If the business of the organization is essentially centered around IT products - that is IT develops the products that the business sells, then IT's competition is the IT departments of the competition. So if I am in the business of delivering storage solutions and my competition has a product that offers a more efficient storage solution at a competitive price, then their IT deparment is delivering a better output than mine. Of course we have to realize the gray areas here - like R&D investment, etc. But at the end of the day, that is how the IT department would be compared for a tech solutions provider.
HOwever, if the business sells traditional products and IT is merely a support function to fulfill items like customer service, billing, then the IT department's competition is both - the IT department of the competitor and the companies that offer off the shelf products to fulfill the need that IT is fulfilling - in our example - customer service and billing tools.

In our second example IT usually gets commoditized, while in the first example, it is usually a case of what can we do better.

In the former scenario, the CIO has to work very closely with the business to stay on top of trends and methodologies and in teh latter case, teh CIO has to stay abreast with the industry trends in the areas he/she supports the business. Either case, the CIO is in a tough spot.

The IT departments competitors are anyone or anything that offers the same or similar products or services that the IT department offers, or otherwise removes the need for the product or service.

One are that comes to mind is the class of services that have become commodities - those services that are generally the same regardless of the source of delivery, and for which the needs of one organization are typically much the same as the needs of any other organization. Email is one such service, with a number of vendors (Google, Hotmail, Yahoo) offering this service to both consumers and enterprises at a very low price point. When these services are offered on the internet to very large numbers of people, they generate an economy of scale that the internal IT department simply cannot match. There is no way for the IT department to deliver these commodity services as cheaply and effectively as the large providers.

On the other end of the scale lie consumer technologies, fast growing in functionality and initially penetrating into the enterprise through personal use by employees. Cell phones, IPods, Blackberries, flash drives and the like. Again, the scale of the user base makes possible the delivery of these services at a price point the internal IT department can't match. Significantly, the fastest growing sector of these are internet delivered social networking and information sharing technologies - often offered free or add-supported to the individual user, these tools deliver advanced functionality for the personal user.

None of this is news to the readers of this section of CIO.com. What I think is interesting is to turn the question around and consider who might consider the IT department to be a competitor. Looking at the definition above, nearly any project IT does that has the potential to transform the business processes of the organization is competing with a service that someone in the organization already offers or wants to offer. Deployment of an online or automated processing tool takes that job away from someone, who quite legitimately will see IT as a competitor to provide that service. This is often the core of the resistance we see during IT project implementations.

There are two lessons here, in addition to a reminder to be mindful. First, internal IT departments must evaluate the services they offer to see if they meet the test of uniqueness - are the services custom to the business, or simply commodities that might be better purchased elsewhere? IT should be providing differentiating factors, not basic services. Second, IT is itself going to be viewed as a competitor by business functional staff in almost any project in which IT is engaged. IT should focus on keeping ownership of the new process with the same staff, and endeavor to provide new services as opposed to merely replacing existing services. Turn the competitors into partners, both internal and external, and IT can provide much more value to the enterprise.

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Thomas M. MacKay
Associate Director, Systems Development
IT Services
Christopher Newport University
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