advantage in the global business environment. By contrast, Hagel adds, "these new technologies let you do rapid, incremental innovation quickly and get immediate feedback on the results."

Getting There from Here

The questions faced by many technology groups that have mastered the cost-cutting discipline are: How do you take that next step forward? And how do you return innovation to your IT philosophy without losing your focus on the business?

Hebert points out that you need to walk before you can run. "What we're seeing in leading companies is IT organizations that have proved their day-to-day competency," he says. "You need to be flawless in execution -- on time, on budget, efficient on the help desk and so on. If you don't master those basic skills, you cannot build a true partnership with the business." As an example, Hebert notes that world-class companies" IT groups deliver 30 percent more projects on time than do their lesser counterparts.

What's emerging in leading businesses is a two-tiered IT strategy. Think of the first tier as the operational, keep-the-lights-on level. Here, cost is king; such measures as outsourcing, utility computing and purchasing software as a service (the IT innovations of the past several years) are all ways to reduce dead-money infrastructure and commodity costs.

Now that so many enterprises have mastered tier one and grown remarkably efficient, tier two -- think of it as the innovation layer -- is gathering steam. Innovation is back infashion in products and services that are increasingly difficult to distinguish from IT.

The real beauty of this two-tiered system is that the impetus to cut costs at tier one never goes away. As Cingular's Arroyo puts it, "We're separating operations from new investment, and every dollar we save [at the tier one operational level] funds additional investment" at tier two.

Another major benefit is that after years in heads-down mode, enterprise IT organizations are finally kicking up their heels and offering staffers the chance to do some exciting work. To most programmers and developers, it feels like a long time since the glory days of the successful Y2K work and sky-high signing bonuses. The past several years have been marked by shrinking staffs, growing responsibilities and, most notably, a dearth of go-for-it technology projects.

Yet research consistently shows that these are the projects that motivate IT workers. The most brilliant programmers and analysts often prefer challenging projects over higher pay and other benefits.

All of which means, of course, that the return of innovation will be a shot in the arm for valuable employees. Indeed, it's a shot in the arm for the industry as a whole -- and the big winner is the forward-looking enterprise.

Four Steps to Innovation

Tips for fostering creativity in your enterprise

Too many businesses mistakenly believe that innovation can only spring from some sort of alchemy over which they have no control. But enterprises can create an atmosphere that fosters innovation. Here are four ideas.

1. Take it from the top. Experts say that to have any chance at success, corporate efforts to boost innovation must start at the very top. The CEO should launch the program with much fanfare and a budget that raises eyebrows. This will make a powerful statement that the company is serious about creativity.
2. Create more elbow room. You may not actually set up a separate "skunkworks" team of innovators in a location far from headquarters. But one way or the other, it's vital that innovators know they have freedom to roam, without undue oversight that's guaranteed to crush the spirit. Mistakes are a fact of life for those thinking outside the box.
3. Cross-pollinate. Today's great business ideas often come from IT. Likewise, the most sweeping technology shifts often come from the business side. Any team devoted to innovation should include top minds from both camps.
4. Make it pay. Employees who come up with innovative ideas should be rewarded. And that doesn't always mean a bonus -- for many, recognition is more valuable.

Innovation Resources

To learn more about the new wave of business innovation, please check  out: