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Building Better IT Partnerships

If information technology (IT) is the future of business, why is it such a pain to manage productively? The reasons lie in the way it has evolved; the solution lies in a move toward partner relationships among technology suppliers.

Imagine a world where you could fill your gas tank with only one brand of gasoline because your car was incompatible with all the others. Or think about owning a phone that could only communicate with other phones of the same type.

These ideas sound absurd to us. A world organized this way would range from intolerably inconvenient to completely unworkable. And yet, we created such a world in the early days of the IT revolution.

Nobody planned it this way. However, as computers found their way into the business world, we were faced with a seemingly limitless universe of possibilities – and like kids in a candy store, we wanted some of everything.

However, getting a computer system to serve the needs of business without creating more problems than it solved turned out to be a formidable challenge. It was a challenge best left to the experts; that is, the suppliers of the technology. Business people had their own operations to run. And the technology experts, understandably, built and sold integrated systems to their customers, telling them that a single vendor meant a single solution to all the customer’s IT needs.

It sounded great on paper. But in fact, vendor-driven solutions work only when all the vendors are reading off the same page. To use the automobile analogy, we buy cars as a single-solution package from a vendor. That works because all cars run on the same types of gasoline and drive, turn, park, and stop in the same ways. Thus, we can all operate on the same streets and highways, with a single set of rules governing our actions.

Historically, this has not been the case with IT systems. Those single-vendor “solutions” have created massive headaches for business organizations because there has been so little common ground – so little compatibility – across systems from different vendors. As a result, businesses whose “legacy” systems (the technology that is already in place) need to grow and interact with IT operations in other parts of the company – or with suppliers or customers – find that upgrading is a monstrous undertaking that cannibalizes precious resources, human and otherwise.

These organizations are often faced with a Hobson’s choice: continue to remain dependent upon the original vendor, or take a deep breath and start the whole IT-building process over from scratch. The drawbacks of the latter choice are obvious; making the former choice runs the risk of subordinating business objectives and strategies to IT needs, rather than vice versa.

Mounting problems with systems compatibility and flexibility, coupled with the economic belt-tightening that has become the new business mantra, has forced business to take a more critical look at how to fill its IT needs.

That in turn has forced suppliers to listen more to their customers. And what we have heard is that most companies, using an average of eight operating platforms to support their IT operations, want to be able to navigate across those systems easily and expand them compatibly.

They don’t want to tear the house down in order to retrofit it, and they want to communicate with all the other houses in their universe.

The result is a move to partnerships: a sea change in how the IT industry does business. Partnerships among technology companies that produce applications and those that produce “middleware” – software that allows applications to run on multiple platforms, or operating systems, enable customers to get what they need. Being more flexible and being able to integrate across supplier and vendor networks can help a company speed time-to-market, adapt to new business models, and improve service at lower cost.

For example, Volvo is using a middleware- and application-provider partnership to standardize all product development for its Renault, Mack, and Volvo trucks and buses. The solution will link more than 50 engineering and manufacturing sites worldwide, allowing collaboration and real-time 3D product-data sharing. And Colgate-Palmolive is using a partnership solution to improve its global supply chain, order entry, accounts receivable, human resources, and warehouse operations, hoping to improve upon a system that increased gross margins from 48 percent in 1994 to 55 percent in 2001.

Technology business partnerships are an elegant solution to a messy problem, a win-win solution that’s good for supplier and customer alike. It’s an approach that the technology companies were bound to find once they began to listen to their customers’ needs.

Lou D’Ambrosio (HBS MBA ’92) is Vice President of Worldwide Sales and Marketing for the IBM Software Group. Mr. D’Ambrosio leads a team of more than 12,000 professionals for IBM’s $13B software business. He is responsible for worldwide sales, global brand management, channels, and international operations.

He led development and execution of the first ever global brand campaign that integrated all four IBM software brands – DB2, Lotus, Tivoli and WebSphere. Most recently, he drove an effort to increase software sales worldwide, which resulted in a 43% growth in revenue for WebSphere and 33% increase for DB2, while establishing IBM as the largest middleware provider in the world.

June 3, 2002
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