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Managing Your Corporation’s New Technology Tax

  • September 18 2003, 1:00am EDT

Have you every worked on a project that’s been subject to the new technology tax? Chances are if you’ve worked on a project that was trying to use an architecture, technology or toolset that was new to your company, you’ve experienced the new technology tax first hand. You may not have referred to it as the new technology tax. In fact, if you were the project manager or the project’s sponsor, you may have called it something entirely different, something that I can’t even repeat in this column.

A project is subject to the new technology tax if the selected solution’s architecture or toolset moves corporate IT into new territory. While the business drivers behind your project may require your project to be the first initiative to implement a wireless solution, PDA application, grid network or any other emerging technology as the first in your organization to invest in this technology, invest you will.

This investment will be in both time and money. Time will be spent evaluating the proposed emerging technology against technologies that are already proven in the enterprise. Time will also be spent investigating potential impacts of the technology in question. Almost all facets of IT: security, change management, infrastructure management, support, etc. can be impacted by the introduction of a new technology into an enterprise’s IT ecosystem. Money will also need to be invested. A proof of concept may need to be conducted, base licenses negotiated and purchased, and the technology’s underlying infrastructure will need to be established. Want to create and deploy a mobile PDA application to your enterprise’s sales force? Who’s going to purchase the wireless connections, authentication and authorization control mechanisms or even the PDAs themselves? Chances are it will be your project.

The new technology tax exists in most companies because there is a disconnect between information system’s (IS) vision and its funding model. A generic list of the average corporate IS department’s objectives undoubtedly would include items similar to setting the corporation’s direction for its IT architecture, anticipating applications of technology, making decisions with an enterprise perspective and maximizing enterprise value while managing costs effectively. However, the same corporation’s IS funding model is typically based on project-level funding with each project driven by short-term departmental or business unit-level business drivers. Building an IS enterprise vision one brick at a time sounds a heck of a lot easier than it is, particularly if each brick is specified and paid for separately.

Besides making it difficult for IS to achieve its objectives, this model creates a strong disincentive for investing in any new technology. If your project is the first looking to develop a Web service-enabled business model or the first that requires a near real- time messaging infrastructure, chances are your project will have to pay considerably more both in time and money than if you were the second project hoping to do exactly the same thing. In this model, the promise of whatever new technology is being investigated needs to be balanced against the risk and cost of needing to fund that technology’s implementation. Here the business benefits maybe departmental, but the costs and associated risks are enterprise in scale. I learned long ago, that unless there is a clear and compelling competitive advantage to pursue, coming in second often makes you the winner in the long run.

There are exceptions to this project-based funding model. IS typically has its own budget for supporting its IT infrastructure and general operations. While many emerging technologies such as 802.11g wireless networks or an implementation of a unified communication model could fall into the category of infrastructure, IS’ infrastructure budget is almost always structured to only support the care and feeding of a pre-existing infrastructure with only periodic and incremental upgrades allotted for. The wholesale replacement of one technology with another typically would fall under a project’s umbrella.

While most CIOs and their corporations recognize that this funding model creates a chasm between IS’ vision and its capabilities to achieve that vision, it is unlikely to change anytime soon. In fact, the chasm is widening. Gartner Research estimates that between 1998 and 2001, the percentage of the IT budget devoted to emerging technology activities have dropped from 2.6 to 1.94 percent. While in percentage terms this appears to be a small decrease, in real dollars it has a fundamental impact on how an IS department can research and prepare for new emerging technologies in their organization.

Now, I am not necessarily advocating any increase into any general emerging technology R&D coffer. I do, however, want to point out the realities of this type of funding model in relation to emerging technologies and any corporation’s ability to apply them. Reducing the budget for an R&D area such as an emerging technology competency center or an advanced technology group does not necessarily decrease the R&D that occurs within an organization, but like some federal tax cuts, merely shifts the burden down to the departmental or project (i.e., state or local) level. It is inevitable, although perhaps delayed, that business drivers will fund projects that will then identify an emerging technology as a potential solution. The project team with assistance from corporate IS will then have to determine the viability of that given emerging technology for both the project at hand and entire enterprise down the road.

The key to developing an appropriate strategy for dealing with emerging technologies within any corporation is to recognize this fact. Regardless of centralized control, research and investigation into the use of emerging technology will indeed occur. Once an organization realizes that this inevitable, the chasm, while still deep, can be bridged as an appropriate balance is reached between the role central IS should play in evaluating emerging technologies and each project’s search for its best fit solution.

There is, of course, no cookbook solution to achieve this balance that would fit every corporation. A multitude of factors go into determining how your corporation should best investigate and manage any introduction of an emerging technology into your enterprise. However, there is one key driver that seems to predetermine whether a given organization actively tries to manage the introduction of new emerging technologies or more reactively and somewhat passively tries to manage them. This key driver is whether your corporation views IT as a tool for competitive advantage or merely for risk avoidance and cost management.

Corporations that believe that their implementation of IT can be a competitive advantage will be more aggressively looking for new solutions. They need to consider funding an emerging technology competency center or advanced technology group whose role it will be to investigate the potential value of new technologies for the enterprise, develop technology timelines for your organization’s adoption of specific emerging technologies and evangelize these technologies when their time has come on the pre-established timelines. These emerging technology competency centers can even act as a catalyst for developing and funding some of the infrastructure and personnel capital necessary to implement the first project that comes along needing a specific emerging technology.

On the other hand, companies that are more interested in risk avoidance and cost management will take a more passive approach. This passive approach may result in limited or no funding of an emerging technology R&D area, but this does not translate into a Wild West where anything goes. Typically, companies that are more interested in risk avoidance and cost management will establish not a distinct emerging technology department but a cross-departmental emerging technology committee. This committee’s primary function will be one of communication and consensus building more than direction setting and governance. Investigation of new technologies may still occur at an enterprise level, but they will be more paper evaluations than hands-on prototypes. The committee’s primary communication role will search for synergies between upcoming projects and identify and prevent potential duplications of effort.

Regardless of how your corporation sees its use of information technology, achieving an effective balance between corporate IS’ role and each new project’s in evaluating and implementing new technologies needs to occur. IS needs to play a dual role both as a governor controlling the introduction of new technologies as well as an architect and general contractor providing the blueprints and some of the heavy lifting required to implement a new technology. Once it becomes recognized that the evaluation of emerging technologies will occur regardless of whether or not it is done by a formal department, hidden as "below the line" IT costs, or built into project budgets, an effective mechanism for handling your enterprise’s management of emerging technologies can begin to be developed.

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