CEOs vs Legacy I.T. Departments; Why Some Companies Are Failing (Or The Constraints Of Job Justification In Internal I.T. Departments):

My travels much of these past two years have been visiting and working with C-level decision maker in various departments (Marketing, Finance, I.T. Distribution, Sales, etc.) of well respected P.E. portfolio and middle market companies. One common theme has been that many companies develop their own "new" interactive and ecommerce software programming and technology. These budget items have been based on the advise of only their legacy I.T departments and their kissing cousins, the Accounting departments (delegated by the CEO who want integrated point and click "what if " and "real time" vertically integrated systems).

Why? Simple, the CEO wants to grow and answer to their shareholders, blaming legacy I.T systems as one major reason why they are failing. Internal I.T. Departments circle the wagons and start to build , on their own, the latest greatest "trend" because they don't need any outside vendors. And the meter turns, and turns, and turns..... Every department now wants to be the one stop lead ALPHA dog when it comes to the internet these days. These internal squabbles may not be resolved for years, if the company stays in business, and the CEO will move on to greater pastures without the senior "team".

In my travels I've seen great solutions from great companies; Citrix, SAP, IBM, and others crash and burn after spending hundreds of thousands or even Millions of Dollars. No adoption, no conversion, no payments to the vendors from unhappy CEOs who are quick to point the blame at the outside software suppliers.

Some recent organizational behavioral observations at struggling companies I've witnessed:

• Some CEOs view the new "system" initiatives simply as a "Plug and Play" home theater setup. They delegate the project to their I. T. department head, and wash their hands of any CEO micro managing. The project gets put on the next board meeting minutes as something hopeful. The CEO lives to die another day with the shareholders.
• More than a few Legacy I.T departments then dig the defensive trenches and present "we can do that internally for a lot less money and justify associated overhead of existing personnel ". (Better to keep the existing our I.T. personnel busy, or so they say).
• With push back from the CEO and Board of Directors the I.T. department will bring in RFP's from " new outside vendors", and drag their feet to kill the "RFP proposal" from coming in the gate. I.T. and Accounting (new found cousins) will now present that the new system can be accomplished with existing vendors and in house staff for a lot less money. "We didn't realize you wanted the systems to go in this direction. We can do it with our current hardware.... just need a budget to add the new applications....." (The save money on the bottom line card).
• The alliance now forms as a back channel with the accounting department who sees the systems world as Quickbooks on steroids.
• Other department heads (Marketing, Sales, Warehousing, Distribution, ecommerce, etc.) are brought in for assessments and input by the ad hoc committees. The hardware bill starts to climb, the input gets lip service, the meter runs at a faster clip...
• The choice and decisions are more of "splitting of the baby" by all departments and implementation is left to the original I.T. folks. I.T. and Accounting work it in between, email breaking down, a virus attack, hardware upgrades, etc, etc, the ultimate job justification kicks in and the beat goes on. (still married to their AS400 system , or what ever they chose a few year's ago because it's there)
• Company numbers are now visible to all departments, middle management, competitors and sometimes customers. I.T didn't get to the security of custom passwords and views because they don't understand the new technology global vision of Interactive users/PLM/CRM/or SaaS.
• Key sales people and Marketing folks leave with all the internal company wide numbers that are now visible to all personnel and end up at a competitor.

A recent conversation I had with a CEO sums it up to a tee:

"When we get through this horrible fourth quarter, we are in need of getting a new interactive/ecommerce programming vendor. This one cost us $600,000 and the system doesn't work. Do you know anybody out there that can fix our problems quickly and cheaply?". When you do , please pass it on to Raymond (The CIO) we need to get new systems in here that will put us at the front of the pack".

And the beat goes on..........................................

Just one observation, do with this what you will, but does it sound familiar? Why some companies are succeeding........... stay tuned for my next BLOG!