“The question is not whether the CEO should get involved in IT decisions, but how?”. With this statement of principle IESE Professor Josep Valor opened the session on “Current trends in IT management: the roles of the CIO and the CEO”. According to Prof. Valor, in order to make technology decisions, we must be capable of grasping two types of logic: the logic of information technologies and the logic of business. In other words, the logic of the CIO and that of the CEO.

The logic of information technologies covers much more than the visible part, what everybody sees, i.e., the business applications. In fact, business applications are merely the tip of the iceberg. The rest, by far the larger part, is hidden from us, Valor explained. At the lowest level are the company’s communications infrastructure and computers; in the middle is the software; and higher up are the transactional and Internet applications, among other things.

For Valor, applying business logic means seeing ICTs as part of the company’s infrastructure and accepting that they will provide basic services to the business functions. The two logics have different speeds: “while a business plan takes 100 days to put into effect, a development system needs 500 and implementing a complete ICT infrastructure will take 1,000 days,” said Valor. In this context, what are the responsibilities of the CEO and the CIO? In Valor’s opinion, the CEO must manage ICTs by committee, drive a plan that gets the rest of the organization involved, choose a CIO with the right profile to serve the company’s needs and listen to the views of the functional heads of IT services. CIOs, he said, “must represent the needs of the IT unit before the ICT committee; participate in preparing technology plans; actively discuss future technology projects and supervise those already under way; and encourage the primary users of the new technologies to take a hand in their design and implementation”.

The session “Practical overview of technology adoption criteria” was led by Joan Bach, CIO of the Celsa Group, and Rubén Muñoz, IT director of the Spanish postal service, Correos. Joan Bach, whose company, Celsa, is a steel producer with more than seven thousand employees, described the company’s recent experience in adopting a SAP system and centralizing its IT services.

At the end of the ’90s, he said, Celsa had seven local IT departments, each working with different applications, all developed internally. All these departments reported to the corporate CIO, who was responsible for formulating strategy. The Y2K problem and the introduction of the euro prompted the company to replace its in-house software with a SAP R/3 system. The decision to adopt this particular ERP system was based on opinions gathered from colleagues, other companies in the industry and companies in general. In other words, what Bach described as an “information cascade”.

Initially, they decided to continue to manage the systems locally, but it soon became apparent that this was a strategic mistake. A market analysis showed that all the companies that had adopted SAP had opted for centralized management, so CELSA decided to follow their example. Thanks to this decision, Bach said, Celsa had been able to continue with the same system for more than 10 years.

The Challenge of Privatization
With more than 67,000 employees, the Spanish postal service provider Correos faces two challenges: to increase its competitiveness and to wholeheartedly adopt new technologies in order to be ready to compete in 10 years’ time, when the European postal sector is liberalized.

To meet these challenges, Correos has invested in technology that will allow it to move up the value chain and offer new services, explained IT director Rubén Muñoz. As an example he cited the INTEGRA project, a platform designed to automate processes, make operational processes faster and more efficient, offer customers better service and attract strategic partners. Seeing innovation as the answer, Correos aims to start offering services online. Two of the new projects it is working on, Muñoz revealed, involve the use of RFID technology to identify each individual item of mail and the “electronic mailbox”, a single permanent repository in which users will receive all incoming communications and notifications.

Successful outsourcing is not as easy as it seems: two out of three IT outsourcing contracts fail and only 24% run to completion, said Rudy Hirschheim, professor at the Ourso College of Business at Louisiana State University, in the session “Myths, realities and trends in IT outsourcing”. Hirschheim questioned the idea that the whole of Western industry is outsourcing its IT departments. In fact, he said, Chevron has gone the opposite way, bringing its information systems back home, while Exxon never farmed its IT out in the first place. According to Hischheim, there is no single trend in outsourcing. Every company finds the solution that best meets its needs. As a result, new job titles have been created, such as Chief Sourcing Officer (CSO), and a wide variety of services is outsourced, ranging from legal counsel to R&D.

The sales staff of Indo, a Catalan company making frames for glasses, have swapped the contents of their heavy suitcases (full of sample frames) for a Tablet PC with an Internet connection. “We have replaced 50% of the samples. Now the sales people only need to carry each frame in one color; the other colors can be displayed on-screen,” said Roger de Ramón, Indo’s IT director, in the session “Learn from experience. How can information technologies improve your business?”.

Apart from reducing the number of samples to be carried around, the Tablet PC also tells salespeople which products are in stock and so which they should recommend. Ordering is now much more streamlined, freeing up time to analyze market information and sales statistics.

De Ramón emphasized that this innovation was adopted in response to the demands of the sales team, not as an IT department initiative. To assess how effective it was, the company first carried out a market test and only then rolled the new system out across the sales territory. The new system not only cuts costs and speeds up processes but also puts Indo “one step ahead of our rivals,” said De Ramón.

Benefits of Independent IT Management
Banc Sabadell decided to set up a new company, Bansabadell Information Systems, to manage its IT systems. Bansabadell Information Systems is focused exclusively on information technology and offers its services to the parent company. Miquel Montes, deputy CEO and COO of Banc Sabadell, explained the benefits of having your own software company. “It gives you guaranteed access to technological resources in a competitive environment; it helps offset the rising costs of outsourcing; it protects your internal knowledge; and it makes it easier to design internal policies to enhance quality and productivity”. Thanks to the new technology it has developed, in the last four years Banc Sabadell has reduced the number of employees in IT and operations by 22.6% and the cost per transaction by 61.6%.

United States. US companies, fully compromised with an automation process. After three editions of the BIT (Business and Information Technologies ) study in the United States, Uday Kamarkar, head of the BIT Project and professor at the UCLA Anderson School of Management, shared some IT market trends in his country. Customer touch points have increased, he said, and the demand for more integrated information, data analysis and database consolidation has intensified. Although there has been an increase in outsourcing and customer service automation, the increase has not affected call centers. Automation has also become a feature of order acceptance and order tracking systems, Kamarkar added.

Listen to the presentation   

Spain. Spanish companies has jumped on the bandwagon of information technologies. The BIT survey  reveals that, as of 2007, 100% of Spanish companies had adopted some kind of information technology, be it e-mail or a corporate web site, compared to 75% in 2005. For Spanish companies, said Josep Valor, intelligent access to information is key. In his view, IT adoption has brought management closer to employees, via e-mail and videoconference. Although the forecasts for 2010 indicate widespread ICT adoption, especially by large companies, Prof. Valor advised caution, as there is no guarantee these plans will come to fruition. One reason, he said, was the current economic crisis in Spain.

Listen to the presentation  

Italy. Government and social capital play an important role on ICT’s adoption. According to Andreina Mandelli from the SDA Bocconi Graduate School of Management, the BIT surveys in Italy indicate that IT adoption has affected Italian industry but do not indicate any specific changes in organizational structure. Mandelli stressed that changes in organizational structure depend not only on IT capabilities, but also, equally importantly, on government and social capital.

Listen to the presentation  (in english)

Germany. Rise of B2B and concern for security. Oliver Günther, the BIT representative from Germany, explained that information technologies have provided considerable support to B2B in Germany. He warned, however, that collaboration between partners still leaves much to be desired and noted that security is one of the main concerns of German companies, as evidenced by the increase in investment in security applications.

Chile. Technology adoption on hold. Sergio Godoy of the School of Communications UC explained that ICT adoption by Chilean companies has more or less come to a halt, as the latest survey shows no significant changes compared to the first BIT study in 2005. Automatic employee monitoring has increased, he said, and with it productivity. But there is still no sign of changes in the adoption of teleworking or videoconferencing, for example.

Colombia. Bridging the digital divide. The Colombian government plans to increase Internet access from its current level of 43.4% to 70%, explained Ana María Trimimiño of the Telecommunications Research Center (CINTEL) in Colombia. The BIT surveys in Colombia reveal that ICTs have been adopted more by government than by private sector companies, although companies are expected to show more interest as Colombian society takes to the new technologies. An example of this is the rapid growth of the mobile phone market, Trimimiño pointed out.

Argentina. Investment in technology as a financial risk. According to the Big Mac index, Argentine purchasing power is below that of Spain or the U.S., said Marcelo Pancotto, professor at IAE in Buenos Aires. In this context, he said, Argentine CIOs consider large IT investments to be a major financial risk. Nonetheless, Argentine entrepreneurs believe that information technologies have reduced the costs of production (41%), direct marketing and advertising (18%) and marketing research (21%). The cost reduction is most marked in manufacturing (71%). The BIT surveys in Argentina also reflect changes in working practices, especially at the lower levels of organizations, and a significant growth in tools for collaboration. At the same time, they document the emergence of flatter organizations and the reduction of middle management levels.

Korea. Transition from manufacturing to services. Hosun Rhim, from the Korea University Business School, introduced the term “servilization” to characterize the gradual transformation of manufacturing companies into service companies. In his view, it is a leap that can allow a company to boost customer satisfaction, competitiveness and business performance. For Prof. Rhim, the key factor driving “servilization” is customer orientation. Technology, he said, allows companies to move from mass production to customization. This trend is clearly exemplified by Korean companies such as Life Apparel, which uses IT to produce its patterns in China and so be able to sell made-to-measure suits at mass production prices.

Listen to the presentation 

Taiwan. ERP, e-commerce and wireless network tools are the most widely used technologies. According to Hsein-Lee Tseng of the National Sun Yat-Sen University, 60% of Taiwanese companies have their own website and engage in e-commerce. In the private sector the use of business intelligence tools is expected to increase by more than 30% over the next three years. Curiously, this contrasts with attitudes in the public sector, where there is very little willingness to adopt business intelligence applications.

New Zealand. Technology investment in New Zealand, a country of four million inhabitants, is influenced by the fact that 95% of companies are small. Ananth Srinivasan of the University of Auckland Business School told the conference that the demand for IT in organizations has grown, but that business function automation and outsourcing have not yet led to any reduction in labor or increase in productivity.