Tough Sell

By Larry Dignan Print this article Print

JetBlue and DuPont have moved technology operations under sales and marketing divisions. Can chief information officers live with this arrangement?

What did Jeff Cohen do when he learned his company was planning to have its technology department report to sales and marketing?

He left.

Cohen, the former chief information officer for JetBlue Airways Corp., left the airline last July, after learning that the technology department would shortly begin reporting to Tim Claydon, the company's senior vice president of sales and business development. Claydon's primary technology experience included managing JetBlue's Web site, which accounts for 70% of the airline's bookings.

Cohen had reported to JetBlue chief executive David Neeleman and chief operating officer David Barger. In January, JetBlue named Todd Thompson as vice president, information technology, reporting to Claydon. JetBlue declined to comment.

"I left because I knew I didn't want to report to sales and marketing," says Cohen, now chief executive of Vertical Software Group, an aviation-software startup based in North Caldwell, N.J. "If you are used to reporting to the CEO and COO, it's hard to report to someone who was your peer." Cohen's not alone. Other technology executives may need to consider the possibility they'll be reporting to sales and marketing in the future. Some smaller companies, such as Philadelphia-based collaboration-software firm Mindbridge, are already set up that way.

And E. I. du Pont de Nemours and Co. reorganized in January to put the chemical company's technology department—which had reported to the operations and services division—under the auspices of John C. Hodgson, DuPont's recently named chief marketing and sales officer. Hodgson's charge is to streamline processes to drive sales and customer service, DuPont said in a statement. The company otherwise declined to comment until the reorganization is complete in the spring.

Though it's possible a company can get closer to its customers by melding sales and marketing know-how with, say, a customer-service implementation, critics of this arrangement say a single function of the company shouldn't have domain over the whole technology staff. The long-term fallout can be that sales and marketing will hog available project funds, leaving infrastructure upgrades, financial systems and logistics improvements behind.

Then there are cultural issues. Technology managers don't want to report to sales and marketing executives because they want a regular audience with the CEO and involvement with corporate strategy, say recruitment firms. "I don't think there's any benefit to this arrangement," Cohen says. "If anything, it's bad. A company does more than sales and marketing.... There are a lot of businesses within the company that need information technology."

It's too early to say whether the recent JetBlue and DuPont moves represent the beginning of a trend—analysts from research firms AMR Research and Gartner note they haven't heard of other sales- or marketing-led technology departments. Nevertheless, there is some historical precedent.

Fred Held, who served as Mattel's chief information officer from 1968 to 1978 had a three-year stretch between 1973 and 1976 where he reported to a sales-and-marketing executive. Held, who left Mattel in 1987 after a 24-year tenure at the toy maker, says the company viewed technology as a tool to combat rival Hasbro as early as 1973.

Held was put under sales and marketing to build what today would be recognized as a supply-chain management and enterprise-planning system. The system, dubbed simply an "integrated system," was custom built in the COBOL programming language because there was no such thing as off-the-shelf software at the time.

The business goal was to become a partner to retailers via better inventory tracking and plans for retail shelves. According to Held, the system could network with retailer systems to enter and track the status of orders, and could also manage marketing promotions with partners such as McDonald's and Burger King.

The corporate structure didn't keep the company from making technological advances. "I reported to sales and marketing when Mattel built one of the most innovative systems around at the time," says Held, now a partner at Atlanta-based Tatum Partners, a consultancy and executive-for-hire firm. Before reporting to sales and marketing, Held had reported to Mattel's president. Held says he didn't view the switch as a demotion largely because he considered himself to be more than a technologist. Before being named chief information officer, Held's background had been industrial management. "I hired a CTO for the technology skills I was lacking," says Held, who even became chief marketing officer later in his Mattel tour of duty.

Proponents say putting technology executives under sales and marketing has its benefits. For starters, it aligns technology with a department that drives sales—and therefore better quantifies the returns generated by information systems. In addition, sales and marketing folks can often do a better job trumpeting technology projects than technologists themselves. Mindbridge, for one, has had its technology run by sales and marketing since its inception in 1997, says chief operating officer Scott Testa. "We view ourselves as a sales-and-marketing company first and a technology company second," Testa says.

One of the company's latest ventures—a hosted version of its collaboration software—was conceived by sales and marketing executives. Testa acknowledges, however, the set-up may work better for smaller companies such as Mindbridge, which has 90 employees.

The real issue is whether sales and marketing can reign successfully over technology in the long run. Once Mattel's integrated system project was completed, Held went back to reporting to the president of the company. "[The reporting structure] was a temporary situation to build the system," says Held. "The biggest danger is that the business won't be balanced and marketing will dominate all the projects."

Niraj Patel, chief information officer at GMAC Commercial Mortgage, where he reports to the CEO, says reporting to sales and marketing could focus technology on moneymaking efforts and the arrangement could work out if a company doesn't have substantial logistics needs. "By focusing technology on sales and marketing you could bring in more orders," Patel says. "But the question is whether you can fulfill the orders."

The risk that sales and marketing might dominate technology projects at the expense of other corporate needs is the primary concern about an organizational chart that doesn't link the CEO or chief financial officer with technology, experts say. For instance, a supply-chain-management system may not be implemented because logistics managers aren't as adept at selling their projects. The other issue is budgeting. If the lead technology executive doesn't have the ears of the CEO and CFO, it's bound to be more difficult to get budget approval for projects such as infrastructure upgrades or using data networks to transmit voice—neither of which would drive sales. No such problems have been reported, but the JetBlue and DuPont experiments have yet to show long-term results.

According to Colin MacKinnon, another Tatum partner, the first questions to ask when technology reports to marketing are: What's wrong? Is the company trying to shake up its culture? Is it trying to distribute technology expenses throughout the company?

MacKinnon says JetBlue's reporting structure makes sense due to its heavy focus on e-commerce and Web development. The case is harder for DuPont, which has to manage a more-complex supply chain. Ideally, a company would allocate some technology resources to sales and marketing for e-commerce and leave the bulk of the department devoted to companywide projects.

Then there's the fallout from dropping technology executives lower on the corporate hierarchy. "I only see trouble on this front," says Deborah Sawyer, a partner at Morgan Howard Worldwide, a global executive-recruitment firm. "CIOs have fought for too long for their seat at the 'C' table with direct reporting to the CEO or president." And she says that companies who relegate technology to sales and marketing may have trouble luring talent. "We're told all the time: 'Don't talk to me unless the next CIO job reports to the CEO.'"

This article was originally published on 2004-03-05
Business Editor
Larry formerly served as the East Coast news editor and Finance Editor at CNET News.com. Prior to that, he was editor of Ziff Davis Inter@ctive Investor, which was, according to Barron's, a Top-10 financial site in the late 1990s. Larry has covered the technology and financial services industry since 1995, publishing articles in WallStreetWeek.com, Inter@ctive Week, The New York Times, and Financial Planning magazine. He's a graduate of the Columbia School of Journalism.
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