Originally appeared in MSI Magazine
February 1, 2000

What’s in a Name?

When was the last time that you or your colleagues uttered the term “glass house?” Maybe it came up in passing during the Y2K project, where somebody uttered the term in pejoratively while clearing away the cobwebs of some ancient code.

The passing of such terms as “glass house” or “data processing,” and “management information systems” speaks volumes about the evolving role of the “IT” organization. “Data processing” itself implied a back room with a black box where technicians did something that nobody understood. At least, when the MIS label came, at least it implied that the computing folks finally had a function—even if that was restricted to maintaining systems that spewed out those weekly or monthly print-outs that, in cryptic figures, told management how it was doing.

The first jolt to the computing folks came during the early MRP II projects where they finally had to sit down with everyday business people and learn something about what the company did. For their efforts, the MIS group was rewarded with a new name: IS, which stood for “information services.”

The emergence of the Internet and the competitive urgency to achieve faster time to market and supply chain efficiency has forced IT to evolve from a service group into a center of business expertise. With the new Internet-energized markets, technology was becoming more than a utility. It was becoming the “thing” that drove, and increasingly defined the business.

Any doubts about the strategic role of IT were quickly dashed with the news of Hershey's recent problems with its new R/3 system. Owing to a disastrous implementation, the candy maker found itself unable to get goods out of the warehouse during the peak Halloween season—and the focus of unwanted attention from the business press. The moral of the story: short of hiring slave laborers to constantly babysit the merchandise from stock to dock, there’s no way to manage the supply chain without IT.

IT is not simply controlling more and more business processes, for many companies, IT is becoming the business. The obvious examples are the “dot com” Internet companies. What would Amazon.com, expedia, e trade, or eBay be without IT? And, of course, there's the well-known comment of a recent FedEx executive, who described the company’s business as moving information, not goods.

Owens & Minor took FedEx’s comments to heart when it recently rethought its data warehousing project. The $3 billion company, one of the nation’s largest distributors of hospital supplies, needed a way to differentiate itself in an otherwise low-margin market. With hospitals anxious to cut inventories to check healthcare costs, and with manufacturers eager to cement customer loyalty, O&M concluded that its data could fill the missing link.

The solution: develop new supply chain consulting services for its customers, using a web-enabled data warehouse as the linchpin. The data warehouse would help hospitals manage their procurements to keep inventories low, while providing manufacturers with information on order fill rates, delivery times, customer retention, and forecast demand.

In the traditional script, IT would have reacted to the business team. In O&M’s case, it took on the role of product developer and co-marketer. Evidently, the strategy is working. Since the sales team was trained to market web access to the new data warehouse, the company has signed up four of the top 15 suppliers and over 60 healthcare institutions, and is currently adding about 3-4 new customers per week. Although the data warehouse itself isn’t necessarily expected to be a profit center alone—the prices are aimed at cost-recovery—it is part of a strategy that is helping the enterprise rethink its positioning in what would otherwise be a commodity service marketplace.

The question that’s unanswered is, as IT takes on the role of developing products, what should its new name be?