Magazine. Vol. 06, June, 2009.
Jan Muchez “We have a problem with intellectual discipline” 9
Daryl Beck “The place for technology people is dying” 8
Ludo Vandervelden “Cash is King” 18
Aart van der Vlist “Get your business to go lean!” 16
Philip Cattrysse “Offshoring was a major step for us” 10 Editorial: The new IT Professional Value of IT in times of a recession: CIO becomes business leader Labour Market and Productivity: Change and Skills KPN and Colruyt sourcing strategy: A fragile partnership The vendor-client relationship: Learn from your mistakes! Bringing business and IT together: Don’t go for SLAs Business simulation: Role-play leads to better IT alignment Get the business to go ‘lean’: Keep everyone happy Insights of the outsourcer is key: Resource management Column: Cash is King
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Crisis and Opportunity
ABOUT CIONET MAGAZINE
CIOnet Magazine is a CIOnet initiative, published quarterly and sent directly to CIOnet members and as a supplement to Data News. Produced by: Roularta Custom Media Publishing Director: Hendrik Deckers (hendrik@cionet.com) Editorial coordinator: Kurt Focquaert (kurt.focquaert@roularta.be) Photographs by: Jan Locus Printed by: Roularta Printing Advertising: Erwin Van den Brande (erwin@cionet.com)
When life gives you lemons, make lemonade ‘Every crisis is an opportunity’ is a statement that received a lot of attention in the past months. Given the exceptional financial crises and their effects on economics throughout the world it is sometimes hard to keep faith in this wisdom. And yet that is exactly what came up in many conversations I had with CIOnet members over the last 4 months. The current economic recession is a great opportunity for every CIO and IT manager to reposition themselves and their IT departments within the organisation. This is your chance to prove your business leadership and prove the value of IT. CIOnet Spain We are proud to announce the official start of CIOnet Spain. Managing director Mona Biegstraaten has created a top Advisory Board, chaired by Roberto Parra, CIO at Repsol. Other member organisations include Cepsa, Ferrovial, Spanish Tax authorities, Citi Group Europe, Telefónica, Sol Meliá, Barceló, Cemex, Miele, Catalunya Government (CEO), Universidad de Castilla la Mancha, UPM Investigación and Abertis. We are very proud to also welcome the national captain of industry Juan Soto and the government representative Luis Salvador. Vendor-Client Relationship under pressure In these challenging times, the relationships between vendors and clients are of top interest.
P REMIUM BUSINESS PARTNER
BUSINESS PARTNERS
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Good alignment, governance and sourcing management will optimise these relationships. These solutions are essential in times when renegotiating contracts and service levels with suppliers is seen as a major way to reduce IT budgets. CIOnet UK With great pleasure we announce the launch of CIOnet UK – the biggest market in which we have launched to date. Nick Smith is leading the UK network, and is currently gathering both a powerful and experienced Advisory Board and also charter Business Partners. As CIOnet establishes itself in the UK, we are getting tremendous interest from IT leaders and potential Business Partners to our proposition. We are very proud that in the UK CIOnet will be working very closely with CIO Connect ltd., the UK’s leading CIO networking organisation which has been around for over 10 years. The partnership will allow complementary networks to develop, building on each partner’s unique strengths and offering great options to CIOs and their direct reports in the UK. Furthermore, in this sixth issue of CIOnet Magazine you will find articles on Labour Market and Productivity, Sourcing Strategies and columns on Lean Business, Resource Management and Budget Cuts. Enjoy, HENDRIK DECKERS Managing Director - CIOnet hendrik@cionet.com
www.cionet.com
Editorial
The new IT Professional
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n these uncertain and unstable times, the need to align business interests with the IT organisation and strategy is becoming increasingly important. The service management philosophy is gaining greater acceptance, in line with the growing influence of technology in business processes. This has undoubtedly had an effect on the skills of IT professionals. Over the past decade, the shortage of qualified IT resources has become more discernible. The challenge for the new IT professional today is not only to excel in knowledge of technology, but also to understand the business dimension and take an overall perspective. Skills have become at least as important as knowledge. Similarly, task-centric orientation has been replaced by a focus on objectives and results. This new direction needs to be seen in context as part of the cultural change prompted by the service management philosophy. To help ease this transition, it is important to stress three matters that are frequently forgotten: information, so that we can understand the objectives being pursued; communication, since the flow of information must be bilateral so that the cultural change can be addressed through employee commitment; and training, which serves as the glue that binds people, processes and technology and gives them proper synergy. In the past, the relationship between professionals and technology in education has been unambiguous and tenuous at best. Today, education has proved itself to be an essential component that guarantees proper transition given the need to focus on new knowledge areas – financial budgeting and control, defining metrics, dashboards, etc. – and renewed skills, such as client management, negotiation skills and so on. At this stage, companies have to consider investing in education in order to provide IT professionals with what they need to approach this change successfully.
MONA BIEGSTRAATEN
Managing Director, CIOnet Spain mona@cionet.com
PICTURE ROBERTO PARRA
Chairman of the Advisory Board, CIOnet Spain, CIO of Repsol
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Opportunity knocks in a crisis
CIO becomes business leader The economic recession may be spurring CIOs on to make even more cost cuttings, but at the same time the crisis is also creating a golden opportunity for them. Because right now, it’s less difficult than before for CIOs to highlight the value of IT to their board.
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Bart Stofberg, Principal Consultant at Quint: “The recession is showing us that companies have to be versatile.”
he CIO is best to concentrate on the three C’s: cash, cost and customer”, says Freddy Van den Wyngaert, CIO at Agfa. “Of course we still have to free up cash and drive our costs down, but we must also never lose sight of the customer. Don’t forget, it is far easier to retain existing customers than it is to go looking for new ones.” As a result, in the current climate, businesses have to look after their customers more than ever. Which is something that can be achieved by boosting the efficiency of the services provided to customers.
“Despite the difficult times we are going through, we have to keep innovating and looking for new avenues. My advice is clear-cut: build on the bad times! And of course there’s a clear role for IT in all this, too.” In fact it is innovation – both in terms of the technology used and the business model – that can generate more turnover and produce growth in new markets. “The current recession is showing us more than ever that companies have to be versatile”, says Bart Stofberg, Principal Consultant at Quint. “IT helps to define the business’s competitive position. Successful companies invariably recognise IT as an important enabler. An unsuccessful business blames IT for getting in the way.” “The first response of any CIO to the crisis is clear”, asserts Erik Schut, Partner at KPMG. “Cost control and dependable portfolio management come first. Immediately after that you have to find an answer to the major changes in the business we are going through at the moment. Which is why having a smart IT strategy is extremely important.” This might include the company developing a clear pathway in which IT can make a significant contribution to the value created. Versatility Yet the strategic role played by IT can vary considerably. Where companies use IT purely as a support function, the focus remains on cost cutting. Companies can still achieve savings by standardising and consolidating their IT environment. The same thing applies to sourcing. In
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fact, the recession is a good time to review all business cases and take a fresh look at negotiating contracts with suppliers. Van den Wyngaert believes that new contracts should be evaluated monthly. “In a period of crisis, you have to be very flexible as a company and anticipate possible changes to the economic environment”, he says. “So it goes without saying that you need the same versatility in terms of IT to support changes to the business.” At Agfa, an interim evaluation showed that the business cases for areas such as outsourcing PC support and the service desk were out of date. “So we decided to provide this service again ourselves to our end users. We managed to do so at a lower cost, too – as well as regaining the customer intimacy we had lost previously.” But at the same time it is important that companies should not focus on IT-related cost reductions alone. IT should not be relegated to a secondary support role. It is actually no longer possible to cut back on IT without adversely affecting service. Most companies have already completed these sorts of cost-cutting programmes. IT needs to keep taking the initiative to achieve business improvement. The current crisis is in the process of defining the role of IT for the years ahead: top performer or leader. We are, in fact, at a decisive moment in that area. Into the boardroom If a company sees IT as an enabler for its business, then the recession presents an outstanding opportunity to implement process standardisation and achieve operational excellence and cost competitiveness. “Right now is the time to expand the use of specific tools for things such as gaining faster access to data, information and knowledge”, states Angelique de Vries, Director SAP Netherlands. “That way, IT helps provide information that supports decision-making.” It’s also a good idea to invest in collaboration tools, although of course
only once the IT department has been able to present a positive business case. “For projects where there is a fast and clear positive ROI, CIOs are currently coming up against far less resistance from the board”, says Freddy Van den Wyngaert. “In that regard, the recession is ideal for pushing through a number of projects – and at the same time elevating the CIO from the boiler room to the boardroom.” IT does, in fact, need to gain greater access to the boardroom, because that’s where the future of the company is being outlined. Unless IT is able to make a proper contribution, any plans are of considerably less value. Yet in practice, CIOs are still often left out of strategic discussions. “We need to be on our guard against DIY solutions”, warns Ron Tolido, CTO at Capgemini. “Once the business starts purchasing proprietary applications – out of dissatisfaction with IT – that only leads to even greater complexity.”
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Erik Schut, Partner at KPMG: “A smart IT strategy needs to provide an answer to the major changes in the business.”
IT as a business driver A third strategy consists of deploying IT as a driver for transformation and growth. According to Van den Wyngaert, the current economic context opens up an opportunity for the IT department to start acting more as an enabler and driver. Agfa is >
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> a good example. While the IT department ope-
rates to a large extent as a support and enabler department for Agfa’s own business, it also acts as a service provider for external customers. For example, Agfa’s IT department manages some parts of the IT infrastructure of hospitals as a subcontractor of the Agfa Health Care Business. This means it is generating additional turnover and acting as a partner for new business. “It’s up to the CIO to strike the right balance and see where the IT department can provide support as well as act as an enabler or driver”, continues Van den Wyngaert. “That’s where the multidimensional role of the CIO comes to the fore. Because at the same time he has to drive down costs and create new value. He has to wear two hats: IT manager and business leader. He also has to be pragmatic and develop a clear vision in the long term.” PICTURE
Ron Tolido, CTO at Capgemini: “Dissatisfaction between business and IT is likely to lead to even greater complexity.”
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Freddy Van den Wyngaert, CIO at Agfa and ‘CIO of the Year 2008’: “Build on the bad times.”
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Recession also impacting CIOs At the end of 2008, CIOnet launched a discussion forum on the subject of ‘The value of IT in a recession’. Based on input from the CIOnet members through a survey and roundtables, the core team will publish a white paper at the end of the year. Interim findings show that CIOs are taking a range of measures to tackle the current economic climate head-on. They are working closer with the business to better manage IT investments with clearer and faster business benefits. Unless there is clear, positive business benefit with a payback period of a year at most (and often even less), they are keeping a tight grip on the purse strings. Internally, they are tightly reviewing contracts with external partners and suppliers and planning targeted programmes – including consolidation, virtualisation and sometimes application
software rationalisation – designed to optimise existing infrastructure. They are also examining options for reducing business costs by improving communication and cooperation within the company. This involves investing in collaboration tools such as videoconferencing, which push productivity up and drive travel costs down. Over the coming months, the future activities of the workgroup will further explore those themes and may include the aspects of adding value to the business to free up cash and supporting extra revenue generation through innovation and information management. CIOnet held one event in Belgium based on the theme of ‘Value of IT in times of recession’ and another in the Netherlands. This article is an encapsulation of both meetings.
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Labour Market and Productivity
Change and Skills Obviously a lot has changed in IT in the past twenty or thirty years. But exactly what has changed – and what impact did those changes have on the labour market?
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“ think our profession has hardly progressed over the past thirty years. That’s a problem I attribute to the labour market and the lack of skills available.” Jan Muchez, CIO at KPN, wasn’t mincing his words as he began his presentation at the CIOnet ‘Labour Market and Productivity’ event. He went on to examine what has changed in software and projects. “The technical side may have moved on, but the problem remains the same and projects are still late.”
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Daryl Beck, Global IT Skills Director at Unilever: “I think the place for technology people in companies such as Unilever is dying.”
“The same thing more or less applies to Infrastructure and Architecture as well”, says Muchez. “Infrastructure has changed. Hardware and software have changed enormously. We may be talking about cloud computing these days, but the cloud is very little different from the mainframe of the sixties. The pendulum has swung from the IBM 360 to the standalone PC and terminal emu-
lation; just like it was before. We may use more connectivity, but apart from that, we’re back to where we started.” The same thing applies to the supply side. “Look how the industry is structured”, says Muchez. “We started out with great big monolithic companies in the 1970s, where you bought everything. And then we saw this huge explosion on the supply side. But now we’re basically back to where we were before. Oracle is selling servers. IBM is providing hardware, software and services – just like the old days. So, depending on which perspective you take, things have either evolved with enormous speed, or they have stayed the same.” Same skills It’s the same in the labour market. “I am now looking for exactly the same skills as I was thirty years ago”, states Muchez. “There are only a limited number of skill profiles out there.” Muchez believes there are perhaps only 10 relevant IT profiles. Like before, only do they carry different business cards. “Let’s take an IT business consultant, for example. We used to call this person an ‘analyst’ but it’s the same person.” Muchez also has an opinion about one of the fundamental problems of IT: variance. “The variance in IT is anything from one to ten. When I have an assignment and I give it to two people with the same qualifications, one will finish the job in a day, while the other will take ten. On top of that, it is highly likely that the person who finishes the job in a day will deliver better quality than the person who takes ten days. So variance is extremely difficult to quantify. That’s the main reason why projects are late.”
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Discipline “We have a problem with intellectual discipline, too. I work in a large, professional IT organisation. When I have a meeting with my management team and there are three options to choose from, we designate one of the guys to go off and find out which of the three options is best. He then delegates the task to one of his people. The upshot is that the outcome is never one of the three original options. There is always a fourth and a fifth option. It’s intrinsic to doing business. And it’s something we don’t address.” The real challenge, according to Muchez, is how to transfer our collective experience. “The big challenge is not so much how we transfer knowledge, but how we share experience”, he says. “Because experience is about learning from your mistakes. I have a lot of experience, but how do I pass it on to others?” The world is changing The times they are a-changin’. That’s what Daryl Beck, Global IT Skills Director at Unilever, tells us. “The focus of growth is moving towards regionalisation and globalisation”, he asserts. “I blame technology for the change. We’ve brought down the cost of communication and improved reliability. All of which has enabled us to operate on a regional and global basis. When we talk to key customers, such as Wal-Mart or Tesco, they don’t want to talk on a local level; they want to talk at least on a regional level, if not a global level.” Beck sees more changes ahead: “Specialisation has become prevalent, replacing yesterday’s more generalist models”, he says. And the ‘job for life’ organisation no longer exists. “Whereas in the past Unilever used to take responsibility for my career, from cradle to grave, this is no longer the case. But we offer people the opportunity to move on.”
“As for organisational trends,” Beck continues, “I think the place for technology people in companies such as Unilever is dying. In the future we will buy the services they are providing now from the IT vendors. Another trend is that IT departments in large and medium-sized companies will be at least one-third smaller than they were in 2000. This is already happening, in fact, because we are outsourcing big chunks of our IT.”
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Jan Muchez, CIO of KPN: “We have a problem with intellectual discipline. And it’s something we don’t address.”
Unilever What are the implications for Unilever? “We are aligning ourselves with the business”, says Beck. “Unilever is moving from a ‘deliver everything’ organisation to one that manages strategic alliances with key partners. We’ve implemented a number of outsourcing agreements over the past three years. We have to manage the relationship with suppliers. We also have to make sure the right governance is in place. So there is the need to develop new, effective disciplines for issues such as client facing Business Partnering, and supplier facing Vendor Management.”
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KPN and Colruyt sourcing strategy
A fragile partnership Can a client company develop a genuine partnership with a supplier? KPN and Colruyt each give their own answer.
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he way I see it, sourcing has to produce a result that you see as the best solution yourself”, says Jan Muchez, CIO of KPN and member of the CIOnet advisory board in the Netherlands. “But stating black on white what constitutes the perfect sourcing policy is impossible.” But Muchez does give a couple of pointers as to what a CIO needs to take into account in general. For example, he prefers to have a supplier that is a market leader and is able to offer stability over time. And that’s something that may well turn out to be very important in the longer run. With an ERP implementation, for instance, a company should opt for a solution that has a lifecycle of somewhere between eight and twelve years. Speaking of which, Jan Muchez is somewhat concerned about market segments where consolidation is the order of the day. “Before we made a
‘You can never really talk about a genuine partnership.’ choice about our investment in a BI package, we waited until the big wave of consolidation in the market had passed.” KPN also keeps an eye on integration – any new systems that you buy must fit in with what is already in place – as well as on the provider’s business practices. “I only want to do business with suppliers who do business correctly. We do buy licences, but not until the system goes live – rather than at the start of implementation.” The commercial terms and conditions that the provider proposes later in the lifecycle of the product are also important for Muchez. He is less
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interested in the current functional and commercial differences between suppliers. Fragile partnership On the services side, Muchez focuses mainly on value for money and alignment. “I like to get what I am paying for”, he says. “But we’re quite happy to pay a good price for good performance.” Muchez tends to give preference to larger companies with the type of culture that fits in well with KPN’s. “There has to be continuity in the relationship with service providers. I can’t remember sending out any requests for proposals in the past two years.” That’s a situation that can only occur once the company has carefully put together its portfolio of suppliers. Muchez also has to keep conventional alignment issues in the back of his mind: the natural antithesis that exists between customer and supplier. “You can never really talk about a genuine partnership”, he says. “A supplier wants to increase its turnover with the customer, while the client wants to spend less. Any sort of alignment can only become possible in the medium term when you expand your business with your supplier because they are helping you to drive your costs down.” Jan Muchez argues for making a conscious choice for a particular service provider and then stick to it. There needs to be a clear balance between the scope of the service provider and the company’s own IT team so that any overlap can be avoided. With outsourcing, the underlying reason for the decision is very important. “Outsourcing is often focused on critical cost reductions: achieving the same or better service at a lower cost. It’s an approach that is a source of misery, too. It is better to measure the actual level of the costs and then to link performance to the supplier’s margin.” Select-
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ing and integrating suppliers takes up quite a lot of time in his approach,“but once the choices have been made, we are able to work much more quickly.” In any event, KPN only goes for European suppliers – which occasionally have part of the work done by an offshore partner. Communication and culture Colruyt has plenty of experience in outsourcing via Indian companies. In fact, the company has now set up its own Indian IT subsidiary. “Our IT environment has evolved with the company over the past thirty years”, says Philip Cattrysse, who has been CIO at Colruyt Group Services since 1990. “The trouble is, that has resulted in a particularly complex group of systems.” But switching to a package solution was not an option for the company. Research indicated that that would only provide a maximum of thirty to forty per cent coverage. So Colruyt decided to reengineer its IT environment from top to bottom. “We estimated that rewriting the software for the core business – purchasing, selling and logistics – would take us three thousand man-years.” In conjunction with the usual growth of the IT department, Colruyt would need 500 to 750 new IT staff members for the task. So with a maximum intake of around 50 to 75 IT-ers per year, the project would take 10 years to complete. In other words, it was obvious that Colruyt would have to bring in external partners. “Offshoring was a major step for us”, says Cattrysse. “Up until then, we had never outsourced anything at all.” Colruyt began a proof of concept process with the Indian company TCS. “There were lots of differences between us, especially in the areas of communication and culture.” A major problem for Colruyt was the rapid turnover of staff at the provider. Forty per cent of the team had changed within a year. TCS was also going through a spectacular growth spurt. “Of the hun-
dred thousand people working for TCS, we had just a hundred working for us”, relates Cattrysse. “So as a client we had very little clout with the provider.” Staff turnover under control As a result, Colruyt came up with a dual vendor strategy, which included working with a smaller company, NIIT. Two years on and Colruyt was still aware that staff turnover at both companies remained particularly high, generating a major need to train new staff. “If that was the case, we might just as well have invested in our own staff”, explains Philip Cattrysse. So Colruyt established Colruyt IT India in Hyderabad. “The climate is better there than it is in the bustle of Mumbai, and the city also has a large Western community, which played a significant role in the choice of location because it makes it easier to attract job applicants from Belgium to come to India and manage the company there.” In the meantime, Colruyt has reduced the staff wastage at TCS to under twenty per cent. Colruyt aims to keep turnover under control in its own Indian company by paying staff more than the average wage. “By 2013 we intend to have reduced our sourcing needs in India to two partners: our own subsidiary and one of our two current providers.”
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Philip Cattrysse, CIO at Colruyt Group Services: “We were looking at a project of three thousand man-years. That was simply not achievable without outsourcing and offshoring.”
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The vendor-client relationship
Learn from your mistakes! Working with other people is not always easy. Keeping the relationship between customer and supplier on track is a real art. “
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Els Blaton, CIO at Axa Belgium: “When starting up a new vendor-client relationship, make sure there is enough buyin from both business and IT.”
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Stef Knaepkens on the relationship between customer and supplier: “There are so many reasons for failure. But it always has to do with alignment, governance and sourcing management competence.”
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uccess doesn’t just depend on the business and results turned in by the vendor,” asserts Stef Knaepkens from Kite Consultants, “but also on the overall relationship between customer and supplier.” It is important for the client to maintain the attitude of a partner in the relationship at all times. There are also needs to have clarity about requirements and expectations, and the client has to measure and monitor the way the contract is being carried out. There are plenty of reasons why collaboration can go off the rails. “It always has to do with alignment, governance and sourcing management competence”, says Knaepkens. “Reasons for failure include drifting business objectives, unrealistic expectations, fuzzy scope, cultural gaps, staff leaving the project team, and so on. But just as easily, the quality delivered by the supplier can fall short, or else there can be unexpected changes to the business, sending the project into confusion.”
In February, CIOnet brought a range of customers and vendors together to talk about their relationships and experiences: Els Blaton (Axa Belgium), Carl Tilkin-Franssens (KBC), Alain Grijseels (RIZIV), Ludo Wijckmans (Microsoft), Bas Burger (BT), Jean-Claude Vandenbosch (Getronics) and Kris Poté (Capgemini). “We generally learn more from failure than we do from success stories”, said moderator Ludo Van den Kerckhove (VDK Gnosis). All of the participants therefore presented examples that demonstrated communication problems between IT and business, and between customer and supplier. The result often saw budgets and project lead times quickly going through the roof. Dare to say ‘no’ Quite a few of the examples showed what happens when there is a difference in maturity between client and vendor. Overselling by the provider – usually to keep the project on track – automatically leads to problems. Ironically enough, though, it is often the customer who provides the trigger for the overselling. Suppliers don’t like going against the customer’s wishes, even when what they are asked to do is not realistic. “The background and context to the job also play an important role”, said Els Blaton. “The business can change over the course of the project, making it difficult to control scope, lead time and budget. Sometimes the project itself needs a lot of changes as well, because it lacked the right preparation to begin with.” A recurring point raised during the discussion was that if a project is ultimately threatening to go wrong, the company has to have the courage to pull the plug. The client also needs to dare to say ‘no’. Sometimes it is better to admit your mistakes and limit the damage.
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Bringing business and IT together
Don’t go for SLAs Actually, it’s a ‘bit embarrassing’ to think that we have been talking about business-IT alignment for twenty years already, said Rob Poels, partner at the organisation consultancy Twynstra Gudde. Yet despite that, business-IT alignment is still clearly something of a problem.
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Wouter Haasloop Werner, CIO at Maxeda: “The vendor is not exactly ‘the enemy’ but you do find yourself in a strategic arena where each party has its own interests.”
hree speakers focused on this particular issue at a recent CIOnet meeting in the Netherlands.
Norien Kuiper, IT architect at the Tax Department, kicked off proceedings by explaining the concept of business-IT alignment. “There are six different approaches for achieving a good rapport between business and IT”, she said, taking her audience through all six approaches as part of her presentation, including organisation and management. She mentioned the example of an internal supply-and-demand organisation, although Wilfred de Herder, CIO of Océ, said that he thought that was a very theoretical way of looking at things. “In our organisation,” he said, “we have one young man called ROI (return on
investment), and his workmate, EVA (economic value added). That’s how things are with us in terms of IT.” Reverse marketing ‘Vendor management’ was the focus in the presentation by Wouter Haasloop Werner, CIO at
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Maxeda. First, how do you go about looking for the right party to handle your outsourcing needs and then how do you go about building a workable relationship with them? “The vendor is not exactly ‘the enemy’,” he stated, “but you do find yourself in a strategic arena where each party has its own interests.” He gave his audience a number of practical tips, such as ‘reverse marketing’ – i.e. looking for a vendor that fits in with the type of organisation. “If you are an entrepreneurial organisation, it makes sense to opt for an entrepreneurial vendor.” Relationships The main topics of Rob Poels’s presentation were emotions, the way people work and so on. You can have as many models and structures as you like, but in the end, business-IT alignment is all about relationships. For Haasloop Werner, having a good working relationship with the vendor is all about the defining factors of knowledge, experience and relationships. In his presentation, Poels talked about success and failure factors in business-IT alignment, including a ‘buddy system’, in which IT manager and business manager meet to have a drink from time to time to go beyond their ‘moaning relationship’. IT is a thorny topic for many managers, because it is complex and expensive and IT projects often fail. “So it is important to get a dialogue going between business and IT that wins over the trust that business has in IT.” He also examined various ways of building up a good relationship, with surprising results. For example, it seems that signing SLAs can have no effect at all, except when business and IT agree to experiment together.
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Role-play leads to better IT alignment
Business simulation Grab@Pizza, the everyday, successful pizza company, is in dire straits. Halfway through the year half of the planned turnover has been achieved and profits are small.
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hat’s how the ‘Grab@Pizza’ business simulation game, that CIOnet Netherlands has produced in conjunction with GamingWorks, starts. 4 senior managers sit around the table and their task is to get the company back on top over the next 6 months. The task set to the team (consisting of business and IT managers) is to support the business in its initiatives by providing the right IT tools, plus the right planning and implementation. For the first few months, the IT team is far too busy with its own problems. IT needs to be kept running and – oh yes – they still have a business. Result: turnover is a bit better, so is profit. But the CEO is still not happy. After some reflection provided by the game leader (Jan Schilt – GamingWorks), the players discover the major success factors of business and IT alignment. Jerry Luftman’s maturity model (which sets out the 6 elements that have an effect on the maturity of business and IT alignment) comes in very handy and the participants are able to extract some valuable tips from it. The team is then given time to optimise the process.
model again and it is good to see how this sort of game helps to focus on improving maturity. Pretty realistic After the game, Jan Peter de Valk, CIO Benelux of DHL, says: “I can see exactly what actually happened here. It’s a great game for developing IT and business awareness in terms of business and IT alignment.” Wouke Lam, Head PMO Infrastructure Sourcing at Shell, reacts: “A game like this is good fun to play. It’s also pretty realistic and good to see how you can get talking with one another about such an important topic as business and IT alignment.”
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Dear CIO, do you think you can succeed in rescuing Grab@Pizza and aligning your IT with your business? If so, contact j.schilt@gamingworks.nl or visit the www.gamingworks.nl website.
Jan Peter de Valk, CIO Benelux of DHL: “It’s a great game for developing IT and business awareness in terms of business and IT alignment.”
Almost happy The business is improving in the subsequent months and now decides to factor in changes also beginning to notice that IT is taking the right actions that are helping the business to be successful. IT solutions are identified in the marketplace, which helps the business to generate more turnover and lower overheads. Result: higher turnover and higher profits. The CEO is ‘almost’ happy. Afterwards, we check with each other to see what development the team made in business and IT alignment maturity. We also check the Luftman
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Get the business to go ‘lean’!
Keep everyone happy Get your business to go ‘lean’. Everyone will be happy. Starting with your client, who will find IT a lot less bureaucratic.
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t doesn’t matter whether you have introduced ITIL, CMMi, BiSL or ASL to your organisation, it is certain to have cost you a truckload of paper, processes, meetings, intranets, workshops, tools, consultants, money and time, etc. But the good news is that after months and sometimes even years of persisting in your endeavours, the results you were looking for are now finally being achieved. The way IT is organised is becoming more professional and under greater control, more predictable even. In other words it is delivering positive results for those businesses that use it properly. I would say that most IT organisations in 2009 are at around level 2, with just a few at level 3.
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Aart van der Vlist, Director Application Management at ING National Netherlands, is the author of this article.
BPR In the 1980s, the term ‘process optimisation’ was all the rage, ending up as ‘BPR’ – Business Process Redesign. You swept up all your old processes and made a brand-new start with a single efficient process. The idea behind it was a good one because processes tend to become a bit battered over the years. After various incidents, changes to the legislation, new management philosophies and so on, processes get adjusted and a kind of process patchwork quilt comes into being. The processes involved in the IT organisation of large Dutch companies also fit together a bit like that. Right back from the age of the mainframe, processes have evolved as a function of midrange, con-
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nectivity, workstations, etc. Then, as they became more rounded off, added to and enhanced, processes were shoehorned into standards such as ITIL. But as a result of this evolution, the processes, procedures and tools of the average large IT organisation on levels 2 or 3 have taken on the look of a process patchwork. Lean manufacturing I am a fan of ‘lean manufacturing’ myself – the process optimisation method used by Toyota aimed at eliminating waste from processes (‘muda’). BPR features the simplistic notion that complex processes can be put in place from a best practice in one fell swoop. Lean manufacturing takes the existing process and cuts out all waste through a process of continuous improvement. LEAN looks at variations in demand (Muri), process variations (Mura) or waste that creates no value for the customer (Muda). The Muda categories constitute a checklist by which every IT process can be reviewed: defects, overproduction, transport, security, storage, movements, transfers, over-processing and unused creativity/capacity. Apart from ITIL, CMMi, BiSL, ASL or any other neat box you care to name: have you reached level 2 or level 3? Stay there for a year and get your business to go ‘lean’. Everyone will be happy. Starting with your client, who will find IT a lot less bureaucratic. And then there’s your staff, yourself, your controller and your suppliers. Who should be doing it? You and your own management. But beware of process and model makers in this round of cleaning! The views expressed in this article are written as a private individual.
Column
Insights of the outsourcer is key
Resource management As far as IT Governance, and more specifically the management of IT’s four major resources – Information, Applications, Infrastructure and Human Resources – is concerned, operational outsourcing is still the main topic of Resource Management with Enterprise Architecture a strong second among CIOs and academics.
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hose findings were discussed during a brainstorm session organised by Unisys and attended by some 30 CIOs and academics. The industry has clearly matured as there is now awareness that it is essential to have the CEO ‘on board’ and that IT outsourcing is not a technology issue. At the same time it is recognised that ensuring that the insourcer has the right capabilities, is key to success. The same maturity does not seem to exist for application outsourcing where the top three issues identified were cost being too often the main
There is now awareness that IT is not a technology issue. driver, the need to maintain flexibility and agility, and the challenge of managing complexity. I suspect the business still does not care much about complexity, expecting IT to solve it, but will continue the push for cost and agility. Abdication The industry is clearly least mature in managing information as a resource as few enterprises have an established enterprise data model. Again complexity was put forward as an issue with the hope that pragmatic and simple tools would help. When have tools ever been simple? When have tools ever solved a complex problem? The word ‘abdication’ came to mind when the top two solutions put forward were leadership and in-
creased responsibility for executives and the business. If IT is not going to lead this debate, who will? More specifically, moving the PMO to the business to drive business-IT transformation is a great idea but who is going to sell it if not IT? Leadership While the old cries for alignment, executive support, better business cases and attracting the right skills, keep on coming back, a lot of hope is put on Enterprise Architecture as a means to move resource management forward. It is good to see that the insight in the issues of IT sourcing has significantly increased. For the solutions, however, I am betting on leadership as the main solution to create a compelling vision of change, to drive understanding of the challenges involved and to promote the adoption of good practices.
PICTURE
Erik Guldentops, author of this article, is Executive Professor at the Management School of the University of Antwerp (UAMS), the inventor of COBIT, former director at Swift and advisor to the boards of the IT Governance Institute.
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Column
Cash is King
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f you don’t have enough cash nor access to cash, no way you can survive. And even if you have cash, shareholder value generation is still a must. Hence, a budget cut always has a purpose. And the most obvious one is to stop the bleeding and preserve the survival chances of the company. The following guiding principles may turn out useful: 1. Be creative and help the CFO to achieve the bottom line objectives. The CIO has a unique position in the company. He knows – or should know – what mix of technology he needs to improve the business processes, which in turn should lead to reduced costs, increased revenue or a combination of both. 2. Your IT vision and roadmap will be your best tool to decide on deprioritisation of activities and projects with reallocated resources. As a CIO you are the conductor of the orchestra in deciding what comes first in new process improvement and business support. 3. To balance between OPEX and CAPEX is not really a solution when cash flow preservation is the financial priority. This implies that the CIO needs to understand the mechanism of those expenses. The cash flow impact will normally be identical, but the implications on P and L and balance sheet are different. 4. The distinction between lifeline IT activities and new IT projects for sure will help you to identify cutting potential. In lifeline you always can do better. Reduce your current running cost. Renegotiate all your contracts, but beware for lowering today’s cost at the expense of future cost. Software as a service might under such circumstances help but look at it also from a net present value perspective. Basically, new projects should only be started if the payback is less than 6 months. Anything beyond this cut off point is difficult to financially secure. 5. A key question is: are you flexible enough? How many contractors versus permanent employees do you have? If you have well balanced your organisation and operations then you should be able to move into cost reduction mode swiftly by eliminating the variable cost. When the going gets tough, the tough get going. And survival ‘logic’ should be the sole reference stick.
LUDO H. VANDERVELDEN
Senior Vice President Toyota Motor Europe Ludo Vandervelden passes the baton to Jean-Pierre Cardinael, former CIO and member of the Board of Fortis Bank. Theme: how to manage human resources, organisational and functional aspects in a process of merger and demerger.
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