Texaco Case Study

The Evolution of the Corporate IT Function and the Role of the C I 0 at Texaco - How do Perceptions of IT's Performance Get
Formed?
Rudy Hirschheim University of Houston
Abstract
While senior management's confidence in the IT function and the CI0 appears to be at an all time low, the field's understanding of why this condition exists is still confused. This paper suggests that the problem lies in how perceptions about IT are formed. To this end, the paper briefly looks at the growth and evolution of the corporate /T department at the oil giant Texaco, Inc. The analysis paints a somewhat disturbing picture of a top performing IT organization, intimately responsible for the success of the corporation, yet being perceived by much of senior management as an overhead that was costly and ineffective. The paper suggests some reasons as to why such perceptions might have come about, and what lessons fhe field can learn from what happened at Texaco. It is our belief that through such historical analyses, like the one performed at Texaco, a richer and broader understanding of the nature of organizational IT units is possible. These analyses shed light on the root causes for why IT is often perceived negatively. We suggest that IT organizations might change these perceptions by partnering with business units to share the credit for successful implementations and managing the perceptions about /T's contribution.
Jaana Porra University of Houston Michael S. Parks University of Houston
ACM Categories: H.0, K . l , K.2 Keywords: Evolution of the ClO's role, Evolution of the IT function, IT function History, Perception Formulation, IT Management, Perception gap
lntroduction
Over the past decades, CIOs have often been critical of upper corporate management's lack of understanding of IT. Senior executives seem to be chronically unaware of what can realistically be achieved by information systems and at what cost. These management perceptions about IT simply don't match reality. But ClOs have been unable to change these perceptions of IT. After nearly half a century, corporate IT is still considered an overhead, "a perpetual money pit" or a "black hole" (Lacity & Hirschheim,1995). Even the IT function's leadership has been deemed ineffective. Both the IT function and its ClOs have been labeled as mistakes (Earl & Feeny, 1994; Markus, 1999; Enns & Huff, 2000; HBR, 2000). Senior executives grew weary of IT's unfulfilled promises to create competitive advantage, enable business transformation, drive down costs, and improve customer service. Business news stories and
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research that painted an unflattering picture of IT and IT management appear to have influenced senior management (in a negative way). This has led to a replacing the technically oriented growing call for: (I) CIO by a non-IT executive' (2) distributing IT to the business units2 and (3) outsourcing the IT function to 3 specialized technology firms . In the 1990s, these frustrations led corporations into dramatic cycles of restructuring, reengineering, downsizing, outsourcing, and backsourcing their IT function (Willcocks & Lacity, 1998). Over the past decades, significant amounts of IT dollars have been spent to eliminate corporate IT functions, support IT in business units and then to outsource -- often only to return to corporate IT functions again. The rush to eliminate the "IT problem" has caused some firms to overlook any negative consequences of such drastic reorganizations. For example, the touted cost savings through outsourcing IT did not always materialize and service levels often declined (Lacity & Hirschheim, 1993). Once the IT staff and its knowledge left the firms, management had even less control over IT strategy and operations. But most importantly, getting rid of IT functions and minimizing the ClO's role, did not overcome the original problem. After downsizing, outsourcing and backsourcing, many firms still did not know the value of their IT (Lacity & Hirschheim, 1993). Assessing the value of the IT organization is a welldocumented problem (Strassmann, 1985, 1990; Marchand et al., 2001). IT functions have largely been considered overhead and their value mostly intangible. ClO's have been measured on an equally intangible scale. For example, Earl and Feeny's (1994) study suggests that ClOs who "add value" to the corporation are: loyal to the business; open; goal, ideas and systems oriented; consultants and facilitators; good communicators; IT knowledgeable; and have typically been IS analysts at one time. Similarly, Ross et al. (1996) suggest that for IT to create strategic advantage it must develop the ability
There are many numbers of articles which propose such a solution. See for example, Romanczuk and Pemberton (1997) and Palmlund (1997). Such belief is also apparent in the imaginary Lenox Insurance Company case where Diana Sullivan the CIO was held accountable for not being a business person (Reimus 1997). Although a counter position can be found in Feeny et al. (1992) who in their study note that ClOs with technical backgrounds generally had a better relationship with their CEOs than those ClOs with all business backgrounds.. See for example, Pastore (1997) and Strassmann (1995). There is considerable literature extolling the virtues of IT outsourcing (cf. DiRomualdo and Gurbaxani 1998; Earl and Sampler 1998; Venkatraman 1997). For an in-depth analysis of this area see Lacity and Hirschheim (1993, 1995) and Willcocks and Lacity (1998).
to: (1) control IT-related costs; (2) deliver systems when needed; and (3) affect business objectives through IT implementation. For this to occur, IT must possess: a competent and motivated IT staff with the appropriate skills; a reusable technology base; and a partnering relationship with the business units. The building of strong partnering relationships with business units has been suggested as the key for IT organizational success and been the subject of considerable discussion of late (cf. Peppard & Ward, 1999; Venkatraman & Loh, 1994; Rockart et al., 1996; Earl 1996; Ward et al., 1996; Willcocks et al., 1997; Venkatraman, 1997; Broadbent & Weill, 1997; Benasaou & Earl, 1998; Feeny & Willcocks, 1998, DiRomualdo & Gurbaxani, 1998; Venkatraman & Henderson, 1998; Earl & Feeny, 2000). However, the discourse on the value of the CIO and IT function revolves around intangibles. The participants in this discourse have apparently concluded that rejecting the value of the CIO and the IT function was done on reasonable grounds. No one seems to question the belief that ClOs and IT functions failed. Both are considered to have failed for plausible reasons. The failure of the CIO was attributed to: fundamental personality flaws; they were too technology focused; they were unable to understand the business; and they were incapable of communicating effectively (cf. Ward & Peppard,1996). The IT profession as a whole seems to have accepted the fact that ClOs' were an unsuccessful experiment. We disagree. It is our contention that ClOs and their IT functions did not fail as portrayed in magazines and journal articles. Too little is known about the value of IT before and after the outsourcing trend to come to such conclusions. Instead, ClO's and IT functions failed because they were consistently "perceived" as a failure. It seems to us that the real question is "how do senior executive's perceptions about the I T function really get formed?" No one really knows with any certainty. Anecdotal evidence supports a variety of sources, ranging from benchmarking to personal relationships to business magazine articles to consultants' reports to past 4 historical performance . While we acknowledge that there are numerous sources that impact senior management perceptions about IT. It is this last
In Lacity and Hirschheim (1995), the authors speculate that senior management often chooses to outsource a company's IT because it has negative feelings about the function. Since IT isn't delivering value for money, some other arrangement (outsourcing) must be better. These negative perceptions about IT exist seemingly independently of any objective quantitative data to the contrary (i.e. through benchmarking reports, consultants' reports, etc.).
measure -- historical performance and history in general -- that we wish to consider. The purpose of this paper is to study: why Texaco top management perceived its IT function's service quality negatively for forty years; why executives expected an increasing scope of services from the IT department while effectively stagnating resource contributions to the unit; and why were the IT leaders unable to change the situation. We believe that a historical perspective on the evolution of an IT unit from birth to death may help to illuminate how the technological leadership of ClOs and their IT functions eroded in large firms such as Texaco and why senior executives continue to hold IT in a poor light. To this end, we have been studyin$ the historical evolution of the corporate IT function and the ClO's role within Texaco (now Chevron-Texaco) for the past 12 years. The history of the Texaco IT function spans the forty years that Texaco has had an IT function. While the story of Texaco's IT unit may only provide a few suggestions about the reasons behind the perceptions gap between the CEO's and ClO's and their IT functions, such histories may eventually lead us to understand what has changed and why.
organizations use the convenient label "cultural differences" to describe a problem they are unable or unwilling to address. For them,
...culture is a symptom rather than the cause of

an ineffective relationship between the IT organization and the rest of the business and the consequential failure of organizations to exploif and leverage IT for business benefits and value creafion (p.30). Peppard and Ward believe the gap between IT and the rest of the organization is based on four factors: leadership, structure and processes, service quality, and values and beliefs. In a similar vein, Hirschheim and Klein (2000) note the existence of a mismatch between the expectations and beliefs about the IT function possessed by individuals inside and outside of IT. They refer to this mismatch of expectations as a "disconnect." They write:
...there is a 'disconnect' befween expectations as formulated by senior management and fhe pracfice of IT depatfmenfs in the way they interpret their mission.
They contend that even a cursory examination makes it apparent that the IT community has not been able to meet these exfernal expectations for a long time.
The Perceptions Gap

Unfortunately the negative perceptions of IT'S performance are not a new problem. As early as the 1960's Andrew Pettigrew wrote that one senior manager described the computer department as a "bunch of techies" who had to be isolated from the rest of the organization because they were '!so different". The manager's solution was to "build a wall around the computer depatfment" so as to minimize the interaction between them and the rest of the firm. He knew the organization needed the computer department but he felt the people working in the department were so different from everyone else they needed to be left alone (Pettigrew, 1973). Today, thirty years later, researchers continue to report similar management perceptions of IT. Many in the field see the strained relationship that exists between the IT function and the rest of the organization as a fait accompli. It is legendary. Ward and Peppard (1996), for example, note the existence of a "cultural gap"' between the IT organization and the rest of the firm. They argue that IT is often "culturally outsourced" before it actually gets outsourced to a third party provider. Peppard and Ward (1999) go one step further by contending that
In this paper we use the term "IT function" but we are specifically referring to the corporate IT function.
Service Quality
One way of illuminating the IT perception problem is to consider it as a service quality issue (Pitt et al., 1995). According to Parasuraman et al. (1985), service quality is founded on a comparison between what the customer feels should be offered and what is actually provided. Gronroos (1982) and Sasser et al., (1978) also support the notion that service quality is the discrepancy between customers' perceptions and expectations. Conrath and Mignen (1990) report that one of the most important components of user satisfaction is the match between users' expectations and actual IS service. Rushinek and Rushinek (1986) conclude that fulfilled user expectations have a strong effect on overall satisfaction. ClO's and IT functions clearly suffer from expectations of top management that are too high. But how did expectations of what IT should deliver escalate? Three sources of service quality expectations include: (1) users; (2) the IT department; and (3) vendors (Pitt et al., 1995). According to Zeithaml et al. (1990) among the prime determinants of expected service quality are: word-of-mouth communications between users; past experiences; and communications with the service provider. Users exchange stories about
their relationship with the IT department. These conversations influence users' expectations of IT'S service. Experience is also a key molder of expectations (Pitt et al., 1995). Users may adjust or raise their expectations based on previous service encounters. For instance, users who are serviced well by the IT function are likely to expect good service in the future. But the IT function itself also affects how its service is perceived. In the process of negotiating an information system project with a user, the IT function creates an expectation of a finished product that actually requires perpetual care and maintenance. Finally, vendors influence user expectations (Zeithaml et al., 1990). Users read vendors' advertisements, attend presentations, and receive sales calls. In attempts to sell their product, vendors often raise expectations by emphasizing the positive aspects of their solutions and downplaying their shortcomings. Service quality expectations are variously defined as: desires and wants of what a service provider should possess; normative expectations; ideal standards; desired service; and the level of service a customer hopes to receive (e.g., Van Dyke & Kappelman 1997; Teas 1994; Parasuraman et al. 1985, 1988, 1991; Boulding et al. 1993). They are closely tied to the product or a service of IT. From this perspective, the ClO's and IT function's performance is measured against management perceptions of what they should deliver from one project to another (Boulding et al., 1993). We believe that over its forty years, Texaco's IT function was caught in a perceptions gap. Over the decades, Texaco's management's expectations of what IT could do for the business units at a specific cost grew increasingly unrealistic. Texaco top management seemed to share perceptions that comprehensive corporate information systems were increasingly inexpensive and effortless to implement But why?
reasons, we applied Peppard and Ward's (1999) four categories of the perceptions gap: (1) leadership; (2) structures and processes; (3) service quality; and (4) values and beliefs, to analyze Texaco IT function's history. Before this was possible, we wrote the Texaco IT function history from its inception to its end.
Writing a History of Texaco's Corporate IT Function

This paper is based on a history of Texaco's corporate IT function6 (Porra et al., 2002). In this paper, we offer a brief summary of the central events relevant to understanding how the ClO's role, the IT function and the perceptions gap evolved. In the following, we briefly explain how we wrote the Texaco corporate IT function history. A complete text of the historical method and how we applied it can be found in Hirschheim et al. (2002). When writing the history of Texaco's corporate IT function, we utilized many sources. Texaco was very generous in terms of allowing us to investigate stacks of reports, memos, plans and letters. Additionally we studied public materials such as: annual reports; financial supplements; magazine and newspaper articles; and brochures. We also read other oil company histories. But most importantly, we had personal relationships with many of the key players for as long as fifteen years. We relied on hundreds of hours of taped interviews and interview transcripts extending nearly two decades. Many of these interviews were originally meant for other research projects such as the quality movement and outsourcing (Hirschheim & Miller, 1993). But now they have become part of an unfolding saga of ClO's and their IT functions. In writing the Texaco IT story, we assumed an interpretivist stance on history. We were discovering and interpreting past evidence, which itself was an interpretation of what was occurring by the persons participating in the events. We wrote the Texaco IT history in the spirit of deconstructionist writings7. This
This occurred before the announcement of the merging of Texaco and Chevron. Today, Texaco's and Chevron's IT units have been merged into one to support the newly formed company ChevronTexaco. The merger of these two companies was confirmed by the government in October 2001. The notion deconstructionism was first coined by the French post-structuralist philosopher Jacques Derrida (1973, 1976, 1978). Following deconstructionist ideology, deconstructionist history is based on the assumption that the past is a complex series of literary products that derive their meanings from the nature of narrative structure (or forms of representation) as much as from other culturally provided ideological factors. (Munslow, 1997). According to this stance of modern history, society is of
How Do Perceptions Get Formed?

While it is clear that a perceptions gap existed at Texaco, it is not possible to point to any one reason why it existed and persisted. Over the forty years of the IT function there were many reasons that contributed to it. We believe that the mismatch between what top management expected of IT and what it contributed to IT budgets and personnel is a result of an accumulation of issues which over time increasingly distanced top management from the IT function. In order to categorize some of the central
means we do not aspire to claim that the history we wrote is "true" in any objective sense of the word. Forty years of evidence can be put together into a coherent story in many plausible ways. We present only one story of how the ClO's role, IT function and top management perceptions of IT evolved over four decades.
Forty Years of Texaco's Corporate IT Function8

Overview of Texaco's organization Texaco's organization was typical of an oil company. It was divided into an upstream and a downstream organizations. The upstream organization included oil exploration, drilling and production. This component fed raw oil and gas stocks to the refinery where the final petroleum-based products were created. The downstream organization consisted of distribution and marketing of these oil and gas products. Although Texaco recently opted for joint ventures for cost efficiency in areas such as exploration and marketing, the company was largely self-supported owning most of its own value chain from drilling rights to the gas pump until recently. Inside this vertically integrated organizational environment, information technology appeared in the 1950s as another novel technology to be pursued for profit. In the beginning, computer technology was not a natural part of any particular organizational unit. Unlike many other technologies, from the outset this technology had a more general scope. Over the next four decades, this technology showed a remarkable capacity to penetrate the entire firm. Texaco IT Function's Eleven Eras Texaco's IT function history can be divided into eleven distinct eras: (1.) Pioneering with I T (19571966); (2.) The Computer Services Department (1967-1978); (3.) Rapid Growth - Databases and Networks (1979-1982); (4.) End User Computing (1982-1983); (5.) The User Base Explodes (19831984); (6.) Cutting Cost (1985-1986); (7.) Giving up I T to the Business Units (1987); (8.) The End of the I T Era (1988-1989); (9.) Downsizing, Outsourcing, and Cost Cuffing ( I 990--1995); (10.) Consensus Building (1996); and (11.) Transitioning to Acquisition (19972001). In 2001, Texaco IT entered its twelfth period with its merger with Chevron IT. Our story focuses on the years between 1957 and the Chevron merger. The names of the IT eras were chosen to highlight the major challenge facing the IT function at the time. Many of the eras were primarily about organizational challenges such as starting an IT function or cutting cost.
Having studied Texaco from 1989 through 2001, we accumulated thousands of pages of documents, interview transcripts, and the like. The written case study itself is a significant document, too large to present here. Since this paper deals with perception formulation, we only provide aspects of the history that describe the evolution of the ClO's role and the IT function. The entire case can be found in Porra et al. (2002).
Texaco
Before merging with Chevron in 2001, Texaco had 99 years of corporate history. It was founded by Oilman "Buckskin" Joe Cullinan and New York Investor Arnold Schlaet at Beaumont, Texas in 1902 (Texaco, 1990b). With the acquisition of Californian Petroleum in 1928, Texaco became the first oil-company to market in all 48 states. In 1905, the company entered the European market. In 1936 it was among the first oil companies to become involved in the Middle East and to produce and market oil products in Africa, Asia and Australia. In December 1984, Texaco acquired Getty Oil to expand its worldwide reserves of crude oil and natural gas, by 1.6 billion barrels and 2.5 trillion cubic feet respectively. In December 1988, Star Enterprise was formed. It was a 50-50 partnership between Texaco and Saudi Aramco, and its function was to refine, distribute and market Texaco-branded products in the states east of the Mississippi river. In the late nineties Texaco initiated Equiva Services LLC - the emerging IT, human resources and legal services company that supported the new TexacoIShell joint venture Equilon Enterprises. In addition a TexacolShellISaudi Aramco joint venture Motiva Enterprises was formed. From the early days with only a handful of people in Texas, Texaco grew to be one of the largest corporations in the world, doing business around the globe. Only recently has it begun to outsource its functions. During its first 80 years, the company evolved into an oil-giant and a Fortune 10 company with its asset value approaching $40 billion. But during its last two decades, survival dictated a leaner, more efficient and effective business. At the end of the century, Texaco was drastically smaller in the number of employees (ca. 20,000 in 1999 compared with ca. 67,000 in 1981), but nearly equal in assets (about $28.8 billion in 1998 compared with $27.5 billion in 1981). It has also been consistently profitable (except for 1987 when Texaco paid out $3 billion to settle a Pennzoil lawsuit).
indeterminist nature and its representation in historical narrative, self-referential. Thus, historical narrative is a re-presentation of historical content by its authors.
Era Name
Dates
CIO
Type
IT PersJBudget CIO Reporting at End of Era Relationship

700/$70 mill. 708/$88 mill. 920/$117 mill. Chairman of Board Senior VP
( Pioneering with IT
The Computer Services Dept. 79-82
1957-66 Savage Initiator 67-78 Hodges Builder
II / I
Hodges Builder 82-83 83-84 85-86 87-89 90-96 96 Hodges Builder
Senior VP
Rapid End-User Computing

The User Base Explodes Cutting cost Giving IT up to the Business Units - End of IT Era Downsizing, Outsourcing and Cost Cutting Consensus Building
1200/$136 mill.* Senior VP 1150/$154 mill. 1000/$142 mill. 970/$135 mill. 440/$110 mill. 480/$115 mill. 510/$12O mill. Senior VP Senior VP Senior VP Senior VP Senior VP Chairman of Board
Hodges Consolidator Hodges Entrepreneur Metzger Distributor Bennett Downsizer Amidei Consensus Builder Transitioner
Transitioning to Acquisition
97-2001 Diaz
*The temporary increase in the IT personnel and budgets beginning this era is due to Getty acquisition not Texaco management's decision to increase Texaco IT function's budgets or personnel. The two IT functions will be consolidated during the following eras
Table 1. The eleven eras of Texaco IT and their IT leaders But others were about technological challenges such as introducing databases and computer network technologies or most consequentially, putting a workstation on every Texaco employee's desk. Six IT Leaders The eleven eras saw six IT leaders with distinct roles: (1) K. Ward Savage Jr., the initiator CIO (1957-1972) started the IT function; (2) Les Hodges the builder, consolidator, entrepreneur C/O (1972-1988) built the majority of Texaco's core information systems and the IT organization, consolidated Getty IT function with Texaco IT and finally successfully managed IT function under difficult resource constraints; (3) Jim Metzger the disfributor CIO (4988-1993) distributed IT to the business units; (4) Don Bennett, the downsizer C/O (1994-7 995) significantly reduced the IT function personnel; (5) Les Amidei, the consensus builder CIO (1996) attempted to build consensus between the downsized IT function and Texaco top management; and (6) Rick Diaz, the transitioning CIO (1996-2001) was the last Texaco IT function leader. He led the department through the merger with Chevron IT. In the beginning of the story, it is difficult to separate the history of the IT function from its leaders. So intimate is the relationship between the personnel and the IT leader. But toward the end of the story, the IT function becomes increasingly distinct from the CIO. We have summarized the eleven areas and their IT leaders in Table 1. In the following excerpts of the Texaco IT history, we highlight some organizational and technological indicators that seemed us to be important in explaining the perceptions gap at Texaco. Beyond ' their eras, naming the primary roles of the ~ 1 0 sand we will list their primary organizational and technological accomplishments. We will also list the IT function personnel and budget numbers at the end of each period. As a comparison point, we show Texaco's total employee numbers at the end of period. Finally, we indicate the number of Interactive Computing System (ICS) users. This number shows how many end users had a terminal or a PC on their desk at the time. After each excerpt, we discuss signs of a perceptions gap in Peppard and Ward (1999)
For practical purposes, we call the IT leader "a CIO. Factually at Texaco, only one IT leader, Diaz, ever held the title "CIO".
terms of leadership; structure and processes; service quality; and values and beliefs, as well as reasons why we believe the gap widened over the years. In the leadership category, we were interested in finding out: the kinds of roles the IT leaders played; their reporting and personal relationship with top management; the top management mandates that they confronted; and the kind of relationship the CIO had with the IT function. In the structures and processes category, we looked for any major organizational and procedural changes in the IT function. In the service quality category, we recorded information that describes how the IT function was perceived by top management or users. In the values and beliefs category we described signs that the IT function developed values and beliefs of its own.
Excerpts of the Texaco IT Function History Pioneering with IT (1957-1966)
top managers rather than "an IT leader." Since there was no IT organization, Savage continued to apply structures, processes, values and beliefs he was accustomed to - those of the firm's top management. Savage was equally new to computer technology and its business applications, like the rest of the executives. At the time there was great uncertainty about the future of corporate computing in general. IBM invited executives like Savage (and later Hodges) to brainstorming sessions with the purpose of innovating new ways to utilize the new resource. Computers were a novelty and their successful application in firms was a shared challenge to all.
The Computer Services Department (1967-7978)
C/O: Savage C/O type: Initiator CIO I T Function Personnel at the end of the period: 700 I T Function Budgef at the end of the period: $70 million Main I T accomplishments: First computer installation; process and plant control Texaco Employees at the end of period: 74000 ICS user base: <few hundreds The first General Manager of IT was Ward K. Savage, Jr. a senior manager from the refining department, who reported directly to the chairman of the board. Under Savage's lead, Texaco installed its first mainframe computer in 1957 (Hodges, 1986). This first mainframe, an IBM 705, would not threaten even an early model PC. Two years later, in 1959, Texaco pioneered the application of computer technology to process and plant control in one of its refineries (Texaco, 1988a). Savage teamed with International Business Machines (IBM) to be an early user of their lnformation Management System (IMS) in the late 1960's. The first ten years of Texaco's IT were characterized by close co-operation with IBM, experimenting with new ways hardware and software could make routine organizational processes more effective and efficient in both the administration and production arenas.
Perceptions Gap - Signs and Reasons
CIO: Hodges (beginning in 1972) C/O type: Builder C/O I T Function Personnel at the end of period: 708 I T Function Budget at the end of period: $88 million Main I T accomplishments: third generation programming languages (e.g., COBOL), more sophisticated computers and operating systems (e.g., IBM OS/360, Texaco's core applications, mainframebased, static, hierarchical, data-orienfed transactionprocessing systems, local area networks (ARCNet) Texaco employees at the end of period: 66000 ICS user base: -1000 In 1967, Texaco formed the Computer Services Department (CSD) (Texaco, 1983a). The purpose of this department was to serve the entire firm from upstream through the downstream operations. In 1969, CSD assumed responsibility for computing in Texaco offices outside the United States. Three years later, in 1972 Les Hodges took over the IT function lead. At that time the reporting relationship changed (McDonald, 1999). Les Hodges, the General Manager of lnformation Systems and Special Technology Department, reported to the Senior Vice President of strategic planning. The reporting relationship between the General Manager and one of the Senior Vice Presidents was maintained until 1988 when Hodges retired. During the next fifteen years, Hodges would effectively report to "every chairman of the board...and every president" of Texaco since they were routinely promoted from the ranks of Senior Vice Presidents (Hodges, 1998). In retrospect, Hodges believes that this reporting relationship was important because it allowed him to have access to the top executives on a first name basis (Hodges, 1998). At that time, the CSD department moved to third generation programming languages (e.g., COBOL) and more sophisticated computers and operating systems (e.g., IBM OSl360). Starting in the '70s and
We found no indications of a perceptions gap between top management and IT during this first era. At Texaco, Savage was considered to be one of the
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continuing until the mid '80s, many major, core applications were implemented (Texaco, 1988a). This meant mainframe-based, static, hierarchical, dataoriented transaction-processing systems. The first decade proved the success of CSD because the department successfully developed the bulk of Texaco's core business applications. But comparatively speaking, Texaco's information systems were raised to a new level of complexity when they were interconnected by local area networks. The first local area network, an Attached Resource Computer Network (ARCNet), was installed in 1978 (Texaco, 1992).
with degrees in IT. This fundamental change in the IT function personnel composition was necessary but alienating. These new IT professionals knew plenty about systems analysis and design but no longer shared an understanding of oil business with the users (Hodges, 1999). From the top management viewpoint, the IT function increasingly spoke a foreign language.
Rapid Growth Databases and Networks (1979-1982)
This era marks the beginning of the perceptions divide. Top management first started the IT function, because it saw a need to control IT cost (Texaco, 1988a). But the perception gap rapidly grew to be more broad based. By the mid 1970s, end-users at most departments had joined the executives raising questions about the high cost of IT (Texaco, 1988a). The first and perhaps the most important contributor to the perception divide was a direct result of initiating the Texaco IT unit. As every other unit, the IT function now needed to justify its existence to others. To this end, the early stages of what eventually became "charge back systems" were implemented (Hodges, 1999). These systems allowed the IT function to charge usagebased expenses as "overhead charges" to the business units. The end result of these systems was unfortunate and consequential. The charge back systems emphasized the cost of IT without clearly connecting these costs with any benefit that could be expressed in financial terms. Another sign of the growing distance of the IT function from top management was the changing reporting relationship. Hodges was reporting to top management rather than being top management like his predecessor. Yet, Hodges still enjoyed a special and personal relationship with top executives due to his work history in oil production at the firm (Hodges, 1998). But dropping the IT function down one organizational reporting level was an indication of top management's negative perception of IT. The rest of the IT function increasingly did not share Hodges's status in the eyes of executives. The reason for the growing divide between top management and the IT function was a structural change in the department. In order to cope with the rapidly growing technical complexity of information systems, Hodges hired the first college graduates
CIO: Hodges CIO fype: Builder C/O I T Personnel at the end of the period: 920 I T Budget at the end of the period: $117 million Main accomplishments: Databases, prototyping Texaco employees at the end of period: 55000 ICS user base: -3000 In 1979, CSD was renamed the Computer and lnformation Services Department (CISD) "to emphasize the growing role of information" (Texaco, Inc., 1988a, p. 6). Information, decision support, relational databases, and prototyping characterized this era at Texaco. The CISD developed strategies to put novel database technologies to good use to store and access various records such as land records for oil exploration. According to Hodges, at this point the department was "barely keeping up with the growth...to get all the work done" (Hodges, 1998). By this time, CISD had fallen badly behind in its application development. In 1981, the department had a total of 321 on-going projects; a backlog of 385 projects; and it anticipated 156 new projects to be added on to the backlog list.
During this era the IT function began to demonstrate values and beliefs different from the firm at large. It turned outward in search for justification of its resource requests. Hodges's primary mission to educate top management about IT values can be seen in his reports to top management. Prior to this era IT function's reports to top management had been factual and informative about technology and its applications. Now they increasingly had a promotional tone. Hodges used external entities such as the American Petroleum Institute (API), other oil companies and third party service providers to give comparison oints for Texaco's low IT expenses (Texaco, 1993)'63 In these comparisons, Texaco IT was typically leading other oil companies in cost efficiency. For example in 1981,
" An example of a comprehensive comparison between Texaco, SoCal, Arnoco, Gulf, Exxon, Shell, and Mobil's IT personnel and computer costs can be found in Texaco, Inc. (1993).
CISD had the smallest IT staff among all of its competitors. With 1,423 total IT personnel corporate wide (3.8% of the total personnel), Texaco was far below Exxon, Amoco, Gulf, Shell, SoCal, and Mobil (Texaco, 1988a). Texaco also spent the least on computing power. It had the smallest computer lease expenses of the seven oil companies (24.1% of the total computer expenses). Despite the tight budget, Texaco was often mentioned as a leader in applying the latest computer technology with its CISD ranking among the fifteen largest in the country (Texaco, 1983a). We consider this era to be the first that clearly featured the IT function as a distinct identity from the firm at large. The unit now increasingly associated itself with IT functions of other firms. The frequent comparisons with third parties in reports to top management clearly demonstrate the function's awareness of its good relative performance on one hand and of the perception gap on the other. That IT function resources come to a near halt during this era speaks to the fact that these promotional efforts had little or no impact on top management. One important reason may have been the considerable system backlog the IT function was struggling to deliver at the time. If the cost efficiency comparison results are ignored, the IT function seemed ineffective.
End-user Computing (1982-1983)
terminals on their desk, they found new ways of exploiting computers and the IT department fell even further behind in delivering applications. The ICS initiative more expanded rapidly than other technology in the past. By December 1982, the Texaco ICS user base in the United States was 2,900 and growing (Texaco, 1983a). By the end of the year, the cost of ICS computing was 25% of all IT function computing cost while only a year earlier the corresponding cost had been insignificant (Texaco, 1981a). Commensurate growth also rapidly occurred in the demand for end-user training. ICS suddenly had a significant educational workload in addition to developing systems for the increasingly involved user.
We know now that end user computing turned out to be a passing fad. End users were not ready for the challenges that came with complicated tools such as RAMIS, Tell-A-Graph, FOCUS, NOMAD or SAS (Texaco, 1988a). In retrospect, the experiment could have brought the IT function and the business functions closer since end users now experienced the same difficulties as IT in terms applying computer technology. But instead at Texaco, users quickly adopted only the central message of end user computing: user applications were easy and fast to develop. But instead of honing their own programming skills, users adjusted their expectations of what the IT function should deliver and how fast. As a result this era marked a rapid widening perceptions gap. The IT department found itself supporting a whole new realm of computing with its own CPUs, tools, applications development, training, maintenance and support. Existing IT resources were stretched to accommodate the significant increase in computing demand".
The User Base Explodes (1983-1984)
C/O: Hodges C/O type: Builder C/O I T Personnel at the end of period: 1200 I T budget at the end of the period: $136 million Main accomplishments: end user computing suppotf, PCs Texaco employees at the end of period: 68000 ICS user base: -5000 At Texaco, with the arrival of the end-user computing the department began an initiative called Interactive Computing System (ICS) and the resulting application environment was labeled Decision Support. For support CISD organized an lnformation Center "to enhance end-user productivity" (Texaco, 1984). This meant providing intelligent workstations and PCs to the engineers and office workers in addition to dumb terminals previously used in traditional administrative applications. The ICS initiative was tailored by Hodges and welcomed by CISD. At the IT department, shifting IT responsibility from CISD to the user departments seemed like a good solution for all (Hodges, 1999). However, the ICS initiative was welcomed as an answer to the applications backlog too soon. As rapidly as the user departments got PC's and
CIO: Hodges C/O type: Consolidator CIO I T Budget at the end of period: $154 million I T Personnel at the end of period: 1150 Major accomplishments: consolidating Getty's I T function, end user computing support, relational data bases, corporate wide computer networks Texaco employees at the end of period: 54000 ICS user base: 27,500
" The apparent increase in the IT function's resources at the end of this era is due to Getty acquisition not end-user computing support. Over the coming eras, the IT resources of the two firms will be consolidated.
In 1983, Texaco acquired Getty Oil Company. The acquisition affected the IT function in two ways. First, a Getty building was transformed into a second datacenter for Texaco outside Houston. Second, Getty's IT department and information systems were integrated with Texaco IT. Within a year, Texaco and Getty's computing resources were "quickly and smoothly" merged into one corporate operation with one Getty building in Tulsa transformed into the Houston IT'Smirror site (Texaco, 1988a). In 1983 and 1984, the need for IT support grew with the expanding company. Following the merger, both the IT budgets and number of IT personnel grew. As a result, users now operated computing equipment in 125 marketing locations, 14 producing locations, 10 refineries and 26 other offices. Abroad, Texaco had computer systems in Dublin, London, Rotterdam, Brussels, Rome, Oslo, Stockholm, Copenhagen, Hamburg, Athens, Canada, Latin America and West Africa (Texaco, 1984). Texaco IT now globally penetrated all business units and most functions. Support functions (the first automation wave), and the primary downstream functions of manufacturing and marketing (second wave) were all automated to a degree. ClSD also faced new technological changes. In 1983 the department faced two consequential advances. CISD: (1) implemented its first relational database system, and (2) created its first "corporate wide" computer network. The local area networks were complemented by an IBM Systems Network Architecture (SNA) computer network, which connected all terminals and PCs to centralized computing resources (Texaco, 1984, 1988a). With these two new technologies, the scope of data and its application shifted from local to global; hierarchical to relational; and from application specific to shared corporate data. Meanwhile, ICS grew in popularity at an unexpected rate. The department's planning reports from the times consistently show growth estimates that were significantly too low. In reality, by early 1984, the number of ICS users had nearly doubled and the number of PCs had grown over six-fold in only two years (Texaco, 1984).
same relative amount of resources the department had in the 1970s when it managed a small, local, IBM mainframe-based set of core applications, ClSD was now responsible for (1) merging two IT functions; (2) starting a mirror data processing center; (3) a global computer network of hundreds of computers from a dozen vendors; (4) coping with two major technological shifts; and (5) supporting an interactive user base exceeding 7,500. Of the IT function's five major tasks of the era, supporting end-user computing turned out to be most taxing of the department's resources. In 1984, the cost of supporting the ICS initiative had increased to an estimated 60% of IT function's total cost -- up 35% in just two years (Texaco, 1981a). The IT staff strained to accommodate the growing demands of end-user computing, the Tulsa mirror site and support for new technologies. During this era top management's maintained a deaf ear to Hodges's resource requests. This effectively turned him into an entrepreneur within the firm. "I still got them [resources], but 1got them in strange ways. "(Hodges, 1999). Apparently oblivious to IT functions growing workload, top management mandated reductions in IT personnel effective immediately. While this top management decision is difficult to justify within the context of the IT function, it was in keeping with what was going on with the firm at large. Top management may have ignored Hodges's requests anticipating short-term financial trouble ahead. But even after Texaco's trouble passed, IT function never recovered. During the following eras, the IT function was systematically squeezed out of its own business.
Cutting Cost (1985-1986)
C/O: Hodges CIO type: Entrepreneur CIO I T Budget at the end of Period: $142 million I Tpersonnel at the end of period: 1000 Major accomplishments: automatingbusiness functions as a result of McKinsey A VA analysis; plan to distribute I T to business units Texaco employees at the end of period: 48000 ICS user base: 14000 In 1985, Texaco's perpetual good times came to a sudden end. The firm lost an $11.1 billion lawsuit to Pennzoil arising from the 1983 Getty acquisition. Pennzoil successfully demonstrated that Texaco had "tortuously interfered" with its agreement to buy 43% of Getty. This lawsuit was the largest corporate settlement ever paid. To pay the damages, Texaco sold under performing parts of both its upstream and
During this era the IT function resource squeeze grew more severe. In 1984, ClSD now employed in excess of 1,100 people counting the new Getty IT personnel. In 1983, the total ClSD budget was approximately $117 million or less than 0.5% of Texaco's total revenue that year (Texaco, 1981a). With nearly the
downstream operation and began a wide array of cost cutting, outsourcing and exploration partnering. In addition to this huge damage payment, the world oil price plummeted to only $12 per barrel from its $35 per barrel high only five years before. The result was massive downsizing at Texaco. By 1987 Texaco filed for bankruptcy and posted a $4 billion loss. But through massive downsizing and restructuring the firm recovered quickly. This massive restructuring significantly impacted the ClSD operation. In 1985-86 all departments at Texaco went through a McKinsey and Company Added Value Analysis (AVA). Hodges recalls the kinds of system requests addressed to the ClSD (Hodges, 1998): We had at that time...a hundred and fifty accounting offices around the United States. People fook orders to get product. Each office had 20, 30 or 40 people in it. A service station...could probably pick up a phone and fell the guy to take the order. He would fhen call the trucker to come and get the product, load if, and fhen move if out to the service station ... prepare the invoice ... manually. And all that cost was operating expenses. It was called "transportation costs': I automated all that ... I put in ... five computers around the country ... Now I have ten terminals that are computer controlled. There's a couple of Tandem machines ... they operate 24 hours a day, seven days a week, never go down. Had to put a telecommunications network to every service station in the United States. ...and it took six or seven years to do that, as big as we were (p. 7 ) Simultaneously with this significant automation effort, ClSD budgets began to decline due to corporate wide cost cutting (Texaco, 1988a). While responding to the business units' AVA related automation needs, ClSD was planning for a major organizational change. In August 1985, a project team was created to review a new organizational structure (Texaco, 1985a). The primary objective of this team was to create a plan to distribute various CISD groups to the business units. Only areas such as procurement and recruiting were excluded from the plan. While all other IT would be distributed, these tasks would remain at CISD. While CISD's importance as the IT service provider was coming to an end, its contributions to Texaco's business units over the years had left a significant mark. According to an informal survey conducted in May 1987, Texaco had almost 4,300 computers installed in the US. (Texaco, 1992). "Clearly, " wrote Hodges, processors
and processor power have become an integral part of our business" (Texaco, 1987, p. III.B.l). Texaco's computer support was now truly global. The corporate SNA network supported 20,000 terminallPC devices in the U S . and thousands more abroad (Texaco, 1992). After the reorganization of IT, the significance of the IT function to other Texaco departments declined significantly due to the rapid growth of computing within the business units. By the end of 1987, IT department provided only 37% of Texaco computing resources. That year ClSD was renamed the "IT Department" (ITD) (Texaco, 1988a). Hodges wrote in the 1987 ITD plan (Texaco, 1987): Texaco continues to be an industry leader in the use of advanced computer technology. In many circles, the company is recognized as having a very efficient and effective central-site-processing environment. American Petroleum Institute industry statistics indicate that Texaco corporate computing function is a low-cost information producer by all comparative measures, yet the company is recognized as the technology leader at the same time. Our analysis is that the two conclusions are tightly linked. (p. l.B, I-I.B.2.)
This era features the importance of the IT function at Texaco. AVA related automation was an essential part of Texaco's corporate mission to grow more efficient. But this era also continues to illustrate the perception gap: Top management reduced IT function's resources while adding to its workload. Extending resource cut backs to the IT function was understandable in some sense. This decision was consistent with the "Added Value Analysis" (AVA) results. Most units would have to do with less. But AVA made Texaco more dependent on IT than ever. The constant and comprehensive reporting from the IT function's part (cf., Texaco, 1987, 1988a) and Hodges's personal, close relationship with top management made no impact. Hodges recalls (Hodges, 1998): biggest pressure I felt was in mid '80s... McKinsey and Company came in and did a the value added analysis of corporation...And...fhen you'd meet, and they'd say, "Well, we can eliminafe this, we can eliminafe this, we can eliminate this. We're going to do all these eliminations and try to get by cuffing out this. And don't ask for extra people on this. ' And they had a whole bunch of pretty good recommendations. I would say that 70% of all the benefits to be derived from that study fook CISD
...the
over two years to do. It was basically a transfer of work from people (the business units) to me (CISD) ... We were going to reduce fheir (the business units3 expenses, but mine (ITD's expenses) was going to go up!...Ifelt like a forty year old man being circumcised! The pain of it was terrible. (p. 12) By this era Texaco top management had ail information necessary to be competent information system appraisers. Throughout his five eras in Texaco IT leadership, Hodges had an ability to induce the business unit managers to admit the savings the IT function helped realize. Every year, Hodges would provide to the executives a list of the projects the IT function was doing for them (Hodges, 1998). For each project, he would (1) show the cost of the system to the IT department; and (2) provide each business unit's leader report on the benefits to their unit -- measured in dollars and saved jobs. "So 1 had those numbers available to me. 1 had them [execufives] commif fo me what those numbers were. And they knew when fhey did [commit the numbers], 1 would pass them on up the organization." (Hodges,1998). We have every reason to believe that at this point, Texaco top management knew the value of their IT in great detail. This information made no positive impact on their decisions about IT function's resources.
Giving up IT to the Business Units (1987) and The End of an IT Era (1988 - 1989)
The morale of the remaining employees was low. TQM's emphasis on teams and team-involved management was hoped to raise employee spirits. ITD emerged from the turmoil displaying mixed feelings (Pilgreen, 1992). While some teams improved their work circumstances by applying TQM, others had a difficult time justifying the time spent on the exercise. They felt ITD's resources were spread too thin. Yet others refused to take part at all. IT personnel morale remained low and employee attitude defensive. In his annual plan Metzger wrote: "The next three to five years will be a period of great change and upheaval within Texaco, as well as a period of great change in the computer industry" (Texaco, 1988a, p. 2). The new and distributed IT organization was described as a "hybrid-matrix" (Texaco, 1988a, p. 3). The IT professionals had reporting responsibilities to both the business units and ITD management. The dispersing of the IT personnel to business units was the first step toward leaner IT personnel in general. Over the next few years, the business units would reduce the newly inherited IT personnel through retirement and normal turnover. Moreover, some business unit leaders had a difficult time understanding what ITD could do for them. PCs appeared to provide all necessary IT infrastructure. Support for this rapidly growing PC infrastructure was one of the last IT components provided by ITD (Pilgreen, 1998). We went through a problem in ... the early '90s ... when you could walk to CompUSA and pick up a PC and take it home and in an hour or two have it out of the box and running. A lot of our execufives seemed fo believe that if I put a PC on fheir deskfop ... I have created a much simpler environmenf. They really didn'f understand that we were creating an environmenf ... far more complex than fhe mainframe environment we had. (p. 18) While the total computer utility processing power had increased 69% over four years, total ITD expenses continued to decrease because the business units were increasingly responsible for providing their own IT services. In 1988, total ITD expenses were $95 million or 0.27% of Texaco's total revenue of approximately $35 billion. Moreover, ITD's costperformance was thought to be very good by IT management. In 1988, the ITD manpower rates in categories such as programmer, programmerlanalyst, system analystlproject leader and supervisor1 manager were benchmarked against rates of third parties such as EDS, AVG, GEISCO and IBM, and found to be lower (Texaco, 1988a). This was in
C/O: Metzger C/O fype: Distributor C/O I T Budgef af fhe end of period: $135 million I T personnel at the end of period: 970 Major accomplishments: disfribufing I T function personnel fo fhe business units Texaco personnel at the end of period: 39000 ICS user base: 15000 In 1988, Jim Metzger assumed Hodges' position as the General Manager of ITD (Pilgreen, 1998). In I988 and 1989, Hodges's last major initiative took effect when Metzger completed the movement of various IT groups to the business units. In 1988, ITD was also affected by a corporate wide Total Quality Management (TQM) initiative. Texaco needed to rethink its processes after aggressive corporate wide restructuring. In three years Texaco had liquidated more than $10 billion in assets from $37,744 to $26,337 million to successfully emerged from bankruptcy. From a 1984 high of 68,088, the number of employees had dropped by almost thirty thousand people in 1990 (Texaco, 1990a).
keeping with ITD's desire to be "cosf compefitive"with anyone in the industry.

This era introduces a new IT leader, Jim Metzger. While TQM, Metzger's first major undertaking slowly went by the wayside with no lasting impact. Metzger was well liked by the IT department personnel. The general feeling was that during Metzger's times, top management's understanding of the criticality of IT increased and the autonomy of the IT leader grew. Having been Hodges's apprentice for years, Metzger continued Hodges' reporting practices delivering comprehensive information about the IT function's to top management consistently and periodically. Within the IT function, Metzger was seen to be more able to effectively communicate the complexity of the new computing environment to the top management. This ability gradually decreased some executives' "tendency to micromanage" (Pilgreen, 1 998). During his era, Metzger also responded to the top management renewed mandate to keep cost down. He made an attempt to build a more sophisticated model of contrasting IT cost with value. A sign of Metzger's popularity among the top management is that at the end of his tenure as an IT leader, he was promoted out of IT to top management. But this promotion did little to change the IT function's fate. IT function's status decreased during Metzger's times. An organizational change dramatically reduced IT personnel's stake in their product. From this point until the Chevron merger, business units were responsible for "whaf, when and where" and the IT function for "how" (Pilgreen, 1998). Now officially, IT professionals performed "work for hire". This era clearly features an estranged IT function with a growing suspicion of top management intentions. Interviews conducted about TQM a few years later indicate an all time low in department morale (Pilgreen, 1992a and 1992b).
Downsizing, Outsourcing, and Cost Cutting (1990-1996)
replaced Metzger. During his era, IT function's role in corporate computing gradually diminished along with a decrease in the IT department's budgets. The department continued to be in charge of the IT infrastructure and recommending directions of technologies and standards to the business units. But purchase decisions about applications and hardware were now made by downstream and upstream organizations -- not at the IT function. At this point user organizations had become semi-autonomous in terms of their IT. One role for IT became standardization. This meant for example integrating incompatible e-mail systems, multiple word processing systems and several desktop vendors (Pilgreen, 1998). Supporting multiple environments required IT personnel with a diverse skill set. "Standardization meant cutting cosf by recommending one or few technologies to choose from" (Pilgreen, 1998).
During this era, the general perception within the IT function was that Texaco top management's understanding of the criticality of the IT function was increasing. But this turned out to be a misunderstanding (Pilgreen, 1998). The next fifteenmonths were "shocking". Bennett closed the Tulsa office (and associated data-center) and outsourced distributed services to IBM. He reduced ITD from over 800 employees to 440. Most likely, Bennett was hired with one specific task in mind. "It was as if Don had a mandate from the top to downsize IT" (Pilgreen, 1998). The reduction in IT personnel was more radical than the general decline of Texaco employees during the same year. But more important for the IT professionals this was a first time in the history of computing when IT was a focused target of drastic layoffs. Bennett's time as an IT leader ushered in a new perception within the IT function. The IT leader had joined top management as a target of distrust. Some of the growing suspicion of the IT leader was undeserved. Outside the downsizing effort, Bennett spent considerable time with the business unit leaders attempting to communicate the value of IT by contrasting cost with services rendered. But compared with Hodges and Metzger, his reporting practices were different. Most significantly Bennett stopped holding periodic management conferences to keep top management and business unit leaders informed about IT. He also relied more on face-toface meetings and less on written reports than his predecessors. The general feeling at the IT function felt that Bennett was not as successful as his
C/O: Bennett C/O type: Downsizer C/O I T Budget at the end of period: $1 10 million I T personnel at the end of period: 440 Major accomplishmenfs: Closing the Tulsa dafa processing center, outsourcingI T Texaco employees at the end of period: 29000 ICS user base: 19000 In 1994, Don Bennett, an experienced "cost cutter"
predecessors in communicating the value of IT to top management (Pilgreen, 1998). In retrospect, Bennett was caught in a compromising position between top management and the IT function. Promoting IT function's services while downsizing the unit sent out mixed messages to top management and IT personnel alike.
Consensus Building (1996)
employee numbers and budgets largely intact. In retrospect, this era is best characterized by a near complete resignation of the IT function from its leader. Partly due to the lack of IT function's co-operation and perhaps unfairly, Amidei's legacy was limited to an some improvements in resource management (Pilgreen, 1998).
Transitioning to Acquisition (1997-2001)
C/O: Amidei C/O type: Consensus builder C/O I T Budget at the end of period: $115 million ITpersonnelat the end of period: 480 Major accomplishments: I T resource management, matrix organization, SAP Texaco employees at the end of period: 24000 ICS user base: 20000 In March 1996, Les Amidei became the new General Manager of ITD. During his eighteen months with the department, Amidei introduced a matrix organization to replace the traditional hierarchical organization ITD had "naturally gravitated back to" over the years following Metzger's reorganization effort. Although Amidei's leadership included many good ideas such as improved resource management across managers, teams and projects, the remaining IT professionals received it with cool resignation. Amidei's times were characterized by enterprise solutions that began to hold promise for improving IT productivity and controlling costs. Other oil companies started adopting enterprise solutions like SAP or one of its competitor products. Texaco followed suit -- but this major new project did little to improve the morale within IT.
C/O: Diaz C/O type: Transitioning C/O I T budget at the end of period: $120 million (end of 1999) ITpersonnelat the end ofperiod: 510 (end of 1999) Major accomplishments: consolidationwith chevron IT Texaco personnel at the end of period: 20000 (end of 1999) ICS user base: 20000 (end of 1999) Since the end of 1997 until the merger with Chevron in 2001, the IT department was called "Global lnformation Services" (GIs) and was led by Rick Diaz. He took over a department of only 480 people. Many believed that the worst was over and morale was improving. Since Hodges, Diaz was the first IT leader who directly reported to Texaco's top management. He carried the title CIO. All these were considered signs of the strengthening of IT at Texaco at the time (Pilgreen, 1999). After Diaz took over, the IT department was reorganized several times. But by then the IT personnel was so used to reorganizations and turmoil that change came as no surprise. GIs continued to decrease in size. Several new joint ventures with Shell and Aramco subsumed all of Texaco's downstream operations. The "new Texaco" consisted ostensibly of only upstream operations in the United States and worldwide. At the corporate level the separate U.S. and international operations were replaced with a single global Texaco. This cut one management level corporate wide but it also impacted the IT function. In retrospect, the business units had varied success with IT cost containment. While Texaco's U.S. production organization still had a sizeable IT unit at the time of the merger, downstream operations had in large part turned over their IT to the ShellITexaco joint venture Equiva Services (Pilgreen, 1999). Contracting their IT to third parties led some to form the opinion that 'downstream operations was leading led the way in further reducing I T cosfsl(Pilgreen, 1999). By the end of 1999, Texaco cut its work force to a mere 20,000 employees. Many IT projects such as
The general feeling at the IT function was that Amidei was a victim of circumstance (Pilgreen, 1999). The distrust of Bennett seemed to continue with Amidei. Moreover, at this point the IT function was already so short of resources that a well-managed organizational change such as that Amidei suggested was not felt feasible by the department. Moving to a matrix organization was considered a secondary objective in an atmosphere of struggling for survival. At the time of Amidei's departure, the morale of Texaco's IT professionals was said to have reached yet another new low. Measured by IT function personnel numbers or budgets, Amidei did not necessarily deserve the negative attitude from the part of his personnel. Through his short stay Amidei maintained both the
the SAP implementation, went to the joint venture services company rather than to the corporate IT department. The rationale was that projects like these were better placed close to the primary customer. In 1999, with a little over 400 employees, GIs continued to manage the desktop outsourcing contract, the corporate IT infrastructure and advise the business units about the future directions of technology. In 2001, Texaco merged with Chevron. When the merger became imminent, few within the IT function were willing to speculate on the future of the department.
The last era of Texaco's IT function features outsourcing IT. This effort was part of a corporate wide outsourcing effort and not a reflection of the IT function's performance. Since the quality movement in the early 19901s, the department had routinely benchmarked its service against other companies and not only those in the oil business. These comparisons were used to promote the IT function within the firm (Pilgreen, 1998). However, these promotions had apparently no impact on top management.
On the other side of the equation, there are the cumulative contributions of IT to an increasingly efficient Texaco. This side shows that over the years the small investment in IT was put to an increasingly effective use at a staggering rate. During Savage's times, the first 700 IT employees and an annual budget of $70 million brought the first computer installation and process and plant control for an end user base of a few hundred users. Hodges built Texaco's core applications; local area networks; corporate wide computer networks; hierarchical and relational data bases to an end user base of 14,000 with an average IT staff of 996 and an average IT budget of $128 million. In summary, with three hundred additional people and $50 million dollar increase in the IT function budget, Hodges automated Texaco. The overall effect of the IT function is even more staggering. During the forty years of the IT function, Texaco grew and then eliminated over 50,000 positions. Since the IT function participated in the automation projects as "overhead" we can only speculate on the total effect of the IT function's efforts in creating the "new Texaco". Hodges noted the typical Texaco executive's response: He was saying, 'Man, I have really cut m y expenses. I have cut my expenses $50 million. I saved 5,000 people, but this damned overhead is eating me up:..we [IT function] do the same function...but all of the sudden it became overhead ...Ithink American businesses have had a bad eye about overhead being so high. And one of my theories about overhead is that...we've transferred work to it. (Hodges, 1998) In retrospect, it is clear that Texaco's IT function did a stellar job under an increasingly difficult resource squeeze. Even a casual comparison of the resources of the IT function with its contribution show the severity of the gap between what top management contributed to IT and what it expected IT to deliver13. In this paper, we have learned about the gap in many ways. First, the perception gap was immune to IT leadership. No IT leader significantly alleviated the negative perception of the IT function's performance. Over the four decades of the IT function at Texaco, all IT leaders had significantly different roles such as: initiators; builders; consolidators; entrepreneurs; distributors; consensus builders; downsizers; and transitioners. Most of the ClO's served for five years or less. Only Savage and Hodges served over five
'3 In this paper, it was possible to provide only brief excerpts of the IT function's contributions at Texaco over the forty years of its existence. The complete story can be found in Porra, et al., 2002.
Discussion
Outside the Texaco IT story, the perceptions gap can most tellingly be put into financial terms. On one side of the equation is the total cost of the Texaco IT function measured by IT budget and personnel numbers. This side is a story of forty years of increasingly efficient use of IT resources. Since the 1970s, IT personnel numbers grew gradually from 700 in 1970 to peak at 1200 in 1984 when they began a gradual decline to little over 400 IT employees in 1999. Over the same time period, IT budgets started at $70 million, peaked at $159 million in 1984 and declined to $120 million in 1 99gq2. Compared with Texaco's total personnel and revenue numbers, Texaco IT personnel never exceeded 3 percent of Texaco's total personnel. Over the years, the largest IT department's annual budget was around $200 million, which represented only a few percent of the firm's total revenue. By comparison to the technology investments in oil and gas production, the IT budget remained, relatively speaking, unchanged and insignificant when compared with the personnel and revenue numbers of Texaco at large.
While the 1984 IT personnel and budget numbers may seem high in relative terms, they represent mostly temporary peaks due to the Getty acquisition.
years. Only Hodges's term spanned two decades and many eras. Five ClO's had only one primary role that they typically carried out during their tenure. Outside Savage, who for most part of his era had no IT function to lead, the perception gap was immune to IT leader roles. The gap was also unaffected by the IT leaders' relationships with top management. Three IT leaders had a top management mandate that dominated their era. For Savage, it was to "start an IT organization for cost control". For Metzger, it was to "keep cost down" and for Bennett, to "cut the IT function work force by 45 percent". IT leaders who carried out top management's missions were not able to reduce the perceptions gap. But IT leaders with their own organizational initiatives did not fair much better in mending the gap. Hodges and Amidei had their own organizational initiatives to better characterize their times at the IT lead. Of these initiatives, Hodges's is particularly interesting in terms of understanding the gap. Hodges significantly changed the composition, structure and processes of the IT department. In Peppard and Ward's (1999) terms, he transitioned the IT function from a traditional IT organization emphasizing technology and a reactive product development mentality to a "centrally decentralized" IT organization with strong relationships with business unit management and a proactive IT function. Hodges hoped that this fundamental organizational overhaul would counteract the fact that the new IT profession knew increasingly little about the oil business. But in retrospect, working side by side with the business unit personnel every day did little to mend the perception gap. Hodges's era also yields other central lessons about the perception gap. The gap was not affected by close personal relationships with top management. The gap persisted even when the IT leader shared a background in the oil business. The perception gap remained in spite of comprehensive and systematic communication. Through Hodges, Texaco's management was well informed by the IT department's long and short terms plans, application project progress reports, service benchmark results, budgets and personnel reports, and new technology impact reports. Letters, memos and monthly personal meetings complemented these reports. Because of Hodges' reporting, Texaco's top management knew the contribution and the financial value of their IT in great detail. But the perception gap persisted. In the final analysis of the forty years of the Texaco IT function, it seems that the perception gap always
existed. Essentially top management raised the issue of the IT function service quality in 1967. Users joined the service quality criticism a few years later. Since the inception of the IT department until its very end, the perception of inferior service quality persisted. Within the eleven eras, there was no era when top management or users expressed their satisfaction with the IT function. For forty years, top management complaints about the IT function remained ostensibly unchanged. They're [top management complaints about IT] still fhe classic complaints you hear about IT: It takes too long; i t costs too much; I didn'f get what I asked for. It is those same classic complaints. You know, we're delivering things in the Internet environment or on fhe desktop.. .a lot faster than we were ten years ago. But still not fast it's still the classic enough.. .But complaints.. . They [complaints] really haven't changed.. .They don't go away. They really don % (Pilgreen, 1998). Nothing IT leaders did improved the negative perception of the IT function's service quality. No amount of benchmarking against third parties fixed the gap. The eleven eras of the Texaco IT function were marked by an increasing resignation of the IT function personnel from the top management and later also from their own leaders. In retrospect, the values and beliefs related to this resignation can be considered a reason and a consequence of the perceptions gap. It is no coincidence that the IT function began to develop values and beliefs of its own soon after the composition of the department fundamentally changed in the late '70s. From that moment on, the IT profession had origins in an industry of its own. But the resignation of the IT personnel from its leaders put the IT leader into a difficult position between a distrusting department and a suspicious top management. The Texaco IT story includes a particular warning to the threesome of CEOs, ClOs and the IT profession. The forty years of issues related to the perception gap gradually alienated the IT function personnel from top management and eventually from their own leaders to the point of near complete resignation. The relationship between top management and the IT leader was equally problematic resulting in an awkward limbo between senior executives and IT personnel. In the long run, this kind of perceptual gridlock is most unhealthy for any firm. The Texaco IT story may also provide us with clues to why ClOs have a short tenure in general. The profession may simply have no
adequate organizational support to fulfill their job description.
Conclusions
An analysis of Texaco applying Peppard and Ward's (1999) four categories of 'perception gaps', yields a disturbing picture. At the end of the Texaco IT history, it is evident that top management perceptions of the IT leaders' and IT functions' performance developed in a vacuum. Indeed, we believe that the perception gap may not be related to the IT leader or the IT function at all. At Texaco, the perception gap seemed to exist even before the IT function came into existence. It was the very reason behind starting the department in the first place -- not a consequence of the function's performance. Nothing IT leaders did made the perception gap go away. After analyzing forty years of one IT function and its leaders, we submit that top management perceptions may be the only consequential measure of IT in many firms today. Thus, the problem for the CIO and the IT organization continues to be that top management negative perceptions form in spite of any factual information provided to them. As the diverse suggestions from the considerable amount of research on ClOs and IT functions indicates, it very difficult to get to the core reasons why the perceptions gap began in the first place and why it so resilient. But stories such as Texaco help us identify issues that continue to contribute to the gap. In retrospect, there was one particular era during which the perception gap widened rapidly at Texaco measured by IT'S resources versus its task. The first truly difficult time for the IT function was end-user computing in the '80s. During this era, the IT department's workload increased dramatically without corresponding increases in the department's resources. This era marks a first clear sign of a top management expectation of supporting a new technology and corresponding production systems "on the side". We believe that easy to use technologies such as PC technology in the '80s and the Internet technology in the '90s contributed to the false trend in top management expectations that computer systems are increasingly simple and inexpensive to develop, maintain and support. Texaco was a large and conservative firm. Its viewpoint of IT was equally conservative. The main purpose of applying computer technology was primarily to cut cost. While Texaco's IT story lessons may not be generalizable to firms with more proactive attitudes about their IT, they contain an important lesson to the IT field at large. In light of the Texaco IT
story, we believe that the perception gap may continue to plague future IT organizations whether they exist as in-house or outsourced functions. This will continue to be true until the IT profession at large solves the issues that affect the perception gap. It is clear that perception of IT leaders and IT functions is a phenomenon in its own right. Therefore it must be addressed independently of any actual performance of IT leaders, their organizations and actual value of the systems they help create. The most important lesson to the IS field is that ClOs and academics alike have spent far too much time worrying about "the winning CIO qualities", "IT benchmarking" and developing "IT performance and operations measures" instead of understanding the dynamics of perceptions in order to shape and manage them at the top management level. We believe that one important way for IT to avoid being a continuous subject of gossip about their ineffectiveness and resulting poor perceptions is to offer a counter story. But by this we do not mean a hyped-up 'best practice' vignette. The story has to be credible, detailed, descriptive and prescriptive. It has to show the real value of IT. Until now such stories have not been a primary interest of academia14or, for that matter, practitioners. Because of this vacuum, decades' worth of perception gap has formed. Until now, no one has advocated the explanatory counter story of ClOs and IT functions that automated large corporations providing significant but unrecognized efficiencies. Contrary to beliefs, corporations have been successful not in spite of IT but because of IT. In the long run it is important that top management, IT leaders and the IT professional share positive perceptions of IT leaders and organizations. IT and its contributions are inseparable from any corporation's success. Until we are able to resolve the perceptions gap the IT profession must create its own corporate agenda to cope with this unfortunate situation. Perhaps the most consequential mistake the IT profession has made so far is to accept the organizational categorization as "overhead." Charge back systems that reflect only costs and not contributions make successful IT histories difficult to write. The ClO's and IT function's contributions are hidden in internal reports, memos and recollections. While there is no doubt that every business unit benefited from the IT function, it is often difficult to express exactly how much. It is the IT profession's task to make sure that
14 One might argue that the Haward Business School case studies provide such stories but we would disagree since these are mostly used for teaching purposes.
its contributions are accurately recorded in the history.
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lnformation Systems Journal; Journal of lnformation Technology; Journal of Strategic lnformation Systems; and Journal of the Association for lnformation Systems. He is past VP of Publications of AIS. Jaana Porra is an Assistant Professor of lnformation Systems in the Decision and lnformation Sciences department of the Bauer College of Business, University of Houston. She has previously been on the faculties of the University of Southern California, University of California at Berkeley and The University of Texas at Austin. She has over fifteen years of information systems experience as a systems analyst, project manager, technology expert, managing director, and consultant. She has published in journals such as lnformation Systems Research, Communications of the ACM and Decision Support Systems. She is the co-founder and co-editor of the e-journal Foundations of lnformation Systems. Michael S. Parks is an Associate Professor in the Decision and lnformation Systems Department of the Bauer College of Business at the University of Houston. He has been at the University of Houston for thirty years teaching in the areas of operations research, statistics, strategy, and marketing research. For the past twenty-two years he has been in the area of management information systems. He is the co-founder of the management information systems specialization in the college and has taught information systems to over 16,000 students. He has published in journals such as Management Science, Journal of MIS, Operations Research Quarterly, Cybernetica, lnternational Journal of Production Research and Kybernetes.
About the Authors

Rudy Hirschheim holds the TennecoIChase International Chair of lnformation Systems in the Bauer College of Business, University of Houston, and is past Director of the lnformation Systems Research Center. He has previously been on the faculties of Templeton College - Oxford and the London School of Economics. He has also worked as a Senior Consultant with the National Computing Centre in Manchester, England. He and Richard Boland are the Consulting Editors of the John Wiley Series in lnformation Systems. He is on the editorial boards of the journals: lnformation & Organization;

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The Evolution of the Corporate IT Function and the Role of the C I 0 at Texaco - How do Perceptions of IT's Performance Get

Jaana Porra University of Houston Michael S. Parks University of Houston

...culture is a symptom rather than the cause of

The Perceptions Gap

Writing a History of Texaco's Corporate IT Function

How Do Perceptions Get Formed?

Forty Years of Texaco's Corporate IT Function8

IT PersJBudget CIO Reporting at End of Era Relationship

1957-66 Savage Initiator 67-78 Hodges Builder

Hodges Builder 82-83 83-84 85-86 87-89 90-96 96 Hodges Builder

Rapid End-User Computing

keeping with ITD's desire to be "cosf compefitive"with anyone in the industry.

adequate organizational support to fulfill their job description.

its contributions are accurately recorded in the history.

About the Authors

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