COMMERCIALIZING information technology

At the recent 2000 Canadian Insurance Congress held in Whistler, a panel of information technology executives drew focus to “commercialization of information technology”. Among the speakers was British Columbia’s industry luminary, Lawry Shand, who provided an insurance perspective on the much maligned and misunderstood world of information technology.

Why maligned? Why misunderstood? There remains a mythology surrounding IT. Most senior executives consider IT to be a mysterious and daunting functional area. Surprise, so do most of the “professionals” managing the IT function. Consider that this “profession” only dates back to the baby boomer era. It is still in infancy and yet there is an expectation of precision and predictability. No wonder there are so many perceived failures in the field.

Commercialization is defined as, “to run as a business”, apply commercial methods to, and to engage in or make use of — mainly for profit”. How many of the organizations in the insurance industry would describe their use of IT as a profit driver? I can hear the laughter from coast-to-coast. In the pre-Internet era, IT was viewed as the dominion of technocrats that spoke a different language, kept the “tools of the trade” behind locked doors and who invariably asked the business person to describe their problems in terms a computer would understand.

Information technology is different from technology. It is the application of the business know-how. It is not an intimate knowledge of the underlying circuitry of the hardware or the schema of the database. Consider your refrigerator, how many among us could explain the interaction of “freon” with electricity. More importantly why should we care? Open the fridge door, if the light is on chances are the beer is cold!

Too often organizations and individuals get hung up on the workings rather than what it is supposed to do. The underlying infrastructure is just that, infrastructure. Successful business applications focus on the “what and the why”.

Well, how do we commercialize IT? Firstly, accept that it is not an exact science. Secondly, we must accept it is not a “black art” either. Businesses that separate intellectual assets from the physical assets have achieved tremendous success. The Internet has helped distinguish this separation. There is the infrastructure and there is the content. Subject experts can now focus on the content and feel more comfortable dealing with material that they are intimate with. This is the dawning of the “information age”. Organizations can no longer look at IT as a necessary evil to solve back-office operational issues. Point-of-sale, customer facing systems, self-service applications, intranets and e-commerce describe the new world order. This is a trend, not a fad. In short, the last 25 years have been focused on the mechanics of IT, and the next 25 years will focus on the exploitation of the content to achieve a competitive advantage. The key to executing successfully is ensuring a valid strategy is in place. By strategy we mean a set of positions and a direction to achieve advantage. It is no longer “one size fits all”, each organization needs to examine its unique requirements and weigh these needs against its assets, skills and goals in establishing its unique strategy.

In developing the strategy, organizations can look to a different set of suppliers and methods of sourcing to meet their strategic and operational objectives. Outsourcing, both IT and “business process outsourcing” (BPO), is a good example of a strategy that can free up organizations from focusing on the infrastructure and allows them to concentrate on their specific business drivers.

Application service providers (ASP) are another emerging alternative that enables organizations to focus on content not infrastructure. Would you operate your own hydroelectric plant or buy your own airline to satisfy those needs? Why concentrate on utilities when you can focus on the items that differentiate you in your market. IT is a business function, treat it like you do all the other business functions within your organization.

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