Technology chiefs are watching warily as Web 2.0 gathers momentum overseas, and it's not just the security risks they mistrust. Uptake of this second web generation is driven mainly by marketing departments keen to engage customers. Web 2.0 tools are quickly and cheaply deployed without IT department participation, and they can be highly effective.
Web 2.0 frontrunner Lonely Planet, for example, has raised the volume of revenue from digital sources from 3 per cent three years ago to about 25 per cent, after introducing blogs, podcasts and online reviews to its website.
At STA Travel, RSS feeds (really simple syndication is a technology that can alert a user when a website is updated) are delivering a conversion-to-sales rate that is between 30 per cent and 40 per cent higher than its other forms of media.
But despite these early successes, Australia's chief information officers have been slow to embrace this nascent technology beyond internal experiments.
Chief information officers commonly point to the irrefutable risks of opening up networks to outside forces as the main obstacle to adoption. However, what is often privately feared is that they may be sidelined once business units start unilaterally rolling out innovative solutions conceived outside the organisation.
IT departments are viewed by many business managers as little more than glorified plumbers at times, and their status could be further downgraded through the advent of hosted Web 2.0 technologies.
"Web 2.0 functions have the ability to shut out or supersede different parts of any company by doing different business functions more efficiently and in a way that better meets customer needs," says Rod Bruem, Telstra's editor of nowwearetalking.com.au, a customer blog launched by the carrier's public policy and communications team to bypass the mainstream media.
But whether fears of being sidelined are legitimate, it seems that Web 2.0 has shifted the balance of power by altering the technology decision-making processes within the organisation.
"This is a big topic going around at the moment, basically that IT professionals are now so good they're doing themselves out of a job," says Lonely Planet's global e-commerce manager, Cameron Holland. Lonely Planet is a travel guide publisher. Industry leaders acknowledge that Web 2.0 has the potential to widen the rift with business that technology has been struggling for some years to bridge.
"Web 2.0 technologies really lowers the barrier to entry and there are risks associated with that," says Mark Sharkey, chief technology officer at Yahoo!7, which links to an array of social search and online community portals it has acquired, such as Flickr and del.icio.us. "IT has to move very fast or it could find itself out of the equation," Sharkey says.
A corollary of that could be that, after years of making incremental advances towards the boardroom, CIOs lose ground to upstart hosted technologies that wrest authority away from them. Nevertheless, technology heads who see the value of these tools say Web 2.0 is exciting and pioneering and needs to be encouraged, but carefully managed through policy guidelines. They worry not so much about being sidelined as about being too front of line - and being left to pick up the pieces when inexpert users go it alone.
Undeniably, downstream challenges flow from this emerging technology. Security issues are a given but the new technologies may also lack scalability - a problem that IT then has to sort out. Users may become dependent on expensive or overlapping service providers and they regularly fail to consider the total costs of deploying a chosen tool. And users running a new application consistently fail to consider capacity constraints.
At Murdoch University, roughly one-third of units stream, download or podcast lectures and the library uses wikis, blogs and social tagging to sites such as del.icio.us, which students can then mash up, or integrate, into their own web pages.
Murdoch's CIO, Chris Foley, notes that faculties are leading the charge into this space and putting strain on the department.
"They're guiding where they're going and we just respond to capacity requests," Foley says. "A lot of requests tend to be ad hoc."
Foley has responded to demands by encouraging users to run the applications in sandpit, or test, mode until the department can address each one thoroughly. Users start by setting up applications through sites such as MySpace or Second Life. Running the tools in a test area protects them before they go into production phase, and gives users time to evaluate their value and the business case, Foley says.
That protects the university, but it dilutes control over managing the technology. Nevertheless, it's a choice that has to be made. "It comes down to how much and what you want to control," Foley says.
Control and management issues abound. One issue is: who owns the data if the application is externally run. "Who owns email content if Microsoft hosts it?" Foley asks.
Lonely Planet's Holland cites the issue of depending on another company's robustness when using external code and mashing it with third-party code. There's also a commercial fear of promoting another organisation's technology instead of your own.
The new media also opens the gates to a flood of unstructured data that needs to be managed, Murdoch's Foley says. "How do you secure and maintain the integrity of the data when all the tools and media are so very different?" However pressing these issues may be, IT heads say they are simply technology issues, which can be resolved. "These questions are dead and buried overseas, Lonely Planet's Holland says.
More pertinent are broader strategic questions, such as the potential for the new media to usher in an era in which the disconnect with business is widened.
"There is the potential for marketing people making demands without understanding how the technology works, or getting into solutions mode, or for techno-logy to push a solution that has no business value," Holland says.
CIOs approach these challenges from different angles. Yahoo!7's Sharkey says getting policies in place is the first step.
"This is an area where there has to be very open communications with business and IT needs to understand where business wants to go.
"There's general recognition that if IT wants to stay in control, it has to be on the front foot. It's a control issue and there will be some groups who oppose that."
Yahoo!7 introduced corporate guidelines on areas such as internal blogs and sharing data about a year ago, Sharkey says.
To explore these issues, Murdoch University has set up governance forums that include stakeholders from technology, library and academic groups, to establish lines of responsibility. The school is also adapting policy to such areas as blogging. "The problem is that new things are coming up all the time and it's difficult to keep in front of it," Foley says.
A common theme among CIOs supporting Web 2.0 is that it is driving much closer co-operation between the technology department and business. Lonely Planet has business and IT working together as a single cohort on new projects. About six months ago, it started using agile software development to quickly generate changes business needed. Its strategy is to set up teams of no more than 15 people in the same location, drawing together project managers from traditional business owners, such as marketing or publishing, and putting them together with a technical lead from the IT development team as well as legal, finance and infra-structure to deal with security issues.
"It's a much more interactive and a more collaborative approach to development. "These project leads are not just technology-driven any more because it is moving so quickly that you have to be working very closely.
"We are now seeing a much tighter co-operation between IT and business as a result of this new orientation.
"If we were developing in the old style, it would take 12 months to bring the project to market and in that time the market would have shifted, or it wouldn't be what business asked for," Holland says.
Lonely Planet has a batch of projects on the cards, including a website redesign. Recently it released a video-sharing site - www.lonelyplanet.tv - that lets users upload video and map it via a Google Map mash up at the bottom of the homepage. "The improvements we've seen are phenomenal," says Holland, who oversees about 100 staff, including a team of 15 to 20 developers.
At global tissue and consumer products company Kimberly-Clark, marketing and technology are also working closely on Web 2.0 to achieve enterprise outcomes. "In the Asia-Pacific region, we're finding that a lot of individuals enjoy being interactive," says David Jacques, IT director for developing and emerging markets at
"We've found there is a partnership between IT and marketing where we help advise them on the tools and technologies out there, and marketing takes that information and engages third-party providers themselves."
Jacques says Web 2.0 calls for a formula in which the IT department becomes more focused on understanding where the business needs to be going, rather than on the technology itself.
"The implementation of that techno-logy is important but it's secondary to achieving enterprise objectives, whether we have to engage third parties or India or whatever. "Since Web 2.0 is about unstructured data, our position is that it's OK to engage third parties to do it because that is what Web 2.0 is about - being dynamic and quick-changing.
"For enterprise IT to keep up with that would [cost a lot] because it's not our forte.
"Our focus is on partnering with the business to ensure they get the support they need to engage customers, and it's not necessarily about the plumbing."
Jacques says that CIOs will continue to be relevant as long as they are instrumental to the goals of the business.
"If we can continue to develop the relationship and help them address their enterprise goals, we won't become obsolete," he says, noting dryly that "there's a lot of activity in IT beyond Web 2.0".
Like other industry leaders, Jacques' view is that Web 2.0 is the next logical step in outsourcing technology: that is, by relegating the "nuts and bolts" of technology to third parties, the IT department is freed up to play a more strategic role in the business. "Its all about innovation and letting someone else do the plumbing."
"IT needs to find out what its boundaries are and not try to do everything for everybody," he says.
"I don't think that by allowing marketing or research to engage its own technology that the CIO will be losing any authority." However, he concedes that Web 2.0 will not necessarily help the CIOs' advance into the boardroom.
The new services and manufacturing organisation does not lend itself to having a CIO in the boardroom, says Jacques, who reports to the chief financial officer of Kimberly-Clark. "In banks, it's important for the CIO to be in the boardroom but [in other industries], the CIO should not be in there, because they're just part of the support function. "We don't need to lead the strategies."
Whatever the case may be, says Lonely Planet's Holland, Web 2.0 is forcing old -world companies to think of new ways of doing things.
© Fairfax Business Media
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