COVER BMEU1 v4:may09 29/05/2009 14:41 Page 1
PLUS: Peter Spencer, MD of bmi PAGE 28 Peder Tuborgh, CEO of Arla Foods PAGE 32 Preston Chiaro, CEO of Energy, Rio Tinto PAGE 36
www.bme.eu.com
•
Q3 2009
TOMORROW’S
WORLD HOW YOU COULD BE DOING BUSINESS BY 2020 PAGE 22
BT AD1.indd 2
21/5/09 13:25:52
BT AD1.indd 3
21/5/09 13:25:53
ROYAL JET AD.indd 1
5/5/09 15:15:15
ED NOTE BMEU1:may09 29/05/2009 15:05 Page 3
Editor’s note 3
End of an era Could offices become obsolete as workforces go mobile?
A
s you sit in your office reading this article, look around you and ask yourself, do you really need to be there? The answer, in many cases, will be no. All most of us need to carry out our daily work is a computer and an internet connection. There is no need for us to physically be in the office. Even meetings can now be held remotely using videoconferencing technology. A survey by IDC in 2005 predicted that by 2009 Europe’s mobile workforce will have swelled to 878 million, a rise of 20 percent in four years. That prediction was made before the financial crisis – which has forced many companies to look at how they can cut costs, in addition to reducing their carbon footprint. Reducing the size of their offices or the number of employees based there can be the ideal solution. Already major corporations are adopting this strategy. Microsoft, for instance, has added 400 new staff to its UK
“We will be taking away a significant number of projects that are not commercially orientated in the short-term. We will achieve this by turning every stone in the company” Peder Tuborgh, CEO Arla Foods (page 32)
campus in Reading without increasing the size of its offices, simply by introducing flexi-time and mobile working from home. And where Microsoft leads, others will follow. The big question is, does this mean that the office will become obsolete? The experts we interviewed for this issue’s cover storycertainly think so. One, Professor Nipan Maniar of Portsmouth University, said he believed offices will cease to exist altogether by 2020 and will be replaced by virtual environments employees log into from home. Professor Kevin Warwick of Reading University goes one step further by suggesting that some of the work once done by people in the office could be carried out by robots instead. The financial and logistical advantages to companies of not having office premises are clear. But questions must be raised over whether remote workforces will really be good for business. Sure, they will certainly improve
employees’ work-life balance and increase morale. But can employees really be in tune with the companies’ business objectives and motivated to work as a team if they are only at work by virtue of their internet connection? Professor Warwick’s prediction that robots could take over the workplace is worrying enough. But what if the employees themselves become robotic – logging into their virtual offices from home and working without creativity, passion or going the extra mile. Companies should consider this scenario carefully before choosing to unleash their mobile workforce. n
“When you look at the long-term historical perspective, those companies that continue to market and promote themselves during downturns generally come out stronger” Mark Lund, Chairman of the Advertising Association (page 110)
“Wealth is still out there and luckily people have enough money to buy our products” Manfred Fitzgerald, Director of Brand and Design at Lamborghini (page 104)
Diana Milne Editor
Oracle.indd 1
28/5/09 13:16:11
CONTENTS:may09 01/06/2009 09:09 Page 5
Contents 5
Tomorrow’s world Did you know that in 10 years robots could take over your workplace? Find out more from our team of experts who reveal how they think we’ll be doing business in the year 2020
28 A quiet revolution Peter Spencer, Managing Director of bmi, reveals the big changes happening behind the scenes at the UK’s most modest airline
22 32
36 Going underground Global giant Rio Tinto’s CEO for Energy, Preston Chiaro, on the face of modern mining
Food for thought We speak exclusively to Peder Tuborgh, CEO of dairy giant Arla Foods, about the crisis facing his industry
CONTENTS:may09 01/06/2009 09:09 Page 6
Contents 6
76 62
130 43 “Driving innovation at the speed of light” BT’s Matt Bross says he still pinches himself at having one of the “coolest” jobs in the world. Find out why
56 What do you see in UC? Brent Kelly poses the question
59 Unified Communications: The future beckons The latest trends, according to Frost & Sullivan’s Lavanya Palani Batcha
62 Global protection for a global business Munich Re Group CSO Michael Lardschneider discusses new dangers, his love of IT security and outfoxing the bad guys
EXECUTIVE INTERVIEWS 58 Andrew McDougall, Vodafone’s Unified Communications Group 80 Charles Ferland, BLADE Network Technologies 86 William Janse, Monidee 118 Martin Hanssmann, Millennial Net 128 Dave Jackson, 328 Support Services GmbH
Graham Titterington on what’s next for the IT security industry
With Carole Stern Switzer, President of the Open Compliance and Ethics Group
92 “Probably the best IT in the world” Carlsberg is streamlining its IT operations and chucking out legacy systems. We hear from CIO Kenneth Egelund Schmidt
100 The future of CRM The growing demand for CRM applications
104 On the right track 76 The enemies within Jarrod Haggerty, CIO of the Serious Fraud Office, warns companies to be on high alert against internal threats
82 Mr Nice Guy 66 The shifting security landscape
88 Playing by the rules
MasterCard Europe President Javier Perez, on the importance of being nice and why the credit crunch could be good for business
How the Italian supercar maker Lamborghini will drive demand for fast cars in a downturn
ROUNDTABLE DISCUSSIONS 48 Unified communications 68 IT security 134 Business air travel
EXACT SOFT AD.indd 1
18/5/09 11:32:13
CONTENTS:may09 29/05/2009 14:40 Page 8
Contents 8
INDUSTRY INSIGHT
120 “We are building the future, today”
122 Thomas S. Senger, Kofax 90 Thomas van Vooren, Everett
The rise of eco-industries and eco-innovation in meeting carbon emission targets, according to EU Environment Commissioner Stavros Dimas
110 How to get ahead in advertising
124 Cerf’s up
With Mark Lund, Chairman of the Advertising Association
Google’s internet pioneer Vint Cerf explains why infrastructure development is more important than ever in a tight economy
REGULARS
114 The marketing guru How technology can win customers, even in a downturn
ASK THE EXPERT
116 Championing energy efficiencies
64 Gerald Cäsar, xyzmo SIGNificant Group 102 Roland Rott, Exact Software
Dell’s Tod Arbogast talks about being the greenest tech firm on the planet
HEAD TO HEAD DISCUSSION 96 CRM
12 The brief 14 Insight 20 In my view 140 City guide 142 The knowledge 144 Objects of desire
130 High fliers Busting myths about business aviation with Brian Humphries of the EBAA
82 43
88
BUS AIR INT ADS.indd 1
5/5/09 10:19:47
CREDITS NEW:may09 29/05/2009 14:42 Page 10
Chairman/Publisher SPENCER GREEN CEO JAMES CRAVEN Director of Projects ADAM BURNS Editorial Director HARLAN DAVIS Worldwide Sales Director OLIVER SMART
Editor DIANA MILNE Managing Editor BEN THOMPSON Associate Editor JULIAN ROGERS Deputy Editors NATALIE BRANDWEINER, MATTHEW BUTTELL, REBECCA GOOZEE, MARIE SHIELDS, HUW THOMAS
Creative Director ANDREW HOBSON Design Directors ZÖE BRAZIL, SARAH WILMOTT Associate Design Directors MICHAEL HALL, CRYSTAL MATHER, CLIFF NEWMAN Assistant Designer ÉLISE GILBERT Online Director JAMES WEST Online Editor JANA GRUNE
Executive Vice President MAX FORD Project Director MAGGIE SCOTT Sales Executives MICHAEL ATTIA, JAMES WHITE, TONY KENNEDY Finance Director JAMIE CANTILLON Production Coordinators HANNAH DRIVER, HANNAH DUFFIE, JULIA FENTON Director of Business Development RICHARD OWEN Operations Director JASON GREEN Operations Manager BEN KELLY Subscription Enquiries +44 117 9214000. www.bme.eu.com General Enquiries info@gdsinternational.com (Please put the magazine name in the subject line)
Letters to the Editor letters@gdspublishing.com
Business Management Queen Square House, 18-21 Queen Square, Bristol BS1 4NH, UK Tel: +44 (0) 117 921 4000. Fax: +44 (0) 117 926 7444. E-mail: info@gdsinternational.com
Legal Information The advertising and articles appearing within this publication reflect the opinions and attitudes of their respective authors and not necessarily those of the publisher or editors. We are not to be held accountable for unsolicited manuscripts, transparencies or photographs. All material within this magazine is ©2009 BM.
GDS International GDS Publishing, Queen Square House, 18-21 QueenSquare, Bristol BS1 4NH. +44 117 9214000. info@gdsinternational.com
CORDA AD.indd 1
5/5/09 10:22:44
UPFRONT BM EU1 FINAL:nov08
29/5/09
14:17
Page 12
Frontline 12
THE SCRAPHEAP CHALLENGE
THE BRIEF
The UK government has joined its European counterparts in launching a car scrappage scheme. But some critics says this is a waste of resources. BM reports.
IT WORKED IN GERMANY and ones already set up in France, now the UK government is hoping Italy, Portugal and Germany – that its own car scrappage the latter having boosted scheme will provide a the country’s car Discounts of much-needed lifesales by 40 perline to the councent in March. In try’s beleaguered the first three are offered to owners scrapping auto industry. months after cars over 10 The scheme, Germany’s initiayears old under which owners tive was launched are offered a €2262 disVolkswagen reported a count in return for scrapping cars 36 percent increase in sales and over 10 years old, emulates the Opel a 50 percent increase in or-
€2262
UPFRONT BM EU1 FINAL:nov08
29/5/09
13:57
Page 13
Frontline THE BRIEF
13 the car owners themselves. A surthe government decided to pay vey by the UK-based car price €1131 of the discount, leaving guide Parkers, claims that the the carmakers themselves to scheme is unpopular among UK cover the remaining amount. motorists. It surveyed 600 peoJust days into the scheme, both ple, of which 81 percent said they Honda and Ford announced would not take part. Of those, 70 they had delayed their involvepercent said the scheme was not ment in it, citing lack of clarity generous enough. According to regarding what their financial the AA however, mass participacontribution should be. A tion is not necessary in order for Honda spokesman told the the initiative to deliver its aims. It BBC: “The original request was claims that if only one percent of for a contribution of €1131 from UK motorists took part it would the industry. We were looking still be oversubscribed. at splitting that between the The UK government has a manufacturer and our dealers relatively small window in but we’re being told that we which to make this can’t do that.” The work. The scheme spokesman went ends next March – on to say that Number of UK or beforehand if Honda was chalmotorists surveyed the target of lenging the fact by Parkers, who 300,000 cars that it had been said the scheme is not generous scrapped at a cost told manufacturenough of €339 million is ers alone would met. For the environment have to cover the paythe long-term benefits of this ment. Meanwhile Ford said the scheme are clear – increased company was working with the take-up of low emission cars. government to resolve some But the benefits for the econo“administrative issues” thought my are not. If the scheme to relate to VAT. reaches its 300,000 car target There are nevertheless 38 then the auto industry will car manufacturers that have benefit. But for how long and signed up to the UK scheme how evenly will the benefits and it has received strong supbe spread? port from trade and motoring With UK car sales having organisations. The AA motoring dipped by 28.5 percent in the group has claimed it could first four months of this year, pump as much as €2.3 billion however, one thing is certain: into the UK’s car sector. It has for the motor inalso been welcomed by the dustry failure British Chambers of Commerce, is not an whose Director General David option. Frost told the BBC: “A scrappage scheme is exactly the sort of policy we need during a recession. It will boost demand and help the environment at the same time.” For the scheme to be a success however, the most important people to have on board are
70%
ders compared to the same period last year. Now the UK government is hoping to achieve the same results. There are early signs however that the scheme may not deliver on the promise shown by its German counterpart. Already it has run into opposition from carmakers, which from the start lobbied the government to pay a subsidy of €2262 per car to motorists who took part. Instead
€2262
Discount given to motorists buying new cars
300,000 Number of cars the government aims to scrap
40% Amount German car sales rose following the introduction of the scheme there
€339 million Amount the UK government will spend on the scheme
38 Number of car manufacturers taking part
3500 kg Maximum size of car or van that can be traded in for scrappage
UPFRONT BM EU1 FINAL:nov08
29/5/09
13:58
Page 14
Frontline 14
THE LOWDOWN
SPAINGERMANY
BAROMETER ON THE UP INVESTOR CONFIDENCE is up at last in Germany according to figures from the Mannheim-based ZEW economic institute. It polled the country’s analysts and investors in May and found morale has risen among them and was now at the highest levels in three years. Overall economic sentiment rose to 31.1 percent in May from 13.0 percent in April.
GOING DOWN TOURISM IN SPAIN, which accounts for 12 percent of economic activity on the mainland and 80 percent in the Balearic Islands, has been hit hard by the European recession. The number of tourists travelling to Spain fell by 16.3 percent in the first quarter of this year compared to the same period last year.
DID YOU KNOW?
60 million tourism jobs will be Up to
lost worldwide if swine flu becomes a global pandemic
NEWS ROUNDUP • UK-BASED AIRPORTS giant BAA has said it will appeal against a decision by the UK’s Competition Commission ordering it to sell three of its airports. The commission aims to break up BAA’s monopoly in the UK airports market by forcing it to sell Gatwick and Stansted, then either Edinburgh or Glasgow airports. BAA, which is owned by the Spanish firm Ferrovial, is currently trying to sell Gatwick. However, it is appealing against having to sell three airports on the grounds that the commission’s decision was affected by “apparent bias”. • BT has announced plans to cut 15,000 jobs after reporting an annual loss of €152 million. It has already cut 15,000 jobs in the past 12 months, exceeding earlier expectations by 5000. It is suffering the most losses from its global services unit,
which services the network sysal profits, forcing it to heavily retems of large companies. It has duce its share dividend. It cut its share dividend by over recorded a pre-tax profit of half. Proposed job cuts repre€687 million– compared to €1.13 sent 10 percent of the firm’s curbillion last year. As a result, it rent workforce. has cut its share dividend for the • The European Commission has first time since 2000, by seven unveiled plans for a raft of meapercent. Sales at its UK stores sures to better monitor banks fell by 5.9 percent for the year and financial institutions in the leading up to March 28th. EU. The tough new proposals in- • Vodafone has announced clude the setting up of a new plans to speed up its cost cutEuropean Systematic Risk ting programmes after its annuCouncil to be chaired by the al profits halved to €4.7 billion. European Central Bank presiThe firm’s CEO Vittorio Colao dent, which would give EU natold a press conference it tions early warnings of threats to planned to complete its €1.13 financial stability. It also proposbillion cost cutting programme es the setting up of a European ahead of schedule following System of Financial Supervisors, the losses. He said the firm exwhich would be made up of three pected profits in the coming new EU bodies with legal authoriyear to be flat. It has already ty to supervise the banking, incut the value of its Spanish and surance and securities sectors. Turkish businesses and has • Retail giant Marks & Spencer has slashed €284 million from the suffered a 40 percent fall in annuvalue of its business in Ghana.
NEWSMAKER ROCK STAR AND CHARITY FUNDRAISER Sir Bob Geldof has turned his hand to building a media empire by revealing plans to become the main news provider in Northern Ireland. He told the Financial Times that his production company, Ten Alps, will be among those bidding for the lucrative contract later this year as part of the government’s shake-up of regional news. Ten Alps would offer 24-hour terrestrial and online coverage, he told the newspaper, adding that he believed that in the future online television will dominate: “Tendering out to the usual suspects simply isn’t going to work. In the age of the internet, the notion of television itself is as archaic as the word wireless – even if that has been reinvented for the digital age.”
UPFRONT BM EU1 FINAL:nov08
29/5/09
13:59
Page 15
Frontline THE LOWDOWN
PROJECT FOCUS THE WORLD’S BIGGEST offshore wind farm is to be built in the UK’s Thames Estuary after being given the go-ahead by the government. The €2.2 billion London Array project, which is being built by E.ON, DONG Energy and Masdar, will feature 175 turbines that will pro-
15
duce 630 megawatts of electricity – enough to power a quarter of the homes in Greater London. Planning for the programme will start this year and the first electricity will be generated in 2012. It will help the UK government to reach its target of having
15 percent of all UK energy produced from renewable sources by 2020. The project has been in the pipeline since 2006 but faced delays when Shell pulled out last summer to be replaced by Masdar, an Abu Dhabi based sovereign wealth fund.
EUROPEAN VIEWS
WORKERS from Continental’s tyre factory in the French town of Clairoix set tyres on fire during a protest in Paris against the forthcoming closure of the facility.
NINE TO FIVE IT’S NOT ALL BAD NEWS on the European employment front. According to the Association of Executive Search Consultants, jobs are expected to increase by these amounts in the following sectors in 2009:
Natural resources Media/Entertainment
A DELEGATE RESTS HIS HEAD on his briefcase during a high-level consultation on H1N1 during the 62nd World Health Assembly in Geneva.
26% 34%
Education Healthcare Government Pharmaceuticals/biotech IT
48% 32% 30% 26% 31%
AESC President Peter Felix, said: “Despite the current state of the global economy, our members still see several bright spots for executive hiring in 2009. Other sectors will begin to step up their executive hiring as the current uncertainty dissipates and greater optimism begins to work its way into boardrooms.”
A CAMPAIGNER JOINS union leaders at a march through the UK city of Birmingham to protest against job cuts.
UPFRONT BM EU1 FINAL:nov08
29/5/09
13:59
Page 16
Frontline 16 CUSTOMER SATISFACTION
ADOPTING THE RIGHT CONCEPTUAL MODEL is critical for any business software application, but that is only the beginning. The implementation of this model must be well conceived and well executed, and requires a sophisticated approach to ensure success. One such approach asserts that to optimise any business process, software solutions must be powerful, configurable, deployable, accessible, scalable and secure.
COMPANY NEWS HAPPY DAYS CONSUMER CONFIDENCE across the Eurozone rose in May for the first time in two years. Across the EU, the EU Commission’s economic sentiment indicator rose by 2.8 points in May, to 66.7 points. A spokesman for the commission said the rise “resulted from a clear improvement in
sentiment in the retail sector, which rose markedly, and by consolidation in the services sector.” Meanwhile the executive division of the EU Commission’s business climate also showed an improvement, rising to negative 3.17 points in May from negative 3.26 points in April.
POWERFUL: At the most basic level, optimised software solutions must provide all of the high-end features and functionality required for the process, and adopt the conceptual model most appropriate for the business process.
MIND THE GAP CONFIGURABLE: These powerful features must be completely configurable to reflect every aspect of each company’s unique processes, and must be easily customised directly by the people with the most intimate knowledge of the process. DEPLOYABLE: Once configured, the system must provide easy deployment throughout any size of organisation. This includes fast and complete data migration from previous systems, efficient end-user setup and installation, ease of training and ease of use, and rapid user acceptance and system adoption. ACCESSIBLE: Once deployed, every internal user, customer and business partner must have the appropriate access path to the system, whether web, wireless or client/server. All users must have the full and complete power of the system available, regardless of the access path, and all access paths must be usable in any combination, synchronised to a common database in real time. SCALABLE: The fully deployed and accessible system must easily grow with any size of organisation, from start-up to Fortune 500, and easily expand as the number of users, customers and partners increase. SECURE: Throughout configuration, deployment and use, all aspects of the system must remain completely secure, and system administration privileges must be tightly controlled. Password-controlled access must be implemented for everyone using the system, and extensive and definable privileges must be assigned for every user, customer and partner. For more information, see www.techexcel.com
dustry’s inability to attract stuDESPITE THE RECESSION, the dents to the profession: European construction industry “Construction has been notoriis still suffering from a critical ously bad at attracting students shortage of skills, with 77 perand other new entrants, which cent of professionals within the industry claiming this will hinder has exasperated the industry’s long-term skills developthe sector’s development. There is no ment. The UKdenying the imbased Chartered portance of Institute of of construction graduate and Building’s professionals said apprentice rethird annual their company had cruitment as skills survey already made these employees revealed that redundancies represent the fumore than threeture of the industry. quarters of construcOver three-quarters (76 pertion professionals believe there is a lack of skills. They said cent) of all respondents felt apprenticeships should be they felt the shortage is largely mandatory on public projects, due to companies being unable which would help to encourage to employ workers. A further 54 the employment of apprentices. percent said their company had However, economic problems already made redundancies. are forcing many companies to Michael Brown, Deputy Chief recruit fewer graduates and to Executive of the CIOB, said one cut the number of apprenticeof the biggest contributors to ships – just to survive.” the skills shortage was the in-
54%
UPFRONT BM EU1 FINAL:nov08
29/5/09
14:00
Page 17
Frontline COMPANY NEWS
17
UNIQUE BUSINESS MODEL TAKES OFF VISTAJET, the world’s fastest growcustomer can fly within, or being private aviation company with tween any of these regions for the largest wholly-owned commerfixed hourly costs, only paying cial fleet outside the Americas, has for the time they fly, because seen 25 percent growth in the first there are no positioning costs. quarter of 2009 compared to the VistaJet is continuing to same period last year. grow its executive management VistaJet Chairman Thomas team with the recent appointFlohr said: “VistaJet’s unique busi- ments of Dr. Gerald Wissel as ness model is attracting attention. Executive Vice President and Customers are looking for priGlobal Head of Charter vate aviation ownerBusiness, and Dr. Elias ship, but without Maroun as EVP VISTAJET having the onSales and has seen going costs asMarketing, sociated with Middle East. In growth in the first owning their May 2008, quarter of 2009 comown aircraft.” VistaJet placed pared to the same VistaJet is a an order for 60 period last year leader in the global aircraft with a list charter business and ofvalue of €868 million. fers customers a unique opportuThe order comprised Challenger nity to fly in new Bombardier 605, Learjet 60 XR, the newly inaircraft, at highly competitive mar- troduced Learjet 85, Challenger ket rates. VistaJet recently an850 and Global XRS. VistaJet nounced a new programme plans to have a fleet of more offering that gives customers anthan 100 jets by 2012 and conother way to access the VistaJet tinues to take delivery of new fleet with guaranteed availability. aircraft from Bombardier. The For the first time, customers now company will also continue to benefit both operationally and fimake further management apnancially from the largest service pointments in due area in business aviation, encomcourse. passing Europe, Middle East and Asia. A programme
25%
BRIGHT IDEAS WHEN UK CITIES look to reduce electricity costs, they often focus on street lighting. While shutting down segments of lamps at off-hours delivers the desired result, it’s far from ideal, upsetting residents and compromising safety. Milton Keynes Council took a different route. It implemented a smart street lighting system to reduce energy use, and also cut CO2 emissions, lower crime, reduce light pollution, and update the city’s image. Using new ceramic metal halide lamps immediately decreased energy use by 30 percent and increased lamp life (thus reducing inventory and maintenance costs). The council also implemented a LonWorks control network from Echelon Corporation that allows remote lamp monitoring and control, light scheduling and dimming based on the time of day, energy reporting and alarming, and operations auditing. The system’s energy and operational savings include:
1 2
Reduced energy costs (30 percent overall). About half is due to dimming, which includes both active dimming (reducing light output to decrease energy use) and optimal lighting (modulating light output to sustain safe, pleasing lighting levels). The rest is due to lower-power-consuming lamps. Reduced operating costs (ongoing). Along with inventory savings provided by the lamp technology, the control network supports predictive lamp failure notification. This improves customer service, decreases costs through scheduled maintenance, and helps lower energy use (failing lamps use more energy).
While the project makes a clear energy-saving case for smart streetlight networks and new lamp technology, impediments to nationwide adoption persist. Chief among them: electric utilities charge higher tariffs for data transmitted over power lines. The LonWorks control technology that’s key to this project uses existing power mains installed years ago to transmit data between lamps and service centers. This is not only an artificial tariff, but a roadblock to national energy independence.
UPFRONT BM EU1 FINAL:nov08
29/5/09
14:01
Page 18
Frontline 18
INSIGHT
BETTER PERFORMANCE IN A DOWNTURN
BEDTIME STORIES OVER A QUARTER of UK emportant work documents on ployees are so obsessed with their mobile devices. Of those, work that they are using a mo54 percent said the documents bile device such as a laptop in were not secured with encrypbed before they go to sleep, tion. Michael Callahan, Vice according to a new survey. President at Credant Credant Technologies interTechnologies explains: “This viewed 300 city workers for the survey confirms that there is a survey and found that growing population that is of those that work no longer restricted in bed, 57 perby working hours cent do so for or confined to of UK employees are between two the office buildso obsessed with work and six hours ing itself. that they are using a a week. The People are momobile device such as a laptop before majority adbile and will work they go to sleep mitted their anywhere – even in partners find it a bed. Therefore, when “very annoying habit”. sensitive and valuable data The survey was conducted to is being held on these devices highlight the security implicagets lost, it can have pretty tions of working on laptops detrimental and far-reaching from home. Almost half of the consequences to both the respondents said they hold imworker and their employer.”
Over 1/4
DID YOU KNOW There are now
242,000 millionaires in the UK compared to 489,000 in 2007 Source: Centre for Economics and Business Research (CEBR)
person on every level of your organWITH THE CURRENT STATE of the isation is privy to the same, accuglobal economy, companies are realising the importance of rooting rate information. The dashboard can alert your team to problems, their strategies in data analytics. trends, and opportunities in realMany are taking the next critical time, enabling them to immedistep and incorporating performance dashboards into their solu- ately collaborate and make decisions. Through the perfortion. Performance dashboards take the reporting and analysis ca- mance dashboard, you can communicate key strategies pabilities of your data anand goals to emalytics and combine ployees every day them with visual Companies are realising the to keep motivarepresentation, importance of tion and configiving the right dence high. people the right The impordata in the right their strategies in data tance of a perforformat to optianalytics mance dashboard is mise decisions and clear, but it is also imporaccelerate results. tant to remember that all dashInstead of manually searching boards are not the same. By and analysing information from picking the right performance multiple data sources, your team dashboard, you will have even can view the information they more capabilities and flexibility. need on a single dashboard that Options like Corda’s CenterView displays the data in a way that help companies stay up to date on makes sense to them. their data analytics, make educatPerformance dashboards help bring back confidence in your ed decisions, and be flexible for when the economy eventually company and align employees, bounces back. For more informapartners and customers in your tion, visit www.corda.com business. They ensure that every
rooting
GROWING OLD GRACEFULLY A GROUP OF SENIOR FINANCIAL EXPERTS in the UK who found themselves the victims of age discrimination have joined forces to form a new firm, Mature Accountants. Having built up a database of 3000 qualified, mature accountants it now provides turnaround services to ailing businesses, including cash flow forecasting and planning, improved credit terms and analysis of product profitability. Its founder and Managing Director is Martin LloydPenny, a former partner in one of the UK’s top accountancy firms.
UPFRONT BM EU1 FINAL:nov08
29/5/09
14:01
Page 19
Frontline INSIGHT
19
RESEARCH MANAGEMENT A PRIORITY IN TURBULENT TIMES because of changes in the reONE POWERFUL LESSON of the search process over the past global market turmoil of the last decade, with investment banks 18 months is that hedge fund scaling back the production of remanagers and other investment firms need to have better control search for the buy-side. Managers today conduct a largof the voluminous research er proportion of primadata that underlies ry research their due diligence When firms in-house and efforts and inare more pressed draw from a vestment decithan ever to disparate array sions. of sources in Investment a solution like Advent making investfirms have long Tamale RMS is essential ment decisions. benefited from The research data technology that supthat firms generate and reports such functions as portceive resides in a wide variety of folio accounting, performance systems and in diverse formats – measurement, income managenotes saved on an individual’s PC ment, settlement, risk, investor or in a notebook on a shelf, email relations and trading. Until recontent, web links and contact cently, however, there was no workflow assistance for the core management systems. While asset managers may functions of researching and sehave a much broader range of lecting investments. This abdata and analysis from which to sence had become more glaring
‘work smart’
base their decisions, they face a major challenge in trying to collate and organise the diverse components of the research process. An effective Research Management System (RMS) resolves the nagging issue of research data being scattered among multiple, disparate systems, providing a centralised electronic framework for saving, organising and searching all research materials. This allows users to concentrate on their primary tasks of analysis and decision-making rather than wasting time searching for material already in their possession. In today’s turbulent markets, when firms are more pressed than ever to ‘work smart’ a solution like Advent Tamale RMS is essential for navigating the storm. For more information, contact +44 207631 9240 or emea@advent.com
CUT-PRICE PROTECTION IT SECURITY COULD BE COMPROMISED by budget cuts – judging by the results of Deloitte’s 2009 Global Security Survey. The survey of 200 information sector officers shows 32
percent face reduced budgets with the majority saying they were less inclined to invest in new security technologies than they were in 2007. Only 53 percent
considered themselves to be early adopters of security technology, compared to 67 percent in 2007. While 25 percent did say they had seen their security budgets increase, the increase was on average less than five percent. The result of these shortfalls in investment is that only 28 percent of the respondents said they felt confident they were protected against attacks.
TOP 10
THE WORLD’S LEADING OUTSOURCING FIRMS, according to the latest rankings from the International Association of Outsourcing Professionals:
1 2 3 4 5
6
7 8 9 10
Accenture
IBM
Sodexo Tata Consultancy Services Wipro Technologies
Convergys
ISS
CB Richard Ellis
Infosys Technologies
Capgemini
UPFRONT BM EU1 FINAL:nov08
29/5/09
14:08
Page 20
Frontline 20 MICK BUCKLEY, President of business news channel CNBC in Europe, on the challenges of keeping his audience happy. The credit crunch has been a complex story to explain to our viewers. It’s fair to say that regulators, senior business people and viewers alike have been challenged by the complexity of some of the financial instruments involved. The speed and the extent of the financial crisis and now the economic crisis have taken everybody by surprise. We have a huge responsibility to get our coverage right. We’re not a general news channel with a broad-based audience. Our audience is made up of senior, multi-private investors and financial investors. In terms of what they want, it’s data. But data is available everywhere, so what we seek to give them is the story of what’s behind that data – what are the big macro trends by sector. With fragmentation in the digital space it’s really important that you have a valuable niche. We have the most valuable audience in television. We have an audience that everybody aspires to in terms of their quality. We are happy understanding who our audience is and programming to their needs. Last year we changed CNBC Europe to simply CNBC to reflect the increasing need for pan-regional and global business news. When we launched the channel 10 years ago there was a need to differentiate our European programming, but since then so much has changed in the way we do business. Every story we cover has global implications and the adjustment to the brand reflects this. I’m very attentive to what’s going on with our advertising sales. Things look pretty good for this year. We’re not in a local country retail advertising space; we’re an international channel and we have a really good diversified portfolio of advertisers from a sector point of view as well as from a regional point of view. I wouldn’t describe this as a stressful job because it’s something I really enjoy. My background is commercial and I’ve worked in television my entire career in a variety of places. Clearly the biggest pressure of the job is the responsibility of making sure that our coverage is the best.
IN MY VIEW
UPFRONT BM EU1 FINAL:nov08
29/5/09
14:27
Page 21
Frontline COMPANY INDEX
21
PRESENCE – A KEY FEATURE IN UNIFIED COMMUNICATIONS PRESENCE IS THE KEY FEATURE that unifies the user’s communication devices, software and other objects like computers and vehicles into understandable states. The simplest example of presence is the status of a friend who can be ‘online’, ‘offline’ or ‘away’. Those and other states can be used by the phone system to dynamically route incoming calls to voicemail, a remote or home office, a mobile phone or a co-worker. Those states can also be used by employees to better serve customers; for example, why transfer a call if you can see that your colleague is not present, busy, or does not want to be disturbed? Presence is much more complex than just being online, offline or away. Let’s start with some-
thing as trivial as: is the computer turned on or off? Or is there a meeting in the colleague’s calendar? Or has he set a custom state like ‘Do not disturb’? The physical presence of an employee in the office can be detected by using the Bluetooth or GPS features of this mobile phone. Localisation is linked to presence and if the user is not in the office he might be in his home office and calls can be redirected and transferred using VoIP technologies. The need for presence management grows every day. Even smaller companies are looking for solutions to improve their workflow and communications between co-workers, home users, sales representatives and customers. Most modern, software-based communication solutions
can be extended with numerous plug-ins, however communication concepts are quite challenging for integrators. Nowadays, communication is about more than just installing a PBX with some phones. Integrators need to analyse all the devices and tools used by their customers to truly offer unified communications. For more information, please visit MIXvoip at www.mixvoip.com
COMPANY INDEX Q2 2009 Companies in this issue are indexed to the first page of the article in which each is mentioned. 328 Support Services 39, 128, 129 Accenture 92 Advent Software 19,84 Amicus ITS 48, 53 Archos 144 Arla Foods 32 Audi 104 Barclaycard 82 BHOLD 68, 71 Blade Network Technologies 80,81 bmi 28 Bombardier 134,137 British Airways 28 BT Conferencing IFC, 46,48 BT Group 22 , 43 Business Air International 9,134,135 BW Bank 82 Carlsberg 92 Central Office of Information 110 Cessna 130 Chrysler 104 Cloakware 68, 75 CMO Council 114
Corda 11,18, 78 Courion 68, 69, IBC Danfoss 92 Dell 116 DLKW 110 Echelon 17, 94 Enviros 22 Eos Airlines 130 European Business Aviation Association 130 Everett 90, 91 Exact Software 7, 102, 103 Fairmont 142 Ferrari 104 Four Seasons 140 Fresh Nijkerk 32 FrieslandCampina 32 Frost & Sullivan 59, 100 Google 124 Gulf Stream 130 Hawker Beechcraft 130 IBM 3 Kofax 122, 123 La Banque Postale 82
Lamborghini 104 Lufthansa 28 Mandarin Oriental 142 MasterCard 82 MAXjet 130 Media5 Corporation 48, 55 Microsoft 22, 92 Millennial Net 118, 119 MIXvoip 21, 42 Monidee 86, 87 Morrisons 110 Munich Re Group 62 Nokia 144 Nortel 48, 49 OCEG 88 OfficeTeam 22 Oracle 4, 101 Ovum 66 Panasonic 144 Peninsula Hotel 140 Portrait Software 96, 97 PricewaterhouseCoopers 22, 76 Psytechnics 48, 51 Quest Software 68, 73
Rio Tinto 39 Rocco Forte Collection 142 Royal Bank of Scotland 82 Royal Jet Group 2, 134 SAP 92 Serious Fraud Office 76 Shangri La Hotels 140 Silverjet 130 Sony 144 Stagecoach 82 Stromasys 121 TechExcel 16, 96, 99 UEFA 82 Vauxhall Corsa 110 VistaJet 17, 132 Vodafone’s Unified Communications Group 58, 60, OBC Volkswagen 104 Wainhouse Research 56 Warsaw School of Economics 82 Work Wise UK 22 World Coal Institute 39 xyzmo SIGNificant Group 64, 65
DON’T MISS...
22 TOMORROW’S WORLD How you could be doing business in 2020
32 FOOD FOR THOUGHT BM speaks exclusively to Arla Foods’ CEO Peder Tuborgh
142
THE KNOWLEDGE Europe’s hottest hotel bars
COVER STORY
TOMORROW’S WORLD By 2020 stockbrokers will be replaced by robots and offices will only exist in virtual worlds – or at least that’s what the experts think. BM reports on how you could be doing business by the year 2020.
22
www.bme.eu.com
Tomorrow's World.indd 22
29/5/09 14:44:30
icture yourself at work in the year 2020 and what do you see? Office staff replaced by robots, deals done in 3D virtual worlds or journeys to the office in cars that drive themselves. While all this may have sounded like the stuff of science fiction novels a decade ago, the sophistication of today’s computer technology and the speed at which working life has changed in the past 10 years means just about anything is possible. In this feature we ask a panel of technology and management experts for their vision of working life in 2020.
P
The virtual office: One of the biggest clues to how working life will have changed by 2020 is the emergence today of a mobile workforce that can be based anywhere provided they have a laptop and an internet connection. By 2020 experts predict that organisations will depend on “plug and play” virtual offices that employees can link into from wherever they are, to such an extent that the corporate HQs could become extinct. A study by the US firm OfficeTeam, entitled ‘Office of the Future 2020’, predicts that the whole concept of going to work will be redefined as employees use portable, wireless tools to communicate from any location. Physically commuting to work will be replaced by “telecommuting” – a trend which 87 percent of the executives polled by OfficeTeam believe will increase in the coming decade. The actual geographic location of employees will not matter, allowing businesses to shift human and material resources around the world – virtually – in response to changing market conditions. These trends will be driven by businesses that will realise huge benefi ts from savings on overheads and travel costs, as well as cutting their carbon footprints. Microsoft, for instance, has added 400 staff to one of its existing campuses in the UK, simply be introducing flexi-time and mobile working on laptops and mobile phones. University of Portsmouth academic Nipan Maniar, specialises in creating computer games and virtual environments for educational and training purposes. He describes his vision for the 2020 virtual office: “My vision for 2020 is that there will be no office spaces at all. It will all be virtual. For example, you will be at home, you will log into your office online and it will be a 3D office environment where there will be, for instance, bookshelves containing books you click to open and read online. Companies will straightway see the advantages of having virtual offices. In fact, they would save so much money that they should offer employees’ financial incentives to work from home.” Robotics expert Kevin Warwick of the University of Reading, agrees with the concept that offices will become 3D virtual environments that workers can enter online: “I’m noticing big trends already with people working more from home – the power of the internet and the IT network is incredible in that respect. But by 2020 it won’t just be about message passing. It will be a visual environment with the user’s home network linked in.” The emergence of the virtual office naturally leads to increased virtual meetings, which are already growing in popularity as companies strive to cut travel costs and carbon footprints. Work Wise UK, a non-profit organisation which aims to boost the British economy,
www.bme.eu.com
Tomorrow's World.indd 23
23
29/5/09 14:50:04
claims that if British businesses alone aimed for 10 additional virtual meetings a year they could save €14 billion collectively. Meanwhile research by BT Business claims that a single virtual meeting saves companies, on average €343, 247 miles of travel and three hours of travel time. Indeed, by 2020, meeting virtually will have overtaken face-to-face interaction completely, according to Rachel Pickering of European eco-consultancy Enviros: “One of the key ways that companies are looking to cut costs during the recession is to cut meetings. They are so expensive and can so easily be done by video conferencing. Before, if you weren’t there face-to-face at a meeting this was seen as a sign that you didn’t take it seriously enough. By 2020 this attitude will have turned on its head completely and people will ask why they have travelled to a meeting at all.” Today’s technology allows companies to hold virtual meetings using video conferencing and even to create 3D virtual worlds, Maniar, however, believes that by 2020 business will be done in environments similar to the online virtual community Second Life with participants represented by avatars: “As far as proper meetings, I don’t see why this shouldn’t happen because it will only save time and money. You can incorporate PowerPoint presentations, video calls and conferencing calls into the meeting and all the usual facilities.” While the technology for virtual offices and meetings may be readily available, widespread adoption of it will depend on the shifting of pre-conceived ideas by less forward thinking companies, according to Mike Emmott of the UK’s Chartered Institute of Personnel: “The one inhibition is attitudes. In some parts of Europe and in some sectors you get some unreformed attitudes. Surprisingly it’s often the workforce that finds flexibility implausible.” The concept of virtual working, while demonstrating clear financial and logistical advantages, needs a fundamental attitude shift on the part of companies to become widespread. However, as the recession cuts into travel budgets, and overhead costs and technology makes the transition from physical to virtual a seamless one, practical considerations are overtaking companies’ increasingly outdated reservations.
In 2007 a team of experts from PricewaterouseCoopers (PwC) embarked on a yearlong project to explore the future of people management. The result was the Managing Tomorrow’s People report, which identifies three potential scenarios for working life in 2020: the Blue World, the Orange World and the Green World. One of the lead researchers on the team was Sandy Pepper, a member of the Employment Relations and Organisational Behaviour Group at the London School of Economics. He explains the thinking behind creating three possible scenarios: “If you look back over the last 15 to 20 years, and you think about the things that have happened to profoundly change the world economy, such as 9/11 or the financial crisis, it’s almost impossible to predict what will happen by 2020. The scenario approach involves thinking about a number of possible paths to the future and building up narratives around those paths.” The closest 2020 scenario to today’s world, and the one that assumes the least impact from the financial crisis, is the Blue World. “The Blue World is the world in which there is a continuing growth of big companies and capitalism and a continuing focus on individualism and consumerism,” says Pepper. “This is a development of the world we’ve got now.” In the Blue World the corporate is king – big company capitalism rules and consumers take precedence over social responsibility. This is a world, says Pepper, in which global companies will assume the role of mini states, with many making profits equivalent to the GDP of a small country. Factors that could drive this, according to PwC, include the merging of the world’s biggest technology and search engine companies in 2012, the climax of a decade of M&A consolidation across industry sectors in 2014 and the emergence of the Indian economy as a leader in several industry sectors by 2011. Describing the impact of the Blue World on working life, Pepper says: “The implication of the Blue World to employment is that people would become linked to companies in the way that they are currently linked to the state. You might imagine, for instance, a world where corporate health schemes become more important than national health services. The relationship between companies and individuals would become ever more important.” Such a scenario assumes however that there will be no backlash following the financial crisis against the types of corporations that helped to make it happen. The opposite scenario would be the Green World, in which as Pepper explains: “There’s a reaction against the focus on individual preferences and consumerism.” The Green World would still involve a focus on large companies, but with a focus on ‘patient capitalism’ – where social responsibility dominates the corporate agenda and ‘green’ concerns, such as climate change and sustainability, are the key drivers for the business. In this scenario, virtual meeting technology comes into its own; face-to-face meetings are replaced with virtual solutions and air travel is only
“My vision for 2020 is that there will be no office spaces at all. It will all be virtual” Nipan Maniar
Organisational structures: Technology is an enabler of dramatic changes in working practices, as demonstrated by the move towards the mobile workforce. But how will it shape the organisational structure of the future? It is one of a number of forces that will mould the corporate landscape in 2020 – one of the strongest being the credit crunch and ensuing financial meltdown which has shaken the European business world to the core and forced a complete re-assessment of corporate practices – from governance and ethics to management structures.
24
www.bme.eu.com
Tomorrow's World.indd 24
1/6/09 13:23:22
THE GREEN AGENDA permitted in exceptional circumstances. reen issues are already high on the set a few years ago that don’t seem chalCompanies would also provide emagenda of European companies, but lenging now are likely to be revamped and to ployees with corporate transportation the pressure to produce sustainable become more stringent. Climate change will options between work and home. There products and to operate in a way that will have mean companies will have to look much more would, says Pepper, be a stronger focus minimal impact on the environment will have closely at how much energy is used within on the work/life balance with companies greatly increased by 2020, according a product or a process and at minimistaking a “holistic view” of employment: to Rachel Pickering, Development ing the amount of material that is “Companies would engage with staff Director of Enviros. This, she used in it.” around a psychological construct that’s says, will have a particularly She goes on to say that much more focussed on work/life balbig impact on smaller comproving their environmental ance and sustainability. There would be panies which today are under credentials will become a way a much more rounded view of people’s less pressure to comply with for companies to raise their careers and they would be encouraged environmental guidelines. competitiveness: “Legal reto go on training course and to go on She says: “Smaller companies quirements can take a long time secondment to social enterprises for a tend to be under the radar today to move from being an idea into period of time.” from an environmental regulations perlegislation whereas sustainability issues A more pragmatic scenario – and one spective. But by 2020 they will be impacted affecting the reputation of an organisation driven by today’s technology trends – is more directly, particularly as environmental require a faster response. Companies need to the Orange World. This takes the virtual issues move from being voluntary guidelines pre-empt these reputational issues because office concept to the extreme by suggestto legal requirements. Government targets it will give them the competitive edge.” ing a world where companies become increasingly fragmented and specialised. Each organisation has a core staff, which to have “portfolio careers” in which they work on individual projects is supported by a network of mobile workers that are called upon for companies of their choice – a very different scenario from PwC’s whenever their skills or services are needed. As well as technology Blue World. facilitating the mobile workforce, the following events could result Although the Orange World has the least similarities to today’s in the emergence of an Orange World: a record number of corporate business environment, Pepper believes the financial crisis could be the de-mergers and spin-offs by 2012; a steep decline in the popularity catalyst that will drive a move from corporate giants to the fragmentaof supermarkets and a move towards local farmers’ markets by 71 tion and specialisation of companies: “Because of what’s happened in percent of the European population; skills shortages in China that the past 12 months I think one might well expect there to be a reaction push up wages and drive the balance of power to the individual and against the traditional big company capitalism that has dominated the last 50 to 100 years. What’s happened in the financial world has caused a huge number of people to re-think their careers fundamentally and to take much more interest in smaller organisations that have a particular niche.” Mike Emmott of the Chartered Institute of Personnel agrees that the current financial crisis will drive changes in organisational structure and management practices. He points to the fact that organisations are under increased pressure to improve their reputations and manage staff in an ethical way, indicating support for PwC’s Green World scenario. “There is away from the collective. In the Orange World organisations would a definite re-bound from the behaviours that are seen to have probe built around an “inverted doughnut” structure, says Pepper: “The duced financial disaster. Management will want to display greater idea is you have a core of people working for an organisation and then responsibility in the sense that they can defend their actions and bean outer ring of people associated with it. Companies would manage haviours at the bar of public opinion. There’s far more interest now in this network of people so that they’ve got resources when they need issues about reputation and brand.” He goes on to say that he expects them.” Pepper suggests this would provide the opportunity for people managers in 2020 to veer from the accepted model of corporate be-
G
“Because of what’s happened in the past 12 months I think one might well expect there to be a reaction against the traditional big company capitalism that has dominated the last 50 to 100 years.” Sandy Pepper
www.bme.eu.com
Tomorrow's World.indd 25
25
29/5/09 14:44:39
haviour and take a more maverick, individualised approach to running their organisations: “Managers will be more willing to rely on their own judgement and less impressed by establishment or ‘top-down’ thinking. It will be a bit less hierarchical and less dependent on formal authority and more aware of individuals’ ability to assert their right to be listened to.” The financial crisis, coupled with sophisticated technology allowing remote working, could spell the end of the corporate giant. But with corporate mergers shrinking the size of the financial world and emerging economies gathering power in the industrialised world, the Blue World could continue to be a force to be reckoned with in 2020 and beyond. The change will be driven by a combination of the public’s reaction to the financial crisis and the strategies of corporations as the world economies recover.
Artificial intelligence: PwC’s three scenarios focus on the ways in which employees will be managed in 2020 and assume human beings will still be required to carry out the work they do today – albeit in a different context. However, there are experts that believe that by 2020 the human element will be taken out of the equation completely in some workplaces – instead the work will be carried out by computers with artificial intelligence (AI) or, in extreme cases, by robots. One of the biggest proponents of this theory is Kevin Warwick, a professor of Cybernetics at the University of Reading. He is currently leading a project to study the use of artificial intelligence and in 1998 became the first person to have an RIFD transmitter implanted under his skin. In a later experiment his nervous system was connected to the internet, from which he was able to control a robot arm. He
GOING OFFSHORE
26
firmly believes that artificial intelligence is reaching such a level of sophistication that it won’t be long before machines make decisions in the workplace – particularly where humans are prone to error such as in the financial sector: “The human response is slow and can be error prone and too emotionally driven, which on a business front is not always a good thing,” says Warwick. “In the future a lot of decisions will be taken not by humans but by technology, particularly regarding financial transactions where humans make a bit of a hash of it sometimes.” He goes on to say that in the financial sector today, transactions are already carried out by machines, but these machines do not yet have the intelligence to make decisions. The development of this intelligence will allow machines to decide whether to buy or sell stocks and products based on up to the minute data. This, says Warwick, could lead to stockbrokers being replaced completely by machines: “I think they should be drawing their pensions now because in 2020 machines will be doing the stockbroking,” he says. Warwick also outlines a situation where this sort of AI will enable companies to gather information about customers far quicker than a human marketing officer ever could, and to tailor their marketing accordingly. He outlines how this could work, for example, for retailers: “In supermarkets, 95 percent of what people buy are regular purchased consumer products like milk and bread. The AI system can therefore predict what customers are going to buy and look for links to other products. Then it can send marketing messages about those products that are specifically tailored to the individual consumer. For instance, if somebody has a mobile phone and they usually buy a certain cheese, the AI machine could send them a text message offering them a free trial of a bottle of wine. This would be a specific message tailored to the customer, not a general spam.”
T
he outsourcing of back office functions by European companies to offshore firms is already widespread. And according to the European Outsourcing Association (EOA) by 2020 the types of areas that companies choose to contract out will have increased to include ones as sophisticated as business strategy. Chairman of the EOA, Martyn Hart, says: “By 2020 more and more things will be outsourced that aren’t at the moment, such as business strategy. There will be a maturing of outsourcing in that sense. I also think that outsourcing will be called something else and will be more widely accepted.” He goes on to say that outsourcing services will become more specialised, allowing companies to fragment the portfolio of services they contract out – choosing smaller specialised companies to deliver specific skills. Traditionally Asia and Eastern Europe have dominated as the most popular outsourcing destinations. However, Hart says he believes that by 2020 many more companies will have gotten in on the act: “More countries will be involved depending on their commercial advantage. Services such as call centres will move back closer to home because of cultural affinity.”
www.bme.eu.com
Tomorrow's World.indd 26
29/5/09 14:44:43
“In the future you may well be able to take part of your brain and send that to work. Your robot self could go off to work and do the boring stuff and you could stay at home” Kevin Warwick
The big advantage of AI in this context – like in a banking environment – is that machines will have the ability to make decisions based on up to the second financial calculations and a rapid analysis of variables, far quicker than the human mind. This raises the question of whether humans will in fact become subservient to machines with superior artificial intelligence in the workplace – a scenario which Warwick suggests is inevitable: “From an economical point of view you can see how the machine will be able to make better decisions and do the job in a much better way. Because of this, the human will become much more subservient to the machine. But then we end up with a situation where human beings are drones, keeping the machiness going. The roles will be reversed. It’s like a Terminator scenario.” re already being made to completely One area where moves are es is the military, where technolreplace humans with machines i icularly ogy is being developed, particularly in US, for autonomous vehicles and weapons: “The military is already a warfare. I don’t know al heading towards technological i iers,” how long there will be soldiers,” says Warwick. “Already there are pilot-less fighter planes and l drones so it’s already gone a long way. Autonoa is the direction mous vehicles on land and sea it’s moving in.” b 2020, also This technology could, by h way we he filter down to transform the o Warwick, travel to work, according to who claims GPS technologyy combined c with artificial intelligence could lead t to cars being able to drive themselves: te ems already “Satellite navigation systems d take to get know what road you should to your destination and whatt road signs a can stop ars you will pass. So as long as cars e there is en you hitting other drivers then
done now where people have to decide whether they are having a conversation with a human or a machine. The best machines are able to fool some very eminent people. So even today we have machines that can co communicate with humans so well that experts don’t do know the difference.” The d growing sophistic ca sophistication of humanoid robots could see them become e a fi xture in people’s homes, says Warwick: “I think th there is the possibility of people having havvi humanoid robots around the house e tthat can talk and interact and carry out housework.” h The m most extreme research his team at Reading Rea ad University is currently carrying g out involves implanting rats’ bra ain cells in robots which then brain as s assume the creatures’ characteristic cs The next step, would involve tics. d o doing the same with human brain ce el An experiment which could cells. m e mean “the workplace in 2020 wo u change dramatically”, says would Warwick: “In “In the future you may well be able to take par rt of your brain and send that to part work. Yourr robot self could go off to work and do the e boring stuff and you could stay at home.”” It’s certainly cce an attractive prospect
no need to drive.” eories it Hearing Warwick’s theories i 2020 is easy to imagine a world in m manoid where offices are full of humanoid robots and given the sophisticas stication of robots such as Honda’s n nda’s Asimo, this does not seem so llifar-fetched. Artificial intellic ch gence has developed to such an extent today that machiness are now able to carry out conversations with humans as Warwick testifies: “There are tests that are
Honda’s humanoid robot Asimo
but it re relies eli on a certain business model where rri rigid working practices and decisions m made according to set financial criter ia stifle creativity and individualcriteria ism. W Whether this will happen comes dow down n to PwC’s three scenarios. There wou would ul be little place for robots in an Ora an or Green World. But in the Orange Blu ue World, artificial intelligence Blue an nd taking humans out of the and eq e equation may be seen as the only w way for companies to avoid the ssorts of mistakes that led to today’s financial collapse.
www.bme.eu.com
Tomorrow's World.indd 27
27
29/5/09 14:44:44
Peter Spencer ED:6may
29/5/09
14:27
Page 28
AVIATION
UK airline bmi has traditionally taken a backseat in the publicity stakes and the soft launch of its ‘Better for Business’ marketing campaign is no exception. BM gives Managing Director Peter Spencer a chance to make some noise about bmi’s new raft of services.
b
mi has never been an airline that has believed in standing still for long. Its history since being set up 70 years ago, is peppered with acquisitions and takeovers – the latest of which are bmi’s purchase of British Mediterranean Airways in 2007 and its buyout by German carrier Lufthansa last year. Today though it is Lufthansa’s passengers that are experiencing the biggest changes, thanks to the airline’s decision to revolutionise the business travel experience. Having re-branded itself as an airline for the travelling executive, it has launched a marketing campaign, ‘Better For Business’, that will see it introduce completely paperless travel, chauffeur drive services and a new international lounge and check-in desks at London’s Heathrow Airport. This has been a low-key launch however, with bmi preferring to let the services speak for themselves. “I don’t think we’ve advertised these changes at all yet,” says bmi Managing Director Peter Spencer about the paperless boarding system, which allows boarding passes to be texted to passengers’ mobile phones. “I think we’re quietly professional. What is interesting is the number of people who know about this without us telling them, because it is technology driven. People straight away start using these facilities when you haven’t told them about it.”
28
www.bme.eu.com
Under the radar This understated approach is a very different one from that of bmi’s closest rival British Airways and Spencer says it means the size of the airline is often underestimated by the public. “We want people to understand that we are the second largest carrier at Heathrow. I think people feel there are a lot of carriers bigger than us. We have 80 flights a day at Heathrow. bmi has developed into a major force in the UK travel industry and we want to be recognised for that.” Seeking to stand out in the UK’s crowded aviation market is the main reason why bmi has launched ‘Better For Business’. The chauffeur drive service has now been introduced on routes to and from London, Saudi Arabia, Tehran, Oman, Damascus, Beirut and Moscow, and bmi’s new international lounge is opening at Heathrow’s Terminal 1 this summer. It is also opening new economy check-in desks and a new premium check-in area in Terminal 1 – moves facilitated by the transfer of BA to the Terminal 5 building last year. “The great thing about having BA out of Terminal 1 is that it moves 10 million passengers a year out of the terminal,” says Spencer. “Now it is the quietest terminal at Heathrow. You don’t queue at security or check in anymore and it’s a really good facility because
Peter Spencer ED:6may
29/5/09
14:00
Page 29
it is actually able to handle, manage and look after our customers in a good ambience. What all this has meant is that Terminal 1 becomes our terminal and we wanted to upgrade all our facilities at our terminal in competitive response to Terminal 5.” He goes on to say however that the launch of the new services was not without its challenges as a result of the well publicised chaos surrounding BA’s move.” There were the BA problems in Terminal Five, which rebounded on all the moves. So we’re pretty upset about it all because it was meant to be a really beautifully packaged customer offer.” On a more positive note bmi’s most successful ‘Better for Business’ innovation has been the introduction of completely paperless boarding on its domestic flights out of London Heathrow – making it the first British carrier to take such a step. This allows customers to check in online or by mobile phone up to 24 hours in advance, choose their seat and have their boarding pass delivered electronically to their mobile phone or PDA as an SMS. They can then present their mobile phone in order to board the plane, saving valuable time for travelling executives: “We believe we’re the only carrier that offers this,” says Spencer. “We actually offer, domestically, the opportunity to send your boarding pass to your mobile phone so it can be used for going through security, going through the check-in gate and getting onto the aircraft. So it is actually seriously paperless. With most carriers you have to print your paper pass off. But if it’s a domestic bmi route, so for instance between London and Belfast you just check yourself in on your mobile phone.” The services have now been fully launched following a successful trial in 2008. The same cannot be said however for bmi’s pilot trial of in-flight text messaging and email, OnAir, which Spencer admits has had a mixed reception: “There was some appetite for this and we’re still looking at it. But it wasn’t overwhelming ‘let’s do it’, in your face enthusiasm.” The main objection from passengers, he says, was the concern that in-flight text messaging and emailing may eventually lead to the introduction of in-flight voice calls: “The feedback you get is ‘I hope this doesn’t develop into people jabbering into their mobile phones’. Because I think when you say you (bmi) are mobile phone enabled, people straight away think of speech rather than text or email. We’re certainly not going to go for voice, that’s for sure. I’m leaving the guys in marketing to decide what we should do to fulfill customers’ requests and whether or not we can fulfill those requirements.”
Customer is king
PETER SPENCER
bmi’s response to the customers’ concerns following the OnAir pilot reflects its desire to make changes based on customer feedback. It was this approach that led it to remove fuel surcharges from its UK and European flights last December. This was as part of its strategy to offer fares with no hidden charges for baggage, check-in or seat selection – giving it a strong competitive advantage over other low-cost European carriers, says Spencer: “If you go to some carriers, you end up paying to go to the toilet. You pay for every single step of the way and you never really know how much has been taken out of your pocket in total. They take a little bit here and there. This seems to be a clever way of extracting as much money as they can out of the customer. We combine everything into one fare for European and domestic flights so you know the fare incorporates all these added extras.” It’s a shrewd move given the economic climate in Europe, which saw 30 airlines fail in 2008. “I think in this particular time the most important thing to say is ‘as long as I have sufficient money I should invest
www.bme.eu.com
29
Peter Spencer ED:6may
29/5/09
14:00
Page 30
it in the customer’,” says Spencer. “So we’re not taking the free peanuts away from the customer – we’re saving money in other areas.” While it has grown its market share, Spencer says bmi’s passenger numbers have remained flat and that like all European carriers, it is suffering. “I wouldn’t say we are buoyant. What is happening is that we are suffering in the marketplace just like other carriers. I’ve been in the business more years than I care to remember and what is happening now is unprecedented,” he says, admitting that the airline has made some essential cut backs: “We have cut capacity to address the downturn in demand. We’re putting on smaller airplanes. We’re tightening our belts on the cost side to deliver good value for money to the customer.”
Pastures new As well as cutting back, bmi has also made strategic investments in new routes where it sees high demand potential and gaps in the market – particularly in the Middle East. Describing how bmi is the largest operator to the region and why it plans to ramp up its routes in the Middle East, Spencer says: “These routes
are doing well in spite of the decline in business that everybody is experiencing elsewhere across the Atlantic, in the Far East and in Europe. All the statistics you look at show a downturn but the Middle East is holding up. These routes are very important for trade and investment between the countries that we operate to but it’s also specifically important that they are bearing up through the current downturn. This year alone bmi will double its daily flights between London Heathrow and Tel Aviv, double flights to Riyadh and introduce the wide-bodied A330 aircraft for Cairo and Tel Aviv routes. In its boldest move yet it has also revealed plans to re-establish air links between London and Baghdad and recently met with Iraqi government officials at a meeting attended by the Iraqi Prime Minister Nouri al-Maliki.
bmi’s history 1970s
The early years bmi began life in 1938 as Air Schools Ltd, specialising in RAF pilot training. In 1949 the company became known as Derby Aviation, diversifying operations to include passenger and cargo charter services. In 1959 the company became known as Derby Airways, changing to British Midland Airways in 1964 when it moved to the newly opened East Midlands Airport in 1965.
British Midland Airways further expanded domestic and international passenger services including long-haul destinations throughout the 1970s. The company celebrated a landmark in 1979 when over one million passengers were carried for the first time in a single year.
1980s bmi’s growth continued during the 1980s and passenger carryings were recorded at 1.8 million.
30
www.bme.eu.com
Peter Spencer ED:6may
29/5/09
14:00
Page 31
At the meeting bmi CEO Nigel Turner handed a letter to Iraq’s transport minister Amr Abduljabber Ismail stating bmi’s wish to facilitate commerce between Iraq and the UK by providing commercial flights between the two countries. Speaking after the meeting Turner said: “The ability to travel by air between Heathrow and Baghdad is vital in supporting the considerable energy that is going into bringing business ties and investment back to normality. bmi has a great depth of experience in serving the Middle East and it makes both geographical and economic sense for us to add Iraq to our growing network of services to the region. Iraq is surrounded on four sides by countries that we already serve from Heathrow. We are carrying an ever-increasing number of passengers who, at the moment, travel from Baghdad to Heathrow via our existing intermediate point of Amman. As trade and business ties grow we envisage that these numbers will grow.” Outside the Middle East bmi is also ramping up flights to Eastern Europe and has recently launched flights five times a week to Kiev. It also flies twice daily to Moscow and daily to Azerbaijan, three times a week to Almaty and three times a week to Bishkek, the capital city of Kyrgyzstan where it is the only European carrier serving the route. “These routes are niche markets and they do very well for us,” says Spencer.
As the airline continues to introduce new routes and services for its business passengers it is also preparing for big changes internally – as its buyout by the German aviation giant Lufthansa approaches. Lufthansa has had a 20 percent stake in bmi since 1999 but the buyout – which is expected to go through this quarter following approval from the EU commission - means it will fully own the airline, creating lucrative new business opportunities for the British operator, says Spencer: “It will be great being part of the Lufthansa family. They have been shareholders for ten years now but it’s going to be a great new world for the airline. There will be a lot more business flowing between the two companies, which can only ever be good.” Being part of the Lufthansa family also offers some protection against the damage suffered by smaller carriers in the turbulent European aviation market. The airline’s determination to survive the crisis is the main driver behind the revamping of its services and the introduction of innovative products not offered by its rivals. Because as Spencer points out, the modern airline must do all it can to remain in business. “What we’re determined to do is fight our way through this and come out the other side. This is survival of the fittest stuff.”
1990s
2000s
By the end of the 1990s British Midland enjoyed passenger carryings of over 6.5 million a year. In 1992 Scandinavian Airlines increased its share to 40 percent.
In 1999 Lufthansa acquired a 20 percent stake in British Midland from the 40 percent owned by Scandinavian Airlines.
British Midland was renamed bmi British Midland in 2003 and then reverted to bmi. In 2002, bmibaby, a low-cost subsidiary with its own unique brand was launched. The turn of the century saw a rapid expansion of routes offered by bmi including routes to Washington DC and Chicago, long-haul services to Mumbai, India and Riyadh and Jeddah in Saudi Arabia, and mid-haul routes to Moscow. In 2008 bmi launched five new US destinations from London Heathrow and in March 2008 bmi successfully launched services from London Heathrow to Tel Aviv and Dammam and reported revenues over €1 billion.
www.bme.eu.com
31
FOOD FOR THOUGHT
FOOD PRODUCTION
32
Anchor and Lurpak are just two of the super-brands in dairy giant Arla Foods’ portfolio. But even it isn’t immune to the heavy losses eating into the profits of Europe’s food producers, as Diana Milne discovers when she meets CEO Peder Tuborgh.
www.bme.eu.com
Peder Tuborgh.indd 32
29/5/09 14:40:12
t’s the end of a long week for Peder Tuborgh – and he’s making no attempt to sugarcoat the situation that his company is in. Just days earlier he unveiled Arla Foods’ plan to save €134 million in 2009 – a restructuring exercise that will see it slash 250 jobs across its operations worldwide. The move followed the news that the company has been forced to drop its milk price amidst plummeting dairy consumption worldwide: “There’s nothing good to say about this,” admits Tuborgh. “It has to be done, unfortunately. It’s a very tough programme and we will be taking away a significant number of projects that are not commercially orientated in the short-term. We will achieve this by turning every stone in the company.” And there will be a lot of stones to turn. Arla Foods is one of the key players in the international dairy industry with production facilities in 12 countries and sales offices in 20 countries. Its products, which include major brands Lurpak, Anchor and Castello are distributed around the globe and its core markets include Denmark, Sweden, the UK, Finland, Germany and Poland. Focussing on short-term profi t is the only way to prevent further deterioration of the company’s situation which saw it achieve profi ts that were €46 million below budget in 2008 – meaning the supplementary payment to Arla’s co-operative members has dropped to €0.003 per kilo of milk. The effect on them has, says Tuborgh, been the most difficult effect of the financial downturn for him to witness: “The worst part is the milk prices we are seeing. It’s very low, historically low, and I see that it’s hurting our farmers and they are struggling. To me that is the worst part.”
I
The bigger picture Despite the fact that 2008 ended on a sour note for the dairy giant, it still forged ahead with the its growth strategy, unveiled earlier in the year, which focuses on innovation, core markets in the North Hemisphere
and expanding new markets in Russia, the US and China. As part of its strategy to grow market share in the core market of Northern Europe, the company is in the process of acquiring dairy products producer Fresh Nijkerk from Dutch rival FrieslandCampina. A 10-year licence agreement has also been signed for the use of the Friesche Vlag brand of products for 10 years in the Netherlands. The deal will significantly strengthen Arla Foods’ presence in Northern Europe, says Tuborgh: “This is a very important step for Arla Foods. It makes the Netherlands a core market for our company and we believe that we have a
Tuborgh, at creating greater brand impact for the company’s products and strengthening its marketing activities: “We think that with those three brands we will be able to focus on marketing activities but also create a more visible and greater brand impact for the consumers where we choose to operate. We have numerous brands and I think too many times there is the spreading of marketing resources across the board.” The decision to market products under the Arla banner itself also reflects the company’s wish to strengthen its presence outside its established markets in Northern
“The worst part is the milk prices we are seeing. It’s very low, historically low, and I see that it’s hurting our farmers and they are struggling” lot to offer the Dutch consumers. It’s perfectly in alignment with our strategy to become the preferred provider of dairy products,” he goes on to say. The deal includes the acquisition of the popular Fresh Nijkerk brands Breaker, Milk&Fruit, Kwarkyoghurt and Melkunie. Within its existing portfolio however, Arla plans to consolidate its products into three globally recognised brands, Castello, Lurpak and products branded under the Arla name itself. This strategy is aimed, says
Europe, as Tuborgh explains: “We have done so [used Arla as the main brand] in Denmark and Sweden which are our two original markets. But outside of those markets, Arla has not had a dominant brand positioning – maybe apart from in Germany. But we are refocusing and re-shaping the Arla brand. We have very good ideas of the values that we want to associate with the brand and the kinds of products that we want to deliver for consumers under that brand.”
www.bme.eu.com
Peder Tuborgh.indd 33
33
1/6/09 13:35:21
SCENES FROM ARLA FOODS’ TELEVISION ADVERTISEMENTS
Taking responsibility As part of its branding efforts and in a bid to persuade cash-strapped European consumers to spend more on higher quality dairy products, Arla Foods has launched its ‘Closer to Nature’ campaign. This is part of the company’s aim to become the world’s most natural dairy company, which will involve reducing its use of fossil fuels, using natural fertilisers, improving its animal husbandry practices and working to improve the sustainability of the company’s packaging: “We are focussing on Lurpak, Castello and Arla as brands with the headline ‘Closer to Nature’ which we think is the right position for our brand,” says Tuborgh. “It’s all about natural products and environmentally friendly procedures throughout our
production and distribution processes. It’s a major programme that we are running at the moment in order to align and adjust our assortment [of products].” Describing how the company plans, in particular, to improve the
Arla aims to slash carbon dioxide emissions by 25% by 2022 sustainability of its operations, Tuborgh says: “We’re aiming to reduce our carbon dioxide emissions by 25 percent going up to 2022. That’s throughout the whole value chain. We are looking at transport, using biofuels and
A poster for Arla Foods’ ‘Closer to Nature’ marketing campaign
34
providing education for people driving the vans and collecting the milk. We are better planning our routes to minimise the distances driven and we are investing €25 million in environmentally friendly technology alone.”
Arla foods’ increased focus on brand and reputation building follows a period of controversy for the company, during which it become embroiled in China’s melamine contamination scandal last year. At the time production at the factory of its Chinese joint venture partner Mengniu Dairy was stopped temporarily after milk powder produced there tested positive for melamine contamination. Since the damaging incident Arla has introduced new testing procedures at the facility where production of milk powder has resumed. Tuborgh says: “We [Arla Foods and Mengniu] were definitely hurt by the melamine scandal. I think we handled it correctly and ethically. We pulled back our products immediately and we’ve set up an extremely thorough testing procedure with our partners where we test our products four times throughout the entire production process. This happens when the milk arrives, whenever it is transferred through the dairies, when it goes through
www.bme.eu.com
Peder Tuborgh.indd 34
1/6/09 13:27:50
production and when it’s being prepared for distribution. We’re also labelling the products directly onto the packaging to inform customers that our products are tested and safe to consume.”
Surviving controversy
Arla Foods’ products are tested four times during the production process
FEELING THE HEAT n 2006, Arla Foods’ Middle East sales plummeted during a boycott of Danish products following the publishing of cartoons depicting the Prophet Muhammad by a Danish newspaper. At the time the company was forced to cut 100 jobs as a result. In March of that year Arla took out a full-page advertisement in a Saudi Arabian newspaper apologising for the cartoons and stressing Arla Food’s respect for Islam. This attracted fresh controversy in Denmark where politicians criticised the company’s actions. A month later the company said its foods were re-appearing on shop shelves in the Middle East.
I
Having survived the melamine crisis and, in 2006, a mass boycott of Arla Foods’ products across the Middle East (see below), Peder Tuborgh has proven himself to be a CEO with the backbone to see his company through a crisis. The latest storm blowing Arla’s way could however prove to be the most challenging yet. Turborgh admits that this is a stressful and “emotional” time for him and his management team with some tough decisions to make. However, he says, seeing the impact his decisions make on the company he runs is one reason why, for now, he’s staying put no matter how tough things get: “The best part of the job for me is to be close to the impact of the decisions that I make or participate in making. And of course I have very good people around me which I enjoy every day.”
www.bme.eu.com
Peder Tuborgh.indd 35
35
29/5/09 14:40:15
MINING
GOING UNDERGROUND
36
www.bme.eu.com
RIO TINTO ED P36,37,38,40, 41.indd 36
29/5/09 15:26:51
Life at the coalface today is a hi-tech affair where machines are increasingly taking over where humans once toiled. But companies are under renewed pressure as energy sources dwindle and the global recession bites. Diana Milne meets mining giant Rio Tinto’s CEO for Energy Preston Chiaro to find out why the company is feeling the heat.
very visitor that enters Rio Tinto’s London headquarters has to first watch a safety video. A state of the art, minimalist office environment is hardly the sort of place where you’d expect accidents to happen. But it’s a reminder of what this company is all about – not shiny offices and men in suits but heavy industrial activity conducted at the coalface deep underground. The fruits of this labour have created a multibillion-euro global mining giant where business is conducted a world away from the mines in Australia and Africa where the real action takes place. And it’s there that Preston Chiaro, Rio Tinto’s CEO for Energy, says he most likes to be: “Visiting the mines is one of my favourite parts of the job,” he reveals. “I’m an engineer by training so I’m very hands-on. I like to see the equipment working and I like to see, literally, the shovel contacting the coalface. That’s the fun part of the job.”
E
ing mines in Queensland and New South Wales. It is also one of the world’s three largest uranium producing companies, enabling countries around the globe to develop nuclear energy capacity.
Tough times Being on the front line of the global energy market, Rio Tinto has been heavily exposed to the effects of the economic downturn with around 70 percent of the industry operating at a financial loss, according to a statement made by the company in April following the announcement of 700 jobs cuts in its Australian mines. Across the board, Rio Tinto has announced 14,000 job losses as part of a plan to reduce its debts by €7.4 billion by the end of the year, citing the “unprecedented rapidity and severity of the global economic downturn”. “In the short term the biggest challenge we face is the economic situation and just trying to figure out what’s going to happen next and
“Nothing is recession proof but uranium is less affected by the recession than coal and other commodities” Today though, having risen up through the ranks, leaving the coalface far behind him, Chiaro is more likely to be found behind a desk at the company’s UK or Australian headquarters. As CEO for Energy, Preston is in charge of six Rio Tinto companies producing coal uranium and minerals and is also Director of the World Coal Institute. Rio Tinto is one of the world’s leading producers of coal with interests in 14 coal mines in the US and Australia, including 800 million tonnes of coal reserves at operat-
when the recovery might occur,” says Chiaro. “I would say, based on the markets we see, that 2009 is going to be pretty rough for the whole year.” Within the energy division however, although prices have dropped, demand has remained relatively buoyant – particularly on the uranium side- as Chiaro explains: “Nothing is recession proof so I would hate to describe it in those terms but uranium is less affected by the recession than coal and other commodities because nuclear
www.bme.eu.com
RIO TINTO ED P36,37,38,40, 41.indd 37
37
29/5/09 15:26:59
power is the cheapest source of energy that anybody’s got. Once nuclear power stations have been set up they are very low cost energy sources so utilities companies will want to run them fl at out even in bad times.” He goes on to say that coal demand, despite the job cuts in Australia, has also been relatively unaffected on the thermal side, however coking coal has suffered a decline as it depends on iron and steel demand. The most seriously affected of the companies within his division have been those producing minerals for industrial use in automobiles, homes and electrical devices, which he says have experienced a decline in sales of over 30 percent. “We’ve seen significant slowdowns there. Talc is probably the most affected because it’s most closely associated with the automotive industry. A lot of our talc goes into car bumpers and into the plastic and even the rubber that’s used for tyres. Similarly, a lot of end products used in home building have a lot of talc in them – coatings and paints and that sort of thing. I would say borate is second because it’s used in insulation, fibreglass, textiles, detergents and lots of other products as well. Titanium dioxide is the most heavily affected because it mainly goes into paints and coatings.”
Knock-on effects The upshot of the slump in demand for minerals and the fall of the prices of coal and uranium is that the majority of the ongoing Rio Tinto projects to develop new mines or production sites have been delayed – with the exception of the QIT Madagascar Minerals (QMM) mineral sands mining project which has been completed on schedule and from which the first shipment of titanium dioxide will go out on schedule. “As far as the other projects are concerned in my product group, whether its uranium, borate or coal, we’ve defered projects in most cases,” says Chiaro. “We’re trying to keep them alive through this slow period but they’ve either been reduced to a minimum spend or, when
“We see a lot of growth potential in India. They have a huge population and they want a higher standard of living” we’ve been able to do so, we’ve completely put them on the shelf, with the notion that we can bring them on board very quickly once we see some strength in the economy again.” It’s a frustrating situation for Chiaro and his team, who are keen to open up new sources of coal and uranium to feed the growing demand for energy, particularly from the emerging Rio Tinto markets of Japan, China, Korea and India. The latter, says Chiaro has become a major importer of thermal coal and he predicts demand there will soon be greater than from Japan: “We see a lot of growth potential in India,” he says. “They have a huge population, they want a higher standard of living and electricity is a key component of a higher standard of living. Although India has a large government-run coal industry of its own it
38
Preston Chiaro hasn’t been able to keep up with demand. They are also building a lot of power stations on the coast, which can accept imported coal from places like Australia and Indonesia. In fact, we’ve signed a number of agreements recently to supply thermal coal into India. I see it becoming a major importer of coal going forward. It wouldn’t surprise me at all to see it grow larger than Japan in just a few years.” On the uranium side, demand is particularly high from China where the country aims to produce around 70 gig watts by 2020, and where “in 10 years they want to build a significant tranche of power stations,” says Chiaro. He goes on to say that the company is experiencing significant demand from Korea and Japan, both of which have ambitious nuclear power development programmes. To meet this demand, he says Rio Tinto hopes to develop new sources of uranium in Africa and in Kazakhstan – projects which for now may remain on hold until economic conditions recover: “Timing might have to be delayed because of economic difficulties. But we would definitely like to open up another source of uranium. Kazakhstan is quite attractive because production costs there tend to be low. There appears to be a lot of uranium resources in the ground and we’re working actively in that area.”
Next generation mining The short-term restrictions imposed on Rio Tinto’s expansion plans by the economic downturn come at a time when technology is being developed that will revolutionise the mining industry – and bring cost savings that would, Chiaro hopes, prevent a repeat of today’s
www.bme.eu.com
RIO TINTO ED P36,37,38,40, 41.indd Sec1:38
29/5/09 15:27:04
328 AD.indd 1
18/5/09 11:23:42
project delays. Rio Tinton is currently developing technology aimed at automating the whole mining process, from drilling to the trucks and shovels that haul the material away from the mine. It is currently running a pilot operation of an automated mine in Australia where it has a fleet of automated trucks and automated drills which are controlled remotely by workers based in a nearby city. Describing the cost savings that can come from such a scheme, Chiaro, says: “We should get long lives out of this technology which saves costs, reduces fuel usage and we don’t have the attendant support infrastructure that usually goes with this sort of operation. It saves money, energy, and reduces greenhouse emissions. The aim is to eliminate the need for people. We think it’s a great technology.” He describes the technology behind the trucks: “These aren’t remote control trucks these are autonomous trucks. You programme them so that they know where the shovels are and they link themselves up automatically and go along a pre-programmed path.” As well as cutting manpower costs, taking humans out of the equation will also help Rio Tinto to meet its health and safety targets by reducing workers’ exposure to hazards. Being one of the world’s biggest mining companies means Rio Tinto is under heavy scrutiny when it comes to its health and safety record. It aims to have zero accidents of any kind in the workplace – hence the safety video requirement at its London office on which Chiaro remarks: “If the workers in our mines have to watch a video, why shouldn’t we?” Naturally, learning how to evacuate an office building is a far cry from the daily life or death threats faced by workers mining deep underground in highly hazardous conditions but the company’s attitude is that the health and safety message should permeate every area of the company and that it should underpin every part of its operations: “Safety, for us, is a value not a priority that you rank alongside how many widgets to purchase,” says Chiaro. “We have a very specific target and obviously our target for fatalities is zero. We have seen a steady decline in all injury frequency rates for the past 10 years. We think we are the safest large mining company in the world as measured by those rates.” Last year Rio Tinto fell far short of its target however, after a plane crash in Peru, which killed 10 workers: “Last year was a terrible year – we had 18 fatalities, 10 of which were associated with a helicopter accident in Peru and that’s a horrible performance,” says Chiaro.
40
The big picture Corporate image – particularly at a time when energy companies are coming under scrutiny for the effects of their activities on the environment – is a big concern for Rio Tinto. It is particularly keen to clean up its environmental record, with Chiaro, as the company’s Sustainable Development Champion, at the helm. Like its approach to health and safety, Rio Tinto’s policy is to integrate sustainable thinking into every aspect of its operations, making it integral to the planning and development of any new mines: “When we look at our review and approval processes for investment in new mines and other projects, we make sure that we have sustainable development questions built into the decision making process. We look at how it will affect water, air, and waste disposal, recycling and how to save energy. Some companies put together a group of sustainable development specialists but we’ve tried to distribute this knowledge across the whole organisation and built it into our processes.” He acknowledges however that the very nature of Rio Tinto’s activities, which see it emit around 50 million tonnes of greenhouse gases every year, mean it cannot claim to be a sustainable organisation: “I try to avoid the word sustainable because the mine that we operate is not sustainable – it’s a deposit that we are removing and when the deposit ends that mine ends so by defi nition it’s not sustainable.” He adds that restricting emissions on some operations for example would make them unprofi table: “If we impose restrictions on aluminium smelting operations then we could actually disadvantage those operations and would have to shut them down because they are not profi table and that production facility would move to China where there are no restrictions.” What the company does do, however, is work with government bodies on climate change programmes that take into account the needs of the industry, and monitor and report on its own emissions. When it comes to the building of new mines it is working on technology to minimise the impact on the environment during the mine’s lifetime, which can last for hundreds of years. Giving the example of finding environmental ways of cooling a new mine in Arizona, Chiaro says: “Initially when we designed the mine we took a more traditional approach and were going to build huge air conditioning systems on the surface to keep the mine cool for the people that were working on it. We completely re-thought how we would build the mine and whether we needed so
www.bme.eu.com
RIO TINTO ED P36,37,38,40, 41.indd Sec2:40
29/5/09 15:27:07
many people, whether we could automate some processes instead Working under such difficult circumstances is becoming an inand if we needed to cool the entire mine.” The company is also creasingly common challenge, says Chiaro, which means Rio Tinto’s working on a new ways to dig deep mines called block caving, which role becomes as much about politics as mining. “These governments involves digging a hole under the deposit and then using conveyer are struggling to come up with the right framework for mining. We try systems to remove the coal, hence making no impact on the site at to assist them with that and try to point out what we think are good ground level. examples in other parts of the world. But frankly the capacity, the As well as minimising its impact on the natural environment, Rio backing and the training of people in government in those countries, Tinto also has a responsibility to ensure the welfare of the communitends to be lacking. Sometimes they send people off to western ties living around its facilities. Chiaro schools for training but often you’ll says the company’s aim is to engage find those government ministers with communities at the early stages don’t have the background in this Rio Tinto is a leading international mining of a mine being developed and it is stuff. Frankly, we’d rather work with group, combining Rio Tinto plc, a London particularly keen to develop educaa government where people have listed public company headquartered tion and skills among the local poputhat background.” The challenge is in the UK, and Rio Tinto Ltd, which is lations. Its projects have included increasing, says Chiaro as mining listed on the Australian Stock Exchange, the setting up of the Namibian Insticompanies are forced to dig deeper with executive offices in Melbourne. tute of Mining Technology, close to and search further for tomorrow’s The two companies are joined in a dual the site of its operations, providing energy sources. “In the long term listed companies structure as a single employment opportunities for genthe challenge is about continuing economic entity, called the Rio Tinto erations of local people. to find economic deposits and they Group. The group’s major products It has also set up the Rössing tend to be in countries that are less include aluminium, copper, diamonds, Foundation close to the Rössing mine developed and have less stable govenergy products, gold, industrial minerals in Namibia which includes a schools ernment structures.” (borates, titanium dioxide, salt and talc), development programme, youth And while new sources of and iron ore. Its activities span the world development project and funding for energy are shrinking, global demand but are strongly represented in Australia agriculture, small to medium enterfrom emerging economies is growand North America. There are also prises and infrastructure assistance ing, meaning the company faces significant businesses in South America, for water and sewage systems and increased pressure to push the Asia, Europe and southern Africa. town planning. “It’s our aspiration potential of its operations to the to be the developer of choice,” says Chiaro. “When a community has a mineral deposit nearby we want them to think that Rio Tinto will do a better job than any other company.” Because many of Rio Tinto’s mines and mineral deposits are based in remote locations it has the task of building infrastructure and transport links around the site, often in circumstances of political instability. At the Madagascar Minerals project, for example, Rio Tinto built roads, a port and power network from scratch, during a time of upheaval in the country’s leadership.
limit. “The scale of everything has gotten larger and larger but we’re now approaching limits on size,” says Chiaro. “We’re approaching some theoretical constraints that we won’t be able to break through.” Breaking through these barriers while attempting to meet environmental guidelines, all under increasing economic pressure means Rio Tinto is facing a battle on all fronts. But the world is hungry for energy and Rio Tinto is doing everything it can to develop the technology that will satisfy that appetite for hundreds of years to come.
www.bme.eu.com
RIO TINTO ED P36,37,38,40, 41.indd Sec2:41
41
29/5/09 15:27:16
MIXVOIP AD.indd 1
5/5/09 10:24:42
TELECOMS
“DRIVING INNOVATION AT THE SPEED OF LIFE” From a humble upbringing on a farm in Missouri, Matt Bross boasts what he describes as one of the “coolest” jobs in the world as CTO of BT Group and CEO of BT Innovate. Gerhart Trüb discovers what makes his role so great during a delve into the group’s technology operations. BT’s 21st Century Network (21CN) is one of biggest IT programmes in the world, transferring the telephone network over to an IP system. What has 21CN achieved so far and what savings will be realised? Matt Bross. 21CN is a large, ambitious programme to simplify the multiple networks into a single global IP infrastructure. The programme has, in economic terms, delivered in excess of UK£600 million in cost reductions against a UK£1 billion target. I believe we have the largest Ethernet footprint within the UK on that infrastructure. We’ve rebuilt the entire core infrastructure in the UK around high capacity dense wave, division multiplexing and switching technology that enables the on ramping of the explosion in wireless data and explosion of broadband traffic as we begin the next chapter. This will enable the deployment of super fast broadband on fibre optic cables out to the street furniture within the UK. The 21CN network operates across 170 countries throughout the world so this benefits our broadband profile which delivers 24MB broadband across a huge swathe of the UK, the biggest Ethernet footprint in the UK, and a set of new services. So it has enabled core cost reductions and new services to be introduced within the UK. It creates a fabulous social network of the small to medium size community in the UK and we’re moving from closed innovation where BT would have had to invent every product, service, and application, to an open innovation model that has really benefited our customers, and our
shareholders, enabling them to participate more widely in the innovations that are taking place globally. So 21CN has enabled the core cost reductions, the faster drumbeat of new services introduced within the UK and globally, and that’s a specific insight into one of the market areas around the small to medium-sized enterprise where you can see just the market difference from the old approach to the new approach. What role do you play in the evolution of 21CN today? MB. 21CN has moved to becoming an operational programme, with the continued rollout and delivery sitting with my colleagues in BT Design. My energies are put into ensuring that we leverage up that investment for the benefit of our customers, employees and shareholders. We look to prepare BT for the future by generating and articulating clearly the revenue generation, cost reduction and customer experience enhancement propositions on the super fast broadband infrastructure that we’re delivering. This is where my focus is now because the delivery of 21CN is squarely in the hands of the operating groups. First you innovate it, then you design it and then you operate it. How important is innovation for a giant telecoms group like BT? MB. BT has always been an innovative company but in this time space we have had to innovate the way we innovate. We have had to change
www.bme.eu.com
MattBross.indd 43
43
29/5/09 14:47:36
innovation at its core, being the best at doing internal R&D to open innovation, moving from a company that was focused on technological innovation to a company that’s focused on innovation and the experience that we drive. We have became a company that was looking at only longterm type trends to much more dynamic innovation planning cycles. I call it a move from the ‘blue sky approach’ of innovation to purpose-driven innovation where what you’re doing, even if it’s in the mid or longer-term research programmes, can be tied back to core questions that will really get people business motivated. As we look globally, there’s less and less capital right now certainly to spread around and the need to collaborate in innovation is of paramount importance. We’ve scanned over 460 start-up companies this year for innovative ideas and collaboration ideas but by bringing innovation into the company it lowers the cost of that innovation and can ensure that it’s much more relevant to the customers. So what we’re doing is unleashing innovation beyond the boundaries of the payroll of BT so that there’s not a gap between what’s possible out there and what we deliver to the markets that we choose to serve. And because we’re leveraging up the investment that BT’s doing internally, this will be the lifeblood of successful companies as we come out of this downturn. People often still have this mental image of BT as a fi xed line telephone company, but this couldn’t be further from the truth. How would you say that BT has grown and evolved since you joined in 2002? MB. BT has gone through a series of transformations since 2002. Back then there was massive debt on the balance sheet and ‘deleveraging’ the balance sheet to create oxygen for the transformation of the company was one of the first jobs. But if you look at the transformations, we’ve gone from a predominantly narrow band company to a broadband company. I think we actually just clocked over 10 million broadband subscribers from a base that was measured in tens of thousands in 2000. We have gone from a telco to a global network and IT services company that is trusted with the largest most critical infrastructures for companies around the world, whether it is Reuters, Unilever, MasterCard, Coca-Cola, Pepsi, and so on. We have gained significant trust and credibility. With the transformation from a telco to a global network and IT services company, we’ve booked about UK£8.3 billion pounds of new contract value in the last 12 months. I think the current transformation really is around becoming a global innovation platform as opposed to a global network, one where our customers can successfully address the global marketplace on a variable cost basis faster than they could otherwise achieve themselves. And this is driving us to move from being a network and IT company to a ‘softco’ where the platforms that underpin what we do are much more ‘real-time’, are much more agile. An example of that would be one of the recent acquisitions where we acquired Ribbit out of the West Coast, which is kind of billed as Silicon Valley’s first telco. Through this we can actually begin to embed communications into the workflow. Instead of network services being a big infrastructure like a PSTN (Public Switch Telephone Network) or like a frame relay network, you start to embed communication and messaging into the workflows of companies. And this is really the transformation that we’re undergoing right now and we’ve worked to significantly transform
44
www.bme.eu.com
MattBross.indd 44
29/5/09 14:47:39
MATT BROSS ON HIS ROLE
“I think that I understand the value of people in this equation. My management philosophy is that if you take care of people, they will take care of business because people make things work” globally. So it is a vastly different business than the recent past and certainly when I joined.
“I continue to serve as the group Chief Technology Officer but have taken on the accountability as CEO of BT Innovate, which carries two primary accountabilities. One is engaging in the communities within BT where BT works and operates to stimulate innovation in those communities, and second is with our customers – engaging them in a very direct way to help them innovate within their businesses more effectively, innovate within the ecosystems that they operate, and extract more out of the relationship with BT itself from the innovation agenda. “Internally, I think of it as really restocking the shelves for our market-facing units and other operating groups in the areas of new revenue generation, cost reduction, and customer experience opportunities. It’s about taking the idea generation coming from multiple sources and driving it into well-articulated propositions that those market-facing units can use to drive the financial performance and the customer experience that they intend to put into the marketplace. It’s about making sure that we’re prepared for the future with the right kind of revenue generation, cost reduction, and customer experience enhancement agenda. At BT Innovate we probably had three customer engagements every day of the year last year.”
the innovation agenda of the company from a closed innovation model to an open innovation model. This where open innovation, in my judgment, is defined as BT’s organisational capability to find innovation globally, bring it back and fuse it together with the best of the men and women inside of BT. Then using our innovation platform, get it in front of customers faster than ever before. You are so correct that BT has gone through a significant transformation and in some ways outside of the UK if you look at our global services customer survey, for the better part of last year the number one or number two message from our global services customer base is that we are an innovative company that’s delivering network and IT services
In the past you described life at BT as “one of the coolest jobs on the planet”. Do you still feel this to be the case? MB. Absolutely. Pretty much every day I pinch myself that I should be serving a company like BT as the CEO of innovation and as the Chief Technology Officer because this is a venerable organisation when it comes to technology. My passion is less fuelled by technology than by what I call ‘driving innovation at the speed of life’. I believe that things exist in the domain of invention, and they may be very important inventions until they cross a threshold and that threshold actually is a pretty thin line. They then become innovations when they are enhancing the quality of people’s lives or the success of business. And for me, as we deploy the significant sums of investment that we do at BT, if we can strive to innovate at the speed of people’s life as opposed to at the speed of technology, we take on a higher purpose and create more of what is relevant in the daily lives of our customers. So I really love the range of things I get to learn and understand – from the nanosciences all the way through to the most advanced applications of social networking. Who wouldn’t have fun doing that?
You appear to be passionate about your role. Are you very much a hands on technology chief? MB. I think that I understand the value of people in this equation. My management philosophy is that if you take care of people, they will take care of business because people make things work. My absolute passion is around helping innovation and the talent that we have – that’s not rhetoric. When it comes to my management style, people who know me would say that I understand at quite a deep level how things work but I’m also very comfortable with trusting the people that we put in place to do the analysis and to do the design engineering architecture and get on with it.
www.bme.eu.com
MattBross.indd 45
45
29/5/09 14:47:42
BT AD2.indd 2
21/5/09 13:26:52
BT AD2.indd 3
21/5/09 13:26:53
UnifiedCommsRT:6may
29/5/09
14:02
Page 48
ROUNDTABLE DISCUSSION
A unified solution for communications We sit down with a panel of experts to gauge their views on the power of unified communications (UC) in the 21st century business environment. face meetings are a major avoidable cost, In these tough economic conditions how can but only if the alternatives to doing business UC help companies achieve business goals THE PANEL are economically viable, user-friendly and busiand slash costs? ness quality. Audio, web and video conferencMartin Saunders. UC can provide a business Martin Saunders, Senior Technical Consultant for Amicus ITS ing offer such solutions and increasing with a competitive advantage by allowing customers and business partners to easily numbers of organisations, in all areas of busiCathy Ham, General Manager of Global identify and communicate with the right peoness and public service, are discovering the Portfolio and Marketing at BT Conferencing ple within an organisation. New customers business benefits they can help deliver. These Philippe Babin, General Manager of Media5 can be won by making the business easy and conferencing solutions are often the means by Corporation quick to work with – thus shortening the which most people experience effective, uniRichard Pinnington, UK Marketing Manager for sales cycle. Customer retention can be imfied and real-time collaboration for the first Enterprise Solutions at Nortel proved by the increased customer satisfactime – UC in action. As an example of the cost Ravi Pather, VP of Sales for Europe at tion that goes hand-in-hand with better benefits that can be achieved, our experience Psytechnics communication. UC can help businesses with customers shows that for an organisation make their workforces more productive by of 10,000 people, the typical travel cost for a reducing the need to travel, directly saving time and transport costs. UC face-to-face meeting is in the order of €121. Conferencing typically replaces enables remote meetings without a substantial loss in the quality of 52 percent of face-to-face meetings, yielding a €1.3 million P&L saving. contact between meeting participants by providing high quality voice Adding in the savings in unproductive time (salary cost) while travelling can and video and by allowing presentations to be shared. extend the overall P&L saving to €2 million. Cathy Ham. UC can help people get their work done without the need to travel so much. Travel costs for face-to-
Philippe Babin. Companies looking to justify an investment in UC during an economic downturn may be initially wary of the perceived financial challenges in implementing a UC solution. “UC can provide a business with a However, an effective UC strategy enables an organisation to offset any ficompetitive advantage by allowing nancial challenges by creating a more customers and business partners productive work environment. It brings to easily identify and communicate the capability to streamline communiwith the right people within an cations by bringing all of your commuorganisation” Martin Saunders nications tools – phone, instant messaging, email, conferencing and data – together so that employees can in real time communicate and collaborate regardless of their location as well as within the applications they already know, use and trust. Organisations can also potentially see dramatic returns from reduced overhead costs. Many multi-location businesses report monthly savings of up to 50 percent and more after implementing an effective UC strategy. UC enables companies to set up their remote workers anywhere – on the road or in their homes – reducing the cost of physical office locations, travel, training and equipment. Richard Pinnington. Firstly, UC means different things to different people. Many businesses recognise some of the technology that forms the basis of
48
www.bme.eu.com
NORTEL AD.indd 1
5/5/09 10:25:24
UnifiedCommsRT:6may
29/5/09
14:02
Page 50
UC but not all understand how they can best apply it. To narrow it down, the core topics are: • Convergence of voice and data networks • Convergence of business phone systems and mobile phones • Unified messaging – email, voicemail, IM and even fax in a single message inbox • Audio, video and web conferencing • Presence – a way of notifying other people of your availability and preferred method of contact Implementing any of these initiatives, or creating the ultimate UC environment where a business has unified all aspects of communications listed above and integrated them with business applications such as Microsoft Office, Lotus Sametime or SAP, can have dramatic effects on productivity, business processes, customer service and consequently business performance and cost.
However, these additional benefits can only be realised if a positive user experience can be maintained. Operations cannot wait for users to report problems; they need to provide a real-time view of the service experience and meaningful diagnostics to identify any root cause. Richard Pinnington. As you consider the aspects below, think of the processes or job functions within your business that might benefit from being ‘communications enabled’: • Maximising personal productivity – imagine working on a spreadsheet and clicking on an equation to see if its creator was available for an explanation, maybe via an IM or a video chat. • Deploying the right resources – this aspect is of considerable interest to the fire service, for example, and can have a significant cost, time and environmental impact by reducing unnecessary travel. • Collaborating more effectively – for a contact centre or customer helpdesk, you’d be able to identify experts anywhere in the business and bring them into a discussion to ensure first call resolution. • Streamlining the supply chain – such as triggering alerts to inventory shortages; or sending a text message when a delivery driver is within range of a customers house.
Ravi Pather. UC, simply put, means a range of communications applications running over an IP network that are typically integrated into a set of business processes. Real-time applications such as voice, video conferencing and fixed mobile convergence are typically the first to be Philippe Babin. It is not acceptable especialdeployed followed by some levels of integraly in these economic times to always be un“It is easy to overlook the tion providing enhanced productivity via inavailable or slow to respond to your human factor issues that tegrated telephony, presence, conferencing messages; a prompt reply is expected almost need to be addressed when and so on. Many enterprises currently regard immediately by customers, clients, partners trying to change the VoIP and video conferencing as their primaand other employees. Not responding quickry UC investments using the hard cost savly can result in potentially missing an impormeetings culture of an ings that can be realised. tant business opportunity. One of the organisation” Cathy Ham Integrating these applications provides greatest tangible benefits behind UC is the users with increased efficiencies and proability of an organisation to give its employductivity, however they are realised only ees real time secure voice and data commuwhen the user experience from using nications that enable them to make better these applications is positive. Experience shows that poor reliability or and more informed decisions that can ultimately impact an organisation’s call quality, significantly impacts the service and user confidence with overall competitiveness and efficiency. a consequential reduction in productivity. If these efficiency and productivity gains are to be realised immediately then the IT operations Martin Saunders. By reducing the need to travel, using UC can help a busi(whether in-house or outsourced) must be focussed on service levels, ness achieve its green goals. Employee satisfaction can be increased by enusability and the user experience. This means making an appropriate abling working from home. By providing presence and using instant investment in tools, not making the mistake of assuming that appromessaging, team working can be enhanced over traditional voice and email priate tools come as part of the UC solution. The established network communication methods by providing an unobtrusive means of identifying the or VoIP tool vendors are typically focused on managing equipment, conavailability of co-workers and the best means to make contact with them. figuration, availability and network performance rather than focussing on the users’ call experiences, and the associated diagnostics behind Cathy Ham. UC also allows people to work just as effectively away from the this. traditional office as they would in it. Now people across multiple time zones can work together on global projects without the need to leave their desks, What other benefits does UC offer organisations? or in many cases their homes. Such business agility and flexibility drives inRavi Pather. UC as an extension to pure VoIP or video conferencing offers innovation, customer service and cost efficient business operations. For the creased opportunities for cost savings through increased convergence at both individual, work/life balance is easier to actually achieve, people are hapthe network and infrastructure levels, increased automation of business and pier in their working lives which leads to better employee retention rates, communications processes, and most importantly the flexibility to remain in less natural wastage and a more motivated workforce, more in touch with contact using multiple forms of communications. overall business objectives and strategy.
50
www.bme.eu.com
PSYTECHNICS AD.indd 1
5/5/09 10:25:41
UnifiedCommsRT:6may
29/5/09
14:03
Page 52
Mobility is of utmost importance for businesses, with staff travelling all Cathy Ham. When people do need to travel, UC needs to help them stay in over the world and needing to stay in contact with colleagues and clients. touch easily and effectively. With audio conferencing for example, anyone How is UC playing its part in mobile working? can join an audio conference call from virtually anywhere in the world for Richard Pinnington. Today for many organisations, the cost of mobile-relatthe cost of a local phone call, or even freephone using a fixed phone or their ed communications is the largest mobile. With an internet conelement of their ICT spend. The nection they can talk and share mobile phone operator deterdocuments or slides in the “One of the greatest mines the services available and same way they would gathered tangible benefits the mobile network is separate around a table, projecting behind UC is the ability from your business communicaslides from a PC. Using UC in of an organisation to tions network. Employees need this way allows people to use two phone numbers, mail boxes their time to best effect, to suit give its employees real and double the administrative the circumstances at the time. time secure voice and support. Missing calls or wasting So, when working on the move data communications” time collecting multiple mesis a necessity, it needn’t be a Philippe Babin sages is commonplace. While pain. employees on the business network can see the availability of Martin Saunders. The chaltheir colleagues through ‘presence’, they can’t see the status of off site collenge of global working is one of communication. Traditional ‘mobility’ techleagues. nology has brought email and telephony communication to more people in Fixed Mobile Convergence (FMC) allows you to more places but these communication methods change all this. Firstly, you can publish one number often lack the richness required in sensitive group for each employee. The mobile phone and the situations, such as board meetings, sales engagedesk phone would ring until one was answered. ments and project meetings. There would be one message system, with voiceUC can add this richness by providing simultanemails placed in your email inbox for easy retrieval, ous voice and video communications in a virtual meetor read to you if you’re travelling. If you were on a ing room format where presentations can be made and conference call in the office and wanted to head items of businesses are effectively discussed between home, you could seamlessly transfer the call to many people. When operating in different time zones, your mobile. You can reduce mobile phone costs UC solutions can provide real-time information about by running the mobile call over your wireless netthe availability of people indicating whether it is apwork, then dynamically pass the call to the mobile propriate to attempt to contact them or not. Where it is operator when you move out of range of your netinappropriate to contact someone who might be work. Our habit of using the mobile phone while asleep or otherwise engaged, UC can expose the alterin the office needn’t cost you money anymore. native means of ‘offline’ communications available – in“For those that have And on international calls, you can avoid the costcluding traditional methods such as email and ly roaming charges by routing mobile calls via voicemail. built an understanding local private networks. Essentially, the mobile and a vision of how UC phone becomes an extension off the business Ravi Pather. UC plays an essential role in mobile can benefit the phone system (PBX), so that it has the same feaworking as it enables communications across multibusiness, the real tures as a desk phone, and the same ‘presence’ ple media types, using multiple devices that better issue is that many of capabilities. suit the environmental context. Again to ensure this works effectively the users’ experiences need to be the components are Philippe Babin. UC is not only about voice and data monitored. Psytechnics plays an important role in enalready in place but communications; it is also about how that same mosuring the users’ experiences are maintained and just don’t talk to each bile device is able to achieve the notion of ‘presence’. that their associated IT operations and support other” Richard UC allows enterprises to maximise the connectivity teams have the visibility and tools to ensure that serPinnington of their workforce with their customers and other emvice levels are maintained and services are usable ployees. It offers them the ability to reach directly any from the users’ perspective. You cannot put your given individual, regardless of where they are locatusers on hold whilst operations investigates the ed in the world, enabling insight and collaboration of the employee base to quality issues or performs trial and error tests. You must have real-time serhelp improve work processes as well as to help meet overall customer comvice performance monitoring with meaningful diagnostics to identify the mitments. root cause. Too many times we see IT operations blissfully unaware that
52
www.bme.eu.com
AMICUS AD.indd 1
5/5/09 09:57:20
UnifiedCommsRT:6may
29/5/09
14:03
Page 54
users suffer poor call quality, and that these problems remain invisible, even when reported by users, operations then having to resort to essentially guesswork to troubleshoot. What are the main stumbling blocks to widespread UC adoption and how can these obstacles be overcome? Philippe Babin. The main stumbling block to the widespread adoption of UC is the lack of knowledge that organisations face in understanding the full benefits that UC can bring as well as the technologies involved in implementing the ideal UC solution. It’s important for organisations to understand that there isn’t one magic solution to implement for a UC strategy. For UC more than most other emerging technologies, a ‘one-size-fits-all’ approach will not work, so in order to increase the adoption of UC amongst the masses, it involves a portfolio of solutions approach that can be customised specifically to meet a company’s needs for mobility, collaboration and technologies. Ravi Pather. Managing a positive user experience, and UC operating costs. Users remain sceptical about the benefits of UC as early or existing projects have typically had mixed results. Many of the negative issues associated with these projects are call quality related. The equipment can be operating correctly, the network performing with sufficient bandwidth and quality of service, yet there can still be issues. User complaints involve echo, distortion, noise and volume for voice, and picture blocking, loss of sync and distortion for video. These issues are generally not detected by traditional tools and can only be resolved quickly and reliably using a tool that understands them from the users’ perspective – relating user complaints to actual network or application anomalies. Experience shows there is little focus and emphasis on operations costs when considering new UC applications. A mistaken belief being that UC as just another network application can use existing network performance tools. The reality is somewhat different, the ongoing operational overhead for these real-time UC based applications (primarily voice and video) is higher and more complex than expected. The initial capital expenditure of UC itself remains the focus for the business case, with operations and support generally being considered as an afterthought, sometimes years into the projects rollout. Cathy Ham. The financial and environmental benefits to organisations from increasing use of UC can be quantified. However, it is easy to overlook the human factor issues that need to be addressed when trying to change the meetings culture of an organisation. The key to managing resistance to change is to offer meeting alternatives that are easy to use, cost effective and extremely reliable. To get widespread UC adoption, you have to get people using the technology and seeing and believing for them-
54
www.bme.eu.com
selves how good it can be. We know from our own experience in providing conferencing solutions to many of the world’s largest organisations how much effort and ongoing user support is required to maximise the use of straightforward audio conferencing. Such experience in driving and setting up adoption programmes, training, helpdesks and proactive service monitoring can make the difference between success and failure for widespread UC adoption.
“Experience shows there is little focus and emphasis on operations costs when considering new UC applications”
Martin Saunders. Some technical challenges still surround the
integration of legacy systems into a UC environment although the continued development of gateway technology and natural replacement of older systems means that this is becoming less of an issue for most businesses. Ravi Pather Security is a primary concern for many organisations where confidentiality is a paramount concern – such as in government and healthcare: • The communication between users of a UC solution must be assured • Securing assets belonging to different organisations and individuals presents a challenge • It may not be apparent that a recording of a conversation or virtual meeting is being made – and if it is, where it is being stored and how it is being secured? For UC solutions to be truly effective, they must work for all potential users of it – both inside and outside of an organisation. If a UC solution does not function for users outside of an organisation then experience shows that users within an organisation will become frustrated with it and it will eventually be abandoned. The challenge of providing access to an organisation’s UC to, potentially, anyone is not without difficulty – linking up different UC platforms between organisations can be taxing and very few UC platforms provide a means for an external user to participate without the installation of client software. Richard Pinnington. A lack of understanding of what UC is, and what it can do for a business is often cited as the core stumbling block. For those that have built an understanding and a vision of how UC can benefit the business, the real issue is that many of the components are already in place but just don’t talk to each other. So how much of the investment can be retained and leveraged, what needs to be added, and which vendors or systems integrators can do the work? What existing supplier contracts would be impacted? UC remains a relatively new yet rapidly evolving market. You should look for suppliers that are recognised leaders in the UC space with relationships with application vendors such as Microsoft, IBM and SAP, and the necessary integration skills. Vendors, such as Nortel, will work with you to explore how UC can be implemented within your company for maximum business benefit and then help you with a roadmap that leverages what you already have to allow you to realise those benefits.
MEDIA5 AD.indd 1
18/5/09 11:39:46
WAINHOUSE:6may 29/05/2009 14:45 Page 56
UNIFIED COMMUNICATIONS
What do you see in Unified Communications? Brent Kelly, Senior Analyst and Partner at Wainhouse Research, demystifies some of the issues and challenges associated with the migration to unified communications.
T
he need to communicate and collaborate between individuhook, in a call, in a conference call) adds significant information about how als and groups of individuals has grown exponentially as suppeople are working, and it complements and enhances a user’s presence pliers, manufacturing, R&D, engineering, production, information based on calendar data, location services or computer keyoperations, sales, marketing, finance and retail have all beboard state. By knowing both device status and an individual’s context, come globally dispersed. Companies of all types and sizes are people are able to reduce human latency and more effectively reach out acknowledging the competitive need to streamline the flow of knowledge and communicate with the other people in their particular value chain. and information worker expertise both within and without the organisaPresence will become the dial tone of the 21st century because it altion, regardless of where in the world that knowllows people to know when someone is available, edge and expertise need to be applied. The big as well as how to best contact them. One intereconomic wins in this decade, and the next, will esting proof in our company that presence relikely go to those companies and their key partduces latency is that we have completely ners who are able to flatten and accelerate their eliminated internal voice mail because we never knowledge chains through real-time, ad hoc, globcall someone unless we first establish an instant al collaboration. UC is emerging as a proven framemessaging session asking two questions: are you work for reducing human latency in there, and second, may I call you? Internal phone knowledge-intensive business processes. tag has been completely eliminated. A well-designed and implemented unified communications system should significantly reduce or Challenges and pitfalls eliminate multiple communications attempts in Implementing a UC solution requires the same favour of more rapid, ad hoc, one-on-one and group level of discipline and planning one would use meetings, facilitated by presence, instant messagwhen upgrading a production line or when ining, voice, and conferencing capabilities. UC sysstalling a new line of business application. The tems will, typically, tightly integrate real-time media companies having the most success with UC are with collaborative services and any devices a perthose who employ some kind of defined procedure Brent Kelly is the Unified son uses within the context of any workflow applior process for integrating new technology with peoCommunications (UC) Practice Manager at cation. ple, business processes and existing technology. A Wainhouse Research, where he focuses Rich presence is a fundamental enabler for a UC company does not want to deploy a UC client that on unified communications markets, system. Rich presence gives status information supports VoIP and desktop video and then afterstrategies, products and services. He has about any of the communications tools a person wards wonder if the underlying network infrastrucwritten numerous reports, white papers may use along with the person’s working context. ture can support the increased bandwidth demand and articles on UC and collaboration. For example, telephone status information (onthat IP voice and video will require.
56
www.bme.eu.com
WAINHOUSE:6may 29/05/2009 14:45 Page 57
Do the homework Many companies have heterogeneous environments where there may be multiple kinds of devices (PCs, Macs, mobile phones) as well as telephony systems from multiple vendors and back office systems running a variety of operating systems. Care must be taken to ensure that the UC solution selected will meet the needs of all prospective users and that it will integrate with the existing infrastructure and solutions. Performing a needs analysis is a healthy exercise prior to considering a UC solution because it will help pinpoint which people or groups of people can really take advantage of such a solution. Creating a baseline that includes not only the network hardware, firmware versions and current bandwidth, but also the kinds of devices and the existing software licences available, will also be important. For example, if people already have Microsoft Office Professional, then individuals using Office Communications Server will not need an additional license for the Microsoft Office Communicator client. Small things like doing a needs assessment, profiling user needs, creating a baseline and examining existing licences can save organisations lots of money when ultimately deploying a UC solution.
WHY BUSINESSES DEPLOY UNIFIED COMMUNICATIONS
Productivity 86% Other 13% Revenue growth 5% Business continuity 10%
Cost reduction 78%
Source: Wainhouse research, July 2008
ROI or TCO? One of the key concerns with unified communications is justifying the expense or generating a ROI. As shown in the pie chart, companies are investing in UC for two primary reasons: first, to increase productivity; and second, to reduce costs. We have found that trying to justify a UC solution based on productivity increases is a difficult sell to management. Instead, we suggest that people look at UC from a total cost of ownership (TCO) perspective versus an ROI perspective, with productivity increases being soft benefits one may also accrue. Most companies already have many of the elements that make up a unified communications solution: presence and IM (either premise-based from a free public service), one or more enterprise PBXs, audio conferencing (either premise-based but more likely from a service provider), web con-
Brent Kelly identifies the tangible cost savings for organisations looking to take the plunge with unified communications. Reduced travel. The caveat is that in most organisations, travel costs are so spread out that they are never rolled up to a single number. So some internal reporting and accounting procedure work will likely need to be done to prove that a UC solution can really save the company money. Consolidating infrastructure. We have seen some significant savings occur when companies consolidate their voice systems into centralised or regional solutions versus having individual PBXs at numerous locations. Cost savings typically appear in reduced maintenance, on-net calling and a smaller number of trunk lines being required. Audio conferencing. Some companies claim significant savings when bringing audio conferencing in-house, enough in fact to pay for the entire UC deployment. Our own experience is that premise-based audio conferencing works for some companies, but the hassles and cost with managing an on-premise audio conferencing solution outweigh the benefits for others.
ferencing (usually from a service provider), and some video conferencing. Given that companies already have access to all of these capabilities, it seems reasonable to look at a UC solution that enables a common interface and user model for all of them, from a total cost of ownership position.
Reducing risk and maximising control Other practical reasons for deploying a UC solution can be from a control and risk standpoint. For example, companies may want better control over who its employees are sending instant messages to and what the content of these messages. A premise-based IM solution may reduce certain kinds of risk by giving the organisation more control. Companies can archive instant messages and they can apply ‘message hygiene’ software so that instant messages are scanned for sensitive words, phrases, links and so on, prior to the message being sent.
Conclusion There are a number of organisations deploying unified communications solutions. The keys to success include understanding the need deploying a solution that fits with an organisation’s people, its existing processes and its existing technology; and creating a cost model that provides real TCO reductions in a short period of time. In reality, most companies do not see quite the TCO reductions they target when deploying a UC solution, but they are clearly able to have a much better communications solution with the same or somewhat less total spend. n
www.bme.eu.com
57
EXECUTIVE INTERVIEW
Next generation communications Andrew McDougall gives his advice on making the switch to unified communications. For the uninitiated, could you explain what exactly Unified Communications (UC) is? Andrew McDougall. UC is not a product but an intelligent and time-efficient use of technologies to enable ways of working that improve customer service, reduce transaction costs and deliver flexible working. It is estimated that in 2010 the worldwide UC marketplace will be worth around €4.5 billion. Employees and organisations have many means of communicating with each other, with customers, partners and suppliers: from office phone, office voicemail, email, mobile phone, mobile voicemail, instant messaging, text messaging and the internet, all inconsistent with one another and all with differing costs. This array of communication choices is making it increasingly difficult for businesses to manage the overload and with more and more workers going ‘virtual’– working from home or travelling or from other remote locations– it is becoming harder to find the best way of reaching them. Companies need a way of pulling all these disparate communications streams together to become a unified entity. UC incorporates a variety of methods you can deploy as part of a UC strategy to help you work more intelligently and efficiently, driving cost savings through technical efficiency, allowing your business to improve customer service, make faster decisions and locate relevant resources quickly and efficiently. It delivers, via a single interface, a comprehensive range of communications services and associated information designed to reduce the delays and frustrations of communication between individual employees, the extended virtual organisation and external customers. Empowering staff by freeing them from a complexity of technology allows them to concentrate on why they are communicating. By giving people the flexibility to work from home, the office, remotely or on the move, and providing them with the ability to work dynamically and collaboratively, effectively sharing the same information as their office colleagues, organi-
58
sations can maximise their skills and enhance both employee and customer satisfaction. Do organisations need to invest in new technology? AM. UC does not necessarily involve major investment in new technology. Almost all vendor UC offerings incorporate a variety of methods to integrate with existing voice technology (TDM and VoIP). Depending on which services are already deployed in the existing infrastructure it is obviously the case that some additional investment will be required to support the new user tool and additional contact media (video, instant messaging and so on). When investigating UC for your business you need to consider the ongoing cost of ownership for any vendor solution and not just the immediate outlay, which may appear low cost from a software licence perspective only. It is also paramount that you have a plan that ad-
Andrew McDougall is Head of Vodafone’s Unified Communications Group. He was previously CEO of Central Telecom, acquired by Vodafone in December 2008 to become the Unified Communications Group. Under McDougall’s leadership, Central became one of the UK’s largest and most successful independent telecoms companies with specific expertise in IP telephony, voice, managed services and UC.
dresses real business needs both now and as far as possible into the future so that whatever you buy is aligned to that plan. But will it involve a completely different way of working? AM. It doesn’t have to, but either through orchestrated change programmes or with the passage of time, people’s work habits will evolve to utilise the new ways of working made possible by UC. UC is definitely aligned more easily within organisations that have already accepted an information sharing and collaboration culture and so the challenge for the organisation is to steer such change into patterns that reflect desired behaviours and away from undesirable ones.
“It is estimated that in 2010 the worldwide UC marketplace will be worth around €4.5 billion” How have you helped organisations looking to make the switch to UC? AM. Vodafone’s Unified Communications Group has helped Cambridgeshire County Council to transform its working environment by providing its employees with fast, simple, ‘always on’ access communications. Alan Shields, Technical Architect, Cambridgeshire County Council, said: “Our vision is that staff work flexibly, balancing work/life pressures and the needs of the community – satisfying these and their own requirements. Upon project completion the council will benefit from a truly unified communications solution, providing over 5000 government employees with a platform to effectively communicate, share and interact together from anywhere at any time, enabling new forms of flexible working and significantly improving the quality of public services offered.”
www.bme.eu.com
Central telecom.indd 58
29/5/09 14:39:40
UNIFIED COMMUNICATIONS
The Future Beckons Lavanya Palani Batcha of Frost & Sullivan discusses the latest trends in unified communications. Enterprise Communications is increasingly being considered as a means to achieve several critical objectives in an enterprise. Increasing productivity, higher efficiency, faster turn-around times, enhanced client interaction, quicker ROIs, and significant reduction in long-term costs are some of these mission-critical objectives. In trying to achieve these business goals, enterprises need to overcome several limiting factors such as cut-throat competition, multiplicity of devices, communication over multiple remote locations, lack of infrastructure, unsatisfied clients, and even the current state of the economy. Advancements in technology, products, and applications, and the growth of Internet Protocol (IP) networks have given birth to the unified communications (UC) story, which is considered by many as an integral platform in the future of enterprise communications.
through e-mail, telephone, web browser or a unified client. It also includes sales of voice mail systems as they form an addressable opportunity for unified messaging solutions. • Conferencing and collaboration: Includes audio, video, and web conferencing, and collaboration tools that enable the communications and sharing of information, files, and presentations in real time.
Unified communications defined The proliferation and adoption of the IP telephony platform by enterprises serve as the principal thrust for unified communications. In the simplest of terms unified communications is the convergence of voice, data, and video networks on an IP system. Frost & Sullivan’s unified communications definition and framework includes a wide range of applications as explained below: • Enterprise telephony: Includes KTS, WPBX, PBX, IP-PBX systems, IP phones, and digital phones. • E-mail: Includes e-mail and related calendaring software licenses. • Unified client: Includes software clients, which provide instant messaging capabilities and/or the ability to launch other unified communications applications such as IP Telephony and conferencing and collaboration with presence awareness • Unified messaging: Includes applications which integrate the storage and accessibility of voice, fax, and e-mail messages into a single mailbox, which can be accessed
Lavanya Palani Batcha, is Research Analyst for Frost & Sullivan’s Information and Communication Technology Practice.
needing real-time collaboration between customers, colleagues, business partners, etc., are likely to enjoy the best use of unified communications. Industries that generally have an inclination towards the use of highend technology are also expected to be able to gauge the underlying long-term benefits of implementing unified communications in their premises. The potential for the adoption of unified communications exists across industry verticals such as manufacturing, hospitality, aviation, etc. The requirements for each vertical are unique and the essence of unified communications is such that it can cater to a specific need in each of them. The hospitality segment, constantly in search of avenues for greater customer satisfaction, is likely to benefit greatly from unified communications. Rich interactive user experience provided by IP telephony, the seamless voice and data connectivity through the mobility application for the hotel’s mobile staff, and other innovative facilities are expected to prove to be features offering immense benefits.
Emerging trends • Presence: Includes middleware applications, which provide a real-time status indicator of a user’s ability and willingness to communicate through different communication tools within a network or enables integration of multiple unified communications applications. • Mobility: Includes middleware applications and soft clients, which enable the delivery of corporate desktop and voice communications through mobile devices. • Contact centre applications such as Automatic Call Dialing (ACD), Interactive Voice Response (IVR), Computer Telephony Integration (CTI). • Outbound and multimedia Systems: Includes product license sales of customer facing applications in the contact centre.
Potential across Industries Enterprises that have offices across multiple locations with a large mobile workforce
The integration of unified communications and critical enterprise business processes such as CRM, ERP, etc., is seen as a development, which would enable enterprise customers to view unified communications as a significant value proposition. In the context of contact centres, the deployment of unified communications can result in a marked improvement in the productivity of the agents. They would have the provisions to be seamlessly connected through voice, video, IM, and email to their supervisors and associates on one side and customers on the other. These inherent advantages of unified communications are likely to facilitate the agents to perform multi-tasking. If agents can significantly diminish the time taken for their transactions, then it presents a case where the investment in the technology can be justified.
www.bme.eu.com
FrostSullivan.indd 59
59
29/5/09 14:47:07
CENTRAL TEL ADS.indd 1
5/5/09 10:20:12
CENTRAL TEL ADS.indd 2
5/5/09 10:20:13
IT SECURITY
GLOBAL PROTECTION FOR A GLOBAL BUSINESS Michael Lardschneider, Chief Security Officer (CSO) at Munich Re Group – one of the world’s largest reinsurance companies, with 5000 customers in 150 countries – chats with BM about new dangers, his passion for IT security and how to outfox the bad guys.
S
ecurity and business continuity are two critical facets of business today that many organisations ignore at their peril. With the financial loss and subsequent damage to reputation being somewhat incalculable, these last few years have seen the rise of the dedicated CSO role to try and cover almost all operational eventualities. With 25 years’ experience in security at Munich Re, (short for Munich Reinsurance Company), under his belt, it’s safe to say that Michael Lardschneider knows a thing or two about warding off threats posed to the group. He currently works in the Integrated Risk Management unit in charge of the whole gamut of security and business continuity; a role in stark contrast to his early days, when he worked on loss prevention strategies in the event of robberies and theft. A few years into this early role, the opportunity to move to the IT department emerged and Lardschneider grabbed it with both hands. “As a member of the IT helpdesk team I learned a lot about computer viruses,” he reveals. This part of the business became a passion of his as he got a taste for tackling emerging cyber threats. “One Monday morning in 1990, I had to solve an issue with four PCs that did not boot anymore and my investigations, analysing the MS-DOS 3.2 Master Boot Record and the Partition Table, proved that some malicious code had caused issues with the operating system – the virus also infected me. From then on, analysing virus code and investigating malicious behaviour of PCs became a favourite hobby of mine.” He soon became Munich Re’s virus protection expert and later the Chief Information Security Officer (CISO) for the group’s worldwide operations, before arriving at his current position. Down the years he has seen a myriad of threats, but keeping one step ahead of the bad
62
guys is an uphill battle, admits Lardschneider. “Staying ahead of the criminals and hackers is nearly impossible. It may sound ridiculous but their big advantage is that they are not limited by law in what they do – they just test exploits, attack and hack without caring for the existing laws.” Munich Re, like any other organisation looking to safeguard itself against attack, has to abide by strict regulations. These regulations apply to monitoring activity on the network, analysing log files or assessing vulnerabilities in systems. “We know that we cannot win all the battles,” he notes philosophically, “but we can make it harder for the average attacker.” One of Lardschneider’s tactics to outfox the villains is to build and maintain a multi-layer defence, which allows him and his team to react when the first or second layer is breached. This proves effective when an attack is perpetrated from the outside, but it’s much more difficult to detect and stop attacks by insiders at the group. One such threat posed by malicious employees is their ability to walk off with confidential data that could be sold to criminal gangs. Memory sticks and USB drives are shrinking in size but have the ability to hold vast chunks of data. “You realistically cannot prevent this sort of thing from happening,” this CSO suggests. “Shutting down all the ports where one could extract data from an IT system whilst satisfying the need to communicate is not feasible in my eyes.” He says you need to put faith in your workforce. “The best way of minimising risk is to show, as an employer, that you have confidence in your staff. Letting them know, without threatening, that their employment depends very much on the success of the company and keeping them happy and motivated is the best line of defence against this kind of incident.” While there is little doubt that it is becoming easier for rogue employees to steal information, the way in which organisations do busi-
www.bme.eu.com
Lardschneier.indd 62
29/5/09 14:47:18
ness means that they are becoming increasingly harder to defend. Ask any CSO or CISO and most will bemoan the fact that company perimeters are being stretched as more staff use mobile devices and connect to the network in all four corners of the globe. Indeed, perimeters are becoming harder to actually define nowadays. “It is a headache,” Lardschneider admits. “And the headache is getting bigger the more one thinks about how young people communicate today.” He says that the way that staff expect to do business and communicate, both internally and externally, has evolved dramatically, with the next generation of workforce driving this trend. “Youngsters use their email accounts if their instant messaging system does not work or the SMS of their telecom provider is out of order, so the kinds of communication available have changed dramatically from when I was young. In a few years they will be the ones hired and will expect companies to run IM and use social networks to communicate and do their business, so you could say that the perimeter has already gone.” He continues: “More and more people have the ‘always on’ mentality, so any second that one tries to fight against this development is a wasted second. We need to find solutions to cope with that development.”
Common dangers While Lardschneider suggests that the human element in any business is one of the biggest threats, information overflow is another important aspect – something that Munich Re is all too aware of. “The amount of information we receive per day is tremendous and I sometimes think that it is more than the average person can consume without driving them crazy.” Filtering this avalanche of information, whilst adhering to the raft of regulations, is “a kind of art,” according to Lardschneider. “I say this because we have to separate the valuable from the unnecessary and make sure that we follow the regulations with regards to retaining documents, as well as adhering to when to delete personal data and how to store confidential data.” Lardschneider appears modest when he describes the situation as “not easy”.
He continues by saying that the main ‘technical risks’ facing Munich Re at the moment are botnets and malicious software. “These can tear down your complete infrastructure for quite a while and cause a lot of insecurity. You need to assess whether the calculated results are right or do you mistrust them and calculate a second time in a different environment? “Also, which bits of information have been disclosed by an incident?” Another challenge for Lardschneider and his team is cleaning systems and avoiding re-infections in a global network or by unknown built-in backdoor in web applications.
Second opinions On the business continuity side, Lardschneider believes that the best ‘testers’ a CSO has are their peers in other companies. You can bounce ideas off one another and suggest weak links in the system and how things can be improved, he notes. “The magic words are quality and assurance; we are in very close contact with business continuity experts from other companies and encourage each other to ask critical questions, to evaluate and review concepts, and to discuss emergency plans. It’s the community that shows you risks and makes you think about different scenarios that you have not thought about before.” Of course, being a reinsurance company means that Munich Re has to seek out third parties to check and assess how it operates, including emergency tests. This is then funnelled into “lessons learned sessions”, says Lardschneider. “This concept will never be perfect but we can be sure that we did our best,” he concedes.” As for the road ahead, Lardschneider says he and other CSOs in other industries will be busy following how the economic crisis plays out and how it will impact on security and continuity strategies. Assessing crisis scenarios will, of course, feature high up on his agenda. Lardschneider’s time spent in security has taught him that a CSO cannot afford to rest on his laurels because there is always more to be done. “I have been in the business for 25 years and I’m pretty sure that the next 25 years will continue to be very interesting and challenging,” he concludes.
WISE WORDS: LARDSCHNEIDER’S SECURITY ADVICE “Security depends on the company, its kind of business and its size, but in most cases my advice would be to ask top management this: ‘Do you know why your car has brakes?’ The answer will probably be ‘So I can stop my car.’ I would correct them by saying that the real reason is it allows you to drive faster. You cannot buy a car without brakes, so basic security is built in, but you can equip it with better brakes so you can go faster. This analogy shows that better security also means more chances to be successful. Unfortunately, many managers see security to be a road blocker or a hindrance to communications. This mindset needs to change.”
www.bme.eu.com
Lardschneier.indd 63
63
29/5/09 14:47:22
XYZMO AD.indd 1
5/5/09 10:27:28
ASK THE EXPERT
GOING
electronic
IN THESE TOUGH TIMES
Gerald Cäsar explains how digital and electronic signature solutions enhance business processes through the making and saving of more money.
T
he downturn in the economy has businesses of all sizes thinking about how they could enhance their efficiency and cut costs, without damaging their business results in today’s business environment. We at xyzmo SIGNificant believe that in these tough times businesses could streamline their processes extremely by embedding a simple solution, such as the electronic signature, to optimise
embedding these solutions in their business, companies will no longer need to print documents and break the electronic document cycle solely for the purpose of capturing a handwritten signature, therefore establishing a fully digitised process. When considering the operational overhead of paper-based processes, the cost of each document becomes fairly high. From the experience we have acquired in xyzmo SIGNificant, we have learnt that the simple step of embedding an electronic signature solution enables businesses to achieve two important goals, which are making and saving more money, resulting in a better bottom line with a quick and proven ROI. These goals are achieved thanks to the following benefits: • Reducing operational and back office overhead – there is no need to perform paper-related tasks such as printing, scanning, faxing and shredding, as the business processes become paper-free. In addition, all documents are available to the back office systems for real-time decision-making and for immediate electronic archiving, eliminat-
“The electronic signature helps to accelerate turnaround times by reducing customer waiting periods” the way they work, thus enabling a truly paperless workflow and gaining the chance to turn a crisis into an opportunity. Most companies today automate their business processes and document workflow procedures, leaving the approval stage as the only component that requires the need for paper. Digital and electronic signatures replace the concept of traditional paperbased signing with an electronic one. Signing the original electronic document saves companies on labour, faxing and mailing costs. Additionally, digital signatures safeguard electronic documents and files by allowing the authentication of the signatory and verification of the original document. By
ing cases of document loss or duplication. • Increasing security and reducing fraud – once the document is signed electronically, security increases. The integrity of the content is guaranteed and if requested, dynamic verification of the handwritten signature against a pre-defined biometric profile can be enabled. • Doing more business by closing more deals faster – the electronic signature helps to accelerate turnaround times by reducing customer waiting periods and avoiding searching for contracts while customers are waiting. Thus, more deals can be closed by enabling a rapid and efficient workflow. • Drive customer satisfaction and reten-
tion – by embedding a handwritten electronic signature solution, which requires no changes in customers’ habits. The customers continue to sign like they always did, but with the distinct advantage of an improved experience, thanks to reduced waiting times and the convenience of remote and secured document handling. • Improved legal compliancy and limited liability – the electronic signature is added into the document the same way as signing a paper, but reduces the probability of document forgery, as any manipulation within the document will result in the signature being invalidated. • Increasing revenue by having more time available for up/cross-selling – the usage of electronic signatures dramatically increases the efficiency of sales staff and reduces processing times leaving more time for up/ cross-selling. Many companies from diverse sectors such as telecommunications, banking, insurance, health care and pharmaceuticals are already taking advantage of what this cutting-edge technology has to offer in order to achieve better business results. Our electronic signature solutions could benefit many other customers, especially in times of financial uncertainty. To find out more about how xyzmo SIGNificant can assist you in streamlining your business processes, visit www.xyzmo.com
Gerald Cäsar, President and CEO of xyzmo SIGNificant Group, holds a Masters degree in Engineering from the University of Linz, a doctorate degree in Technical Sciences and an MBA focused on Sales and Marketing. Over the last 19 years Cäsar has held several executive positions, exhibiting a wide range of business, managerial and marketing skills in companies like SERVO DATA and CSC.
www.bme.eu.com
Xyzmo_ATE.indd 65
65
29/5/09 14:48:22
SECURITY TRENDS
THE
SHIFTING SECURITY LANDSCAPE Graham Titterington, Principal Analyst at Ovum, dissects the latest trends in IT security.
I
T security remains a hot topic for businesses and IT professionals alike. It has consistently been close to the top of the league table of IT managers’ concerns and it is evolving at a rapid rate. The IT security industry is developing new types of products and services in response to new business requirements and the deteriorating threat scenario, while changing how it delivers them. We will look at these factors in turn.
Business requirements The loudest call from business to the industry has been for help in meeting the myriad range of legal, regulatory and compliance demands it faces. These require a business to secure its information, and to be able to show that its information is secure. The Payment Card Industry (PCI) standard has had a particularly large impact because it affects every organisation that handles payment cards (that is virtually every organisation) whereas other regula-
66
tions have been more limited in their scope. The walls around a business are coming down. More business is being done over the internet, as opposed to simply using it to communicate and supply information. Internet-facing processes are performing automated transactions without human involvement. Employees are spending more time working outside company premises. Telephone calls often go over the internet and mingle with data traffic. Web 2.0 technologies are making it possible for outsiders to work with corporate data systems in a more interactive way, and to push data into these systems. The challenges of Web 2.0 are still not fully understood. Businesses are also becoming more concerned about the damage that can be done to their commercial operations and reputations through data leakage, or indeed by any visible security failure. These risks are increased by the poor economic climate in which cutbacks can disrupt operations and lead to demoralised or disaffected staff.
www.bme.eu.com
Titteringhton.indd 66
29/5/09 14:48:07
A hostile world The world, which is here represented by the internet, is a hostile place. Hacking has been transformed from a kind of sporting contest into a mainstream criminal activity driven by financial gain. The cyber criminal world is large and highly organised. There is really no such thing as cyber crime, but rather the criminals have found new ways to perpetrate lots of old world crimes on a larger scale. Law enforcement is hampered by the technical complexity of detection, the speed at which the criminals can change their strategy, and the international nature of much of the activity. Attacks are growing “It is exponentially in both volume and sophistication.
The defence
vice provider tests its client’s defences by simulated attacks, are required by the PCI standard and are therefore a growing area of activity. • Activity audit and log analysis: You cannot eliminate all security breaches, but you can detect them when they occur. Computer systems produce log files containing millions of events each day. Automated tools can sift and correlate these and show what has happened at a meaningful level, as well as raising alerts in real-time.
not surprising that the need to satisfy external regulators, to adopt new technology without incurring undue risk, and to stand up to more ferocious attacks is driving the security industry to offer new types of products”
It is not surprising that the need to satisfy external regulators, to adopt new technology without incurring undue risk, and to stand up to more ferocious attacks is driving the security industry to offer new types of products. The days when security could be equated to a firewall and an anti-virus product are sadly long gone. The ‘hot’ areas where interest is growing most rapidly are:
• Data leakage protection: Technology that detects, blocks or controls sensitive information that is moving around or leaving corporate networks. While most data leakage incidents are caused by mistakes rather than malicious intent, the consequences are often similar. • Application protection: The opening up of IT systems to external use is causing the focus of protection to shift from the network to applications, data and servers. Application protection is being enhanced both
These tools are enjoying increased use, both as a specific requirement of some compliance regimes and as the ultimate check on information security.
Delivering information security
The evolution of the supply side of the industry is as rapid as its products. Maturity is bringing commoditisation to the more established product areas such as network protection and anti-malware. An extreme example of this is Microsoft’s intention to make some of its anti-malware products free. The vendors are consolidating and we expect to see acceleration in this process in response to the economic downturn. Security is moving out of its silo and over the Graham Titterington is a Principal Analyst at Ovum, last few years we have seen the big specialising in business continuity, IT security, and IT vendors buying companies to information storage. With 30 years of experience in the IT increase their range of security ofindustry, Titterington has contributed to a wide range of ferings. This is largely the result of Ovum research including taking leading roles in producing realising that security depends on reports on identity management, web services security, good management practices in the business continuity, networked storage and e-business wider sense and it is therefore sensecurity. sible to integrate security planning into IT management. This view is consistent with leading management frameworks such as ITIL and COBIT. Finally we are seeing a trend to by placing greater attention on developing applications that are inherdeliver security as a service rather than by selling software products ently secure, and by using an ‘application firewall’ to filter communicaor hardware appliances. Remotely managed services are provided tions going in and out of the application. SQL Injection attacks through by the security vendors, but will increasingly be delivered by ISPs database applications to steal corporate data are still one of the hackers’ and telcos. They provide pools of expertise and economies of scale, favourite weapons. Applications can be made more secure by improved although at the low end of the scale this comes at the expense of development processes such as those that have been published by leadflexibility. ing ISVs, by using code analysis tools to check for bad coding practices, and by adding security testing to the pre-delivery QA procedures. • Protecting mobile devices that have been lost, including laptops: Two complementary approaches are enhanced access control and encrypting data that is stored locally on the device – and indeed on removable media. • Security audit services: ‘Penetration testing’ services in which the ser-
The future Economic crises always increase the rate of change as we shall see in the security sector. However in a hostile world the demand for security can only increase and we will continue to see rapid innovation from a shrinking supplier base.
www.bme.eu.com
Titteringhton.indd 67
67
29/5/09 14:48:09
IT SECURITY RT:6may
29/5/09
13:54
Page 68
ROUNDTABLE DISCUSSION
ACCESS DENIED A panel of four industry aficionados discuss how organisations can protect themselves against today’s security dangers, as well as how identity access management (IAM) can play a crucial role.
THE PANEL
68
Paul Heiden is the founder of BHOLD
Kurt Johnson is Vice President of Corporate Development at Courion
Robert Grapes is Chief Technologist for Cloakware’s Datacenter Solutions business.
Joe Baguley is European CTO at Quest Software
www.bme.eu.com
IAM has evolved significantly in recent years in line with the threat environment. What security advantages does a strong ID and access management solution offer? Paul Heiden. When it comes to information security, companies basically need to care about two issues: ensuring continuity, which is making sure people can work and control access to prevent unwanted access. Identity management helps to control the process of user management that determines, first, which users are to access your information and, second, consolidates user information that will help to provide and revoke their access. Many of the available solutions synchronise user data over systems. A really useful solution, on the other hand, would help organisations to start controlling access in a more structural (i.e. preventive) manner. This type of solution, generally referred to as an ‘Enterprise Authorisation Management’ solution, enables organisations to prevent and tackle threats that come from unauthorised access; provide business with impact analysis of changes like reorganisations or acquisitions on access; and reduce the total costs for compliance.
COURION AD.indd 1
5/5/09 10:23:07
IT SECURITY RT:6may
29/5/09
13:54
Page 70
Robert Grapes: The security benefits (in no particular order) are: • Being able to uniquely identify individuals and their access to systems in support of audit and forensic evidence efforts. • Being able to apply security policy consistently across devices, operating systems and applications. • Being able to abstract individual permissions into common roles in order to constrain what an individual can do and simplify the management effort. • Being able to assign groups to resources and individuals in order to constrain what an individual can see. • Being able to apply the appropriate level of authentication and authorisation depending on the resource being accessed. • Being able to provision, ‘reprovision’ and ‘deprovision’ rights and access rapidly .
tion today would not attempt to duplicate this capability on a non-Windows system; rather, it would extend the existing data in Active Directory to systems that do not natively benefit from this standard. In what ways has the changing nature of the threats driven the industry’s response? JB. The vast majority of threats come from within the organisation, and the damage done by an internal attack significantly outweighs external threats. In response, vendors are developing advanced technologies to address the entire scope of the identity lifecycle. If an organisation uses a consolidated policy and consistent practices to control provisioning, re-provisioning, and de-provisioning across all systems and applications, many of the internal security holes can be plugged. It is also possible to improve security by centralising authentication and role-based authorisation as well as expanding it to weaker systems.
“The vast majority of threats come from within the organisation, and the damage done by an internal attack significantly outweighs external threats” JOE BAGULEY
Kurt Johnson. The bottom line for most businesses today is that they want to ensure that the right people have the right access to the right resources and are doing the right things with it. This includes setting up access in line with policy, managing changes as user’s jobs change, and turning access off when they leave. IAM delivers on that principle, giving companies the assurance that only authorised individuals have the appropriate level of access to mission-critical systems, which reduces the potential that sensitive data, or other corporate assets, are compromised and fall into the wrong hands. Joe Baguley. Standards have also evolved significantly, and the strongest IAM solutions are those that use these standards to secure the widest range of systems, applications, and platforms. For example, Microsoft Active Directory is considered an extremely secure and scalable directory service because it uses the Kerberos standard for authentication. The best IAM solu-
70
www.bme.eu.com
KJ. It used to be that everyone was worried primarily about outsiders hacking their way into the organisation. While that’s still a major concern, customers are also become increasingly concerned about the threat posed by insiders acting in ways they shouldn’t, whether it’s malicious or unintended. Organisations need more than just strong password policies and other traditional approaches to security; they must also be able to monitor and manage the access rights and activity of users. We believe that coupling identity and access management solutions with data loss prevention (DLP) and security incident and event management (SIEM) solutions will be essential if managers are to be able to respond quickly when they uncover activities which are inconsistent with security policy or industry best practices. For example, when a DLP tool locates sensitive data, quickly determining who has access to that data and what role they play in the organisation is essential to determining the ap-
propriate course of action. Finally, the emergence of industry-specific mandates and government regulations has meant that companies require integrated compliance management and reporting capabilities so they can demonstrate they are addressing these areas of concern. PH. Until recently, the answer to unauthorised access was primarily compliance driven. Tooling like VAAU (now SUN now Oracle perhaps), Eurekify (now CA), Aveksa or Sailpoint were specifically designed to support the detective controls that are part of the yearly audit effort. Significant fraud cases, like the one at Société Générale, clearly showed the shortcomings of these types of solutions. Instead of controlling and adjusting your access rights when things have gone wrong, it makes more sense to prevent unauthorised access in the first place. Not only because of the direct damages involved, but also because even the slightest rumour of fraud may seriously endanger the company’s position in nowadays very nervous markets. RG. The threats have changed because of the industry's response. As we bolster our defenses and introduce new technology the attackers look for new weaknesses. The security of our systems is a continually evolving effort and we will be challenged to maintain our security as new architectures and operating environments evolve like virtualisation and cloud computing. Effective access governance ensures that users have access rights only to information resources needed to do their job and appropriate to their role within the organisation, and that these access rights do not violate compliance regulations. How is the industry responding to help companies to achieve sustainable, effective access governance? RG. The effort towards the creation of a single authoritative source of role information is being supported by several solution vendors. In the past, and still today, most products include their own RBAC mechanisms. By delivering role management tools it will be possible for applications to externalise their RBAC policy decisions and afford the deploying organisation significant reductions in administrative overhead. PH. By introducing the concept of Enterprise Authorisation Management, organisations are
BHOLD AD.indd 1
5/5/09 09:58:14
IT SECURITY RT:6may
29/5/09
14:31
Page 72
now able to make the crucial step from detective controls (often referred to as attestation or recertification) to preventive controls. This ability provides short-term relief, as it ensures that users will not get incompatible access rights and will not get access to sensitive information, unless all relevant conditions are fulfilled. But there is also a long-term value. Preventive controls are really the foundation to optimise the processes that determine access to information: • On an operational level, EAM simply makes people work immediately instead of waiting for days to get required access. • On a tactical level, EAM helps to efficiently and effectively define policies, predict impact and to implement and enforce these in days instead of weeks. • On a strategic level, EAM allows IT departments to become responsive to business requirements; adopting acquisitions or reorganisations or making new business applications available – this all becomes a matter of days instead of months. JB. The industry is responding in many ways. First, organisations are being encouraged to delegate elevated privilege access as opposed to issuing the ‘keys to the kingdom’ to any administrator who might need them. Second, the industry is recommending that an audit and forensics-ready logging capability should be added to that delegation. And third, the industry is advising that access be based on well-established and controlled roles that are held in a centralised directory, as opposed to being created
sential to incorporate policy, such as segregation of duties, within the IAM architecture. This is why we created a connector that enables us to define policy and evaluate proposed provisioning activity in the context of policy. We’ve also enabled policy to be described in business terms which can then map to IT enforcement of that policy. Role management is an essential component of access governance, since it provides the best way to align the organisation’s hierarchy with IT accounts and access rights. Properly defined roles ensure that user access rights are consistent with policy, which improves security and reduces provisioning time and effort.
Another benefit of role management is that changes in business needs can be quickly reflected in changes to business roles, which then rapidly translate into changes in access rights. In today’s highly regulated business environment, auditing and compliance is becoming increasingly important, especially when the consequences of non-compliance could result in jail time. How should companies go about ensuring continuous and sustainable compliance while at the same time reducing audit costs?
PAUL HEIDEN
KJ. Access governance involves the process and collaboration necessary for the proper definition of access policy and defining which roles that access applies to. We have always felt that it was es-
72
www.bme.eu.com
RG. Companies should look for commonality across all of the compliance legislation that they fall under to reduce duplication of effort and perhaps competing approaches. They should work
“The bottom line for most businesses today is that they want to ensure that the right people have the right access to the right resources and are doing the right things with it” KURT JOHNSON
“With preventive controls in place, you can always explain why a certain user has certain access rights: it is the result of the rules being preventively enforced”
ad-hoc across the enterprise. By following these practices, the principles of access governance can be supported.
Taking inventory well does help the auditor, but does not prevent violations from happening. Preventive control is the sole effective contribution to compliance. It will change to emphasis in audit from taking inventory towards the proof of control. With preventive controls in place, you can always explain why a certain user has certain access rights: it is the result of the rules being preventively enforced.
PH. Most tooling currently available has really been designed to automate parts of the audit effort. These tools help to execute detective controls, and to find and remediate violations – very comparable to taking inventory in a warehouse. This tooling for recertification or attestation may contribute to reducing the direct costs related to compliance, but is not a structural solution.
with their audit teams to understand what is to be measured and how it is to be measured to ensure the appropriate controls and mechanisms are in place. To sustain their efforts they should look to automate whatever they can and do so with security in mind. JB. The key to a successful and cost-effective audit is to ensure that organisations can easily gather required information from the fewest number of places. For example, if the information and access logs in 1000 Unix servers can be consolidated into Active Directory, a single auditing tool – optimised for use with Active Directory – can quickly and accurately gather all of the necessary data to prove both Unix and Windows compliance. The bottom line is: if you want to make your compliance efforts simple and cost-effective, you must reduce the number of places to audit, as well as automate data collection. KJ. The best way to do this is to provide managers with the user experience to validate and attest, on either a scheduled or ad hoc basis, that the access rights of the users within their purview are consistent with the requirements of their job functions and enterprise policy. The ability to quickly and easily compile a report ondemand, using a point-and-click interface, en-
QUEST AD.indd 1
18/5/09 13:07:09
IT SECURITY RT:6may
29/5/09
13:55
Page 74
sures a high degree of compliance, while at the same time, greatly reducing the time, effort – and therefore, the cost – of providing this information to the organisation. How are your products and services aiding organisations with IAM? KJ. Courion has been recognised by both Gartner and Burton Group as a leading provider of IAM solutions to organisations of all sizes worldwide. We provide our customers with a very flexible, integrated suite of products that were developed internally, not as the result of cobbling together a bunch of acquisitions. These include role management, user provisioning, password management, or compliance reporting. One outcome of our ‘start-anywhere’ approach is that Courion has developed a reputation for flexibility that allows our customers to address their most pressing point of pain. Our Connector Framework architecture now supports more than 160 separate enterprise connectors to a very heterogeneous range of systems, including operating systems, networks, directories, databases, middleware, and enterprise applications. We also
74
www.bme.eu.com
“The security of our systems is a continually evolving effort and we will be challenged to maintain our security as new architectures and operating environments evolve like virtualisation ROBERT GRAPES and cloud computing” offer the capability to connect to custom applications. Finally, since Courion is 100 percent dedicated to IAM, our professional services expertise is second to none. PH. Organisations that use BHOLD are ‘in control’. They prevent violations, they prevent fraud, and they prevent disaster. BHOLD provides software for organisations in each maturity phase, from detective to preventive control to responsive information management and helps organisations to control access rights, decrease total costs for compliance and reduce risks. BHOLD has been pioneering this area for more than 10 years and is considered by analysts the most mature and well developed player in the field of EAM. RG. Cloakware's Password Authority delivers secure Privileged Account Management, as a subcategory of an overall IAM project, for the
elimination of hard-coded passwords known by developers and the elimination of shared account passwords known by administrators JB. The Quest One Identity Solution empowers organisations to simplify identity and access management by reducing the number of identities and directories that must be managed. It strengthens user authentication and authorisation. as well as automates administration tasks. Quest One does all of this without requiring additional infrastructure or expensive, cumbersome identity synchronisation technologies. Whenever possible, Quest One bases authentication, authorisation, administration, and compliance on an organisation’s existing investment in Active Directory. And those systems that cannot participate as ‘full citizens’ in Active Directory are augmented with Active Directory-enabled functionality such as single signon and role-based authorisation.
CLOAKWARE AD.indd 1
5/5/09 10:22:11
Jarrod Haggerty:23 APR07
29/5/09
14:54
Page 76
Jarrod Haggerty:23 APR07
29/5/09
14:54
Page 77
RISK & COMPLIANCE Every year companies invest millions of euros in guarding themselves against outside criminal threats. But what about the threats that exist within their own organisations? Diana Milne meets ex-police officer, now CIO of the UK’s Serious Fraud Office, Jarrod Haggerty, to find out why the enemy may be closer than you think.
W
hen Jarrod Haggerty joined the Australian police force, he never imagined that his experience of catching street criminals would enable him to land a job as one of the world’s top corporate forensic experts. But six years on the beat on the streets of Victoria proved perfect preparation for a career in rooting out fraud from some of the world’s top blue chip companies. In fact so highly valued is his experience that he has been seconded from PricewaterhouseCoopers’ Forensic Technology practice which he runs, to take up a six-month contract as the Chief Information Officer (CIO) of the Serious Fraud Office (SFO). Describing how he made the transition from cop to CIO, he says: “I did six years with the Victoria Police in various roles – mainly general duty policing and detective roles. Then I left there and put myself through university for three years where I did a finance degree. I joined PwC in Australia on the graduate programme as an auditor in 1999. I lasted three months within the audit division until the company found out I was an ex-policeman with a finance degree who had worked in forensics. I then started off in the forensics department doing general investigations for about a year and a half.”
He goes on to say that disgruntled or cash strapped employees pose a significant threat to companies in today’s climate as many will commit fraud as retaliation against redundancies or to support themselves in times of financial hardship: “People may take the opportunity to commit fraud for various reasons, from a personal point of view. In this climate employees are losing their jobs and there’s less cash around so the appetite to commit fraud from a personal point of view may increase.” The key to detecting fraud – like any crime – is to know the suspicious signs to look out for. Haggerty says there are some obvious signs such as an employee who suddenly seems to have more cash to spend than usual: “Obviously there are typical things, like if someone rocks up in a very nice car or starts spending more money than usual. If somebody seems to be spending well beyond their means then that’s an obvious sign.” However Haggerty’s training has taught him to also watch out for the more subtle signals that an employee may be committing fraud – such as somebody who never takes leave, preferring to be in the office as much as possible: “Often when people
“In this climate employees are losing their jobs and there’s less cash around so the appetite to commit fraud from a personal point of view may increase” The role took Haggerty to PwC’s Birmingham office where he developed a forensic technology practice before moving to PwC’s London office. While he did have to retrain to join the corporate world, his policing experience meant he was well prepared for both investigating fraud and taking part in legal cases or acting as an expert witness in court cases: “Some of what I do now is being involved in the courts as an expert witness. So the police force was great preparation for that,” he says. In his role as CIO of the Serious Fraud Office he is charged with ensuring that the organisation makes the best use of technology in its investigations and in tackling its caseloads. This is more important than ever before, he says, given current economic conditions and the fact that companies are under increased pressure to detect and eliminate fraudulent behaviour that is draining their finances: “In this sort of climate, companies are taking a good look at their spending and their financial systems,” says Haggerty. “The appetite to tackle fraud will increase because of cost cutting efforts on the part of those companies.”
JARROD HAGGERTY
www.bme.eu.com
77
CORDA AD.indd 1
5/5/09 10:22:44
Jarrod Haggerty:23 APR07
29/5/09
14:55
Page 79
ABOUT THE SERIOUS FRAUD OFFICE commit fraud of opportunity, the fraudulent activity starts to grow and grow and they keep having to move cash from one area to stop up another area. We start to see that they don’t take leave because they need to be in the office to keep moving the money around.” Often, he says, it is only when that employee leaves the post that the fraud they have committed is uncovered. This means that as European companies are forced to cut jobs, more fraud is expected to be uncovered in the coming months. Haggerty’s policing experience has proven invaluable in terms of his ability to detect corporate fraud, as he testifies, “The police gave me the right background from an investigations point of view to have an investigative frame of mind. It teaches you to look at things and realise that they are not always as they first appear.” To encourage that same investigative frame of mind within corporations can be challenging he admits, but with the right systems in place, companies can sniff out fraud before it starts to impact their bottom line. This involves having a robust fraud risk management plan in place, and, from a technology perspective, having good controls procedures over IT systems. One of the biggest mistakes companies make, says Haggerty, is having disparate IT systems that do not communicate with each other, hence failing to detect fraud being committed concurrently on two systems. Haggerty says this will fail to flag up one of the most common forms of fraud committed within large corporations; creating a ghost employee with a salary that is paid into a genuine employee’s account: “Often companies will have a very disparate IT infrastructure. There will be one system running for HR and a separate system running finance and payroll. Those systems won’t talk to each other and there’s no ability to run tests to detect the ghosting of an employee. In the HR system a record could be created for a new employee with a fictitious name and address. The bank details however will be the same as those of a genuine employee that are held on the payroll system. Because the two systems don’t link up, the company will never be able to see that it is paying both employees into the same bank account.” As technology plays such a crucial role in the way fraud can be detected, one of Haggerty’s main tasks as CIO of the Serious Fraud Office will be to look at the way it uses electronic information to investigate fraud and to develop technology that will allow it to drill down through data at a faster and more efficient rate. This is particularly important given the fact that technology has enabled fraudsters to vastly increase the impact of their actions, and the speed at which they achieve their ends. While the motivation for fraud has not changed the methods for committing it have changed dramatically, with emails replacing postal mail as the primary delivery method for fraudulent material: “What I’ve seen from a PwC perspective is that the nature of fraud hasn’t really changed but the reach of it has,” says Haggerty. “Years ago when people were committing fraud they would send out say, 200 envelopes. Technology today allows people committing the same sort of fraud to send out two million emails instead.” For this reason he hopes to equip the SFO with technology with the intelligence to automatically detect fraud when scanning through thousands of emails: “There’s a big programme running at the SFO where the organisation is looking at software that is being developed in the market that would allow it to drill down into information and be able to investigate it at a fairly timely level. They are looking for technology that would mean they wouldn’t have to trawl through lots of emails but would alert them to fraud far quicker and would streamline the process.” Haggerty is the first CIO to be employed at the SFO, and with just six months to plan the organisation’s IT strategy for the next three to four years, he
he Serious Fraud Office is an independent UK government department that investigates and prosecutes serious or complex fraud. It is part of the UK criminal justice system. It is headed by the Director who is appointed by and accountable to the Attorney General. The Attorney General is appointed by the Prime Minister and is responsible to Parliament for:
T • • • •
The Serious Fraud Office The Crown Prosecution Service The Treasury Solicitor’s Department The Department of the Director of Public Prosecutions for Northern Ireland
• The CPS Inspectorate • The Revenue and Customs Prosecution Office
JURISDICTION England, Wales and Northern Ireland fall within the SFO’s jurisdiction. The SFO does not have jurisdiction over Scotland, the Isle of Man or the Channel Islands.
has not got an easy task on his hands: “The SFO has not had a CIO before and from that point of view it’s a change for the people there and for the systems they are using,” he says. “One of the biggest challenges is implementing these changes and making people aware of the changes we are going through. I must sit down and understand the changes they are facing and what the market is facing. I need to write a strategy for them for the next four to six years from a technology point of view and within a six month time frame that is definitely tough.” But having experienced life on the beat, Haggerty says he is more than prepared to tackle the challenge no matter how tough times get.
www.bme.eu.com
79
BLADE Network ED:6may
29/5/09
14:19
Page 80
EXECUTIVE INTERVIEW
REALITY In an interview with BM, Charles Ferland, VP of EMEA for BLADE Network Technologies, discusses the virtues of virtualisation for the modern day business. Organisations are all looking to work smarter and more efficiently. How can virtualisation and next generation data centres help to achieve this as well as slash costs and be more ‘green’? Charles Ferland. A cloud design using virtualisation brings extraordinary flexibility to data centre customers by de-coupling the applications from the hardware. This allows customers to focus on their business instead of complex administrative tasks while lowering operational costs by optimising the hardware resources. By virtualising their environment, organisations can focus on the importance of the applications themselves and not the infrastructure they run on. It is well documented that most of the costs are related to the ‘operations’ side of an application versus the costs of acquisition. Therefore, organisations should focus on reducing their cost of operation. In traditional data centres much of the administrative effort is focused around the infrastructure itself, one server at a time, one switch at a time, and so on. By focusing on a rack at a time for data centre design and deployment, economies of scale are achieved. We call this Rackonomics. Management tools have emerged that automate certain virtualisation tasks, but do not unleash the full potential of dynamic deployment of virtual machines (VMs) for business-critical applications, disaster recovery and energy efficient operations due to the lack of network awareness. With the advent of new VM-aware networking, data centres can begin to harness the full potential of virtualisation. What are the common stumbling blocks that businesses encounter or common mistakes they make with their networks and data centres? CF. Many organisations assume data centres are static and try to manage them that way. They are not. Applications, utilisation patterns and business requirements are changing every day. Your data centre must be able to adapt to these changes – quickly and efficiently. BLADE Network Technologies introduced SmartConnect with
80
www.bme.eu.com
aware, and works with server virtualisation offerings from VMware, Microsoft, Citrix and other hypervisor providers. BLADE’s approach applies network policies to the VM themselves instead of the physical switch port where the server is connected. Said another way, with BLADE’s VMready software we virtualise the network port along with the VM connected to it instead of relying on a static physical port – creating a switch with thousands of virtual ports. For organisations, this means much greater flexibility and tighter control over the infrastructure by securely harnessing the benefits of dynamic virtualisation capabilities such as VMotion and Live Migrate.
Charles Ferland has over 10 years’ IT, networking, product management and architecture and international sales experience. A founding member of BLADE Network Technologies, he initiated BLADE’s EMEA operations; responsible for BLADE’s OEM relationships and RackSwitch channel sales. He holds a degree in Mathematics and Computer Sciences from the University of Quebec.
VMready to allow administrators to more easily manage their data centre networks. VMready preserves the proper network configuration, quality of service, and security policies – eliminating the need for intensive manual intervention – when virtual servers migrate to other physical servers. How are your products and services making tangible differences for companies today? CF. BLADE introduced earlier this year the first network virtualisation solution that enables dynamic migration of ‘live’ VMs, enabling the network infrastructure to deliver the true promise of virtualisation. BLADE’s SmartConnect with VMready makes BLADE’s network devices VM-
What predictions do you have for your technology-reliant market over the next 12-18 months? CF. We are seeing more and more requirements for cloud or dynamic data centre solutions. Of course our ultra-low latency, high throughput and low power consumption features are important, but beyond hardware characteristics, organisations are looking for network infrastructure with advanced software capable of handling dynamic environments. That’s why cloud computing is drawing so much attention today. There is a strong customer demand for consolidating the switching fabric in data centres using the well known and established 10 Gigabit Ethernet protocol. Converged data and storage networking reduce the requirement for multiple switching fabrics while heavily reducing operations costs, space and power requirements. BLADE has introduced the first Converged Enhanced Ethernet (CEE) blade switch for supporting Fibre Channel over Ethernet (FCoE). We are closely working with several of our partners such as IBM and NetApp to bring these solutions to our customers.
SmartConnect and VMready are trademarks of BLADE Network Technologies.
BLADE NET AD.indd 1
5/5/09 09:59:34
Javier Perez 2 pages:23 APR07
29/5/09
13:57
Page 82
BANKING
MR NICE GUY Javier Perez, President of MasterCard Europe, is one of the few company leaders who believes the economic downturn will be good for business. Diana Milne reports.
82
www.cxo.eu.com
Javier Perez 2 pages:23 APR07
29/5/09
13:57
Page 83
Y
ou’d expect the head of one of the most successful busiThat’s not to say that Perez believes MasterCard is immune to the woes nesses in Europe to rule his organisation with an iron fist. affecting financial services providers across the world. He acknowledges that But according to Javier Perez, President of MasterCard there could come a point where the credit crunch is bad for MasterCard’s busiEurope, being a “nice guy” is the key to running a successness. Going back to his earlier analogy, he says: “The other end of the specful business – even in today’s cutthroat banking industry. “I trum is that if that Belgium family becomes unemployed and they simply don’t believe that being a nice guy gets you results,” he says. have any money to spend that is bad for MasterCard. I know from experience “Today to get the best out of performing teams of people you need to the impact it will have on the company if indeed the consumer stops spendhave an environment where people are appreciated, recognised and ing. To what extent the incremental spending of small amounts will compraised for the good things that they do. And being able to have a frank pensate for that remains to be seen.” and honest discussion about the things that didn’t work out is the secret to having a performing organisation. If you don’t have a nice environment Changing times with nice people it’s very hard for that to happen well.” While he bases his predictions of consumer spending habits on the patAnd judging by MasterCard Europe’s results for 2008, Perez has been terns displayed in the past, Perez knows that the payments landscape has very nice indeed to his team. The company is one of the few in Europe to changed dramatically in the 30 years since the MasterCard brand was have experienced double digit growth in a year when most were battling to launched. To date the number of MasterCard cards issued by European fisurvive. The company’s gross euro volume grew by 15.5 percent, purchase nancial institutions is a massive 195 million and making payments by plastic volumes by 15.7 percent and purchase transactions by 13.2 percent. In the is now a global phenomenon – fuelled in recent years by the explosion in the same year alone, European customers made 6.4 billion purchase transacpopularity of online shopping. Today technology is revolutionising card paytions with their MasterCards. Beaming proudly as he relates these latest ments further, and addressing many of the public concerns that proved obresults, Perez clearly has all the evidence he needs to stacles to their wider adoption in the past. In particular the support the fact that being nice gets results. And seemintroduction of chip-enabled cards through the EMV staningly not even the prospect of worsening economic condard, has addressed security and fraud concerns. Over ditions across Europe can wipe the smile off his face. half of the MasterCards that have been issued in Europe Indeed, he believes that MasterCard could profit are now chip-enabled. However, according to Perez, this is from the changes in the spending habits of consumers not enough. He says progress on the introduction of chipduring the credit crunch – particularly the pattern of enabled cards in Europe has been disappointing – given spending little and often rather than making less frethat it was a decade ago when the company first introquent high value purchases. “We have a situation in duced the technology to its customers. He blames the Number of Europe, like everywhere else, where we have worsening slow progress not on customer uptake but on the reMasterCard cards economic conditions. What is the consumer doing to sponse by retailers. issued to date deal with that? Well the way people are behaving is to “We thought chip would come out faster. And we in Europe simply do what they want to do, but they are doing it difthought the multi-applications would come faster. The ferently. A typical example is the spending behaviour of first time we recommended chip was 10 years ago. It’s a Belgium family on holiday. In the past the family would been slower than we expected. It’s relatively simple to travelled by plane and paid say €1000 for the four of them. Now they will modify the cards because they expire every three years, more or less. But drive instead and make lots of smaller purchases along the way such as it is hard to modify the acquiring infrastructure, such as the terminals that paying for gasoline, buying meals en-route, then when they get there buyare placed on the retail side. I think we underestimated the magnitude of ing food from supermarkets instead of paying for big meals in restaurants.” the technology change and expense that would be necessary on the acThis situation, he goes on to say, is beneficial to MasterCard because it quiring side in order to deploy chip. You would have to change every terrelies not on the value of single transactions but on the volume of transacminal in Europe without exception in order to deploy chip.” tions that are carried out: “MasterCard is not that sensitive to the economic He goes on to say that reaching standardisation among the card conditions as long as customers keep spending money. It is not so depenproviders also hampered progress – an obstacle that was later overcome dent on volume but is very dependent on transactions. So for us it’s more atby the introduction of the EMV standard that was developed through coltractive to have 10 transactions of €80, than one transaction of €1000.” laboration between Europay, MasterCard and Visa. “At the beginning Another attraction of the credit crunch to MasterCard, claims Perez, is the fact MasterCard had one standard. Visa had another. Some domestic schemes that consumers will increase their usage of credit cards in a bid to better conhad another. So we had to create the EMV code in order to avoid language trol their finances: “[In this climate] people start to be a bit more mindful and issues in which one chip doesn’t talk to another. Or a chip doesn’t talk to a rather than happily using cash, we have seen in the past more usage of plasterminal. So when you put all those things together that is why we have tic in order to keep the money in the bank longer and take advantage of the been slower than we thought.” card. When you have a lot of money in the bank and you’re not that concerned This slow progress is even more frustrating for Perez given that technolyou just burn cash and it’s fine. When you’re a little bit concerned, you start ogy is now rapidly moving onto the next level, leveraging the the EMV paythinking, ‘Maybe I can match my salary with my expenses by taking advanment platform for contactless payment technology. In the UK alone tage of my credit card and paying by the end of the month.’” MasterCard has issued one million MasterCard PayPass branded Barclaycard
195 MILLION
www.bme.eu.com
83
ADVENT AD.indd 1
5/5/09 10:27:42
Javier Perez 2 pages:23 APR07
29/5/09
13:57
Page 85
cards, and has been involved in partnerships with Royal Bank of Scotland and the UK’s Stagecoach bus company to introduce the first ever use of contactless bank card payments on public transport in the UK and France’s La Banque Postale, Germany’s BW Bank and the VfB Stuttgart football team, as well as the introduction of PayPass for students of the Warsaw School of Economics. While slow deployment of the technology by retailers has delayed the widespread adoption of chip and PIN cards in Europe, Perez said that where it is deployable, merchants have been highly responsive to contactless payment innovations – primarily because it makes their jobs easier. “We are receiving an extremely good response from retailers to the contactless technology. They absolutely love the PayPass product because it provides much more speed at the register and a very nice experience for both the cashier and the consumer. It makes the transaction faster, easier and quicker. So that is evolving really well.”The key to spreading adoption of the technology, says Perez, is to ensure that it is not proprietary and that branded contactless cards or those made available through partnerships with transport providers, for example, can also be used to make payments at other outlets: “Retailers like the subway in Paris have realised that proprietary technologies are not the way of the future. If they want the consumers to use the card they need to make sure it can be used everywhere. In other words, if you as a consumer can have a card that can be used everywhere, the chances are you can also use it in the subway. Therefore [in the future] you will see a migration from proprietary technologies like Oyster to products more like PayPass. The same thing but a global technology that can be used everywhere.”
In control Another innovation MasterCard is hoping to introduce, taking advantage of EMV technology is the In Control technology, which allows customers to control their spending on credit cards by customising them to have certain limits on spending amounts and where the customer can actually spend money. This, says Perez, will appeal not just to the budget conscious but also to parents and to companies with corporate credit cards: “It means the consumer, through accessing a website, will be able to set spending parameters for their credit card. You will be able to define where and when you spend money and how much you can spend per transaction. Whenever your card does something that you want to be informed about, the system will send you an SMS. This is very useful for the consumer but also for companies and for families. For instance children can be given cards that they can only use for school transport or school cafeterias.” Ever the nice guy, Perez claims that the thinking behind the product is that it will enable customers to better weather the financial storm. “I guess in a situation like today the first question we ask is how MasterCard is going to wrestle with the economic environment? I have already said that it doesn’t impact us much directly. But it does impact our customers, the banks and the retailers. So we are very keen to make sure we continue to deliver value to all our customers. We will deliver value to society in general by providing a means by which people can spend money wisely and be able to continue to have access to payments in an organised and safe way. We want to make sure that in this changing environment, we continue to provide to all our stakeholders with the best possible product that would enable them to face difficult times.”
MASTERCARD CHIP TECHNOLOGY The role of chip technology in the payments industry is growing rapidly, and issuers all over the world are embracing chip programmes for a growing list of reasons. Chip is a powerful fraudfighting tool. It’s also a cash displacer, a loyalty builder, and a competitive differentiator. The cornerstone of the new chip payments infrastructure is the global EMV standard for credit and debit payments, jointly developed by Europay, MasterCard and Visa in 1996. The latest version of the standard, EMV 2000, is a comprehensive definition of chip payment functionality. MasterCard is currently helping customers leverage their investment in EMV to build market share, identify new revenue streams, and gain competitive advantage. It believes EMV chip technology brings the potential for stronger security, wider acceptance, deeper relationships and new marketing programmes.
The successful introduction of MasterCard’s new products relies less on current economic conditions than on the company’s aggressive branding and marketing strategy. Perez says the “below the line” approach, such as direct mail, still continues to deliver strong results for the company, however the company’s continued success has allowed it to embark on a high profile above the line campaign. One of the keystones of this is sponsorship of international sports events – most notably the UEFA Champions League, which according to MasterCard, resulted in profits of €38.54 million for the teams that reached the knockout stages. MasterCard commissioned a study by one of the world’s leading marketing experts Professor Simon Chadwick of the UK’s Coventry University, who said at the time: “In uncertain economic times, sport’s universal appeal remains strong, making it one of the most lucrative industries to be involved in.” Backing up this claim, Perez says: “We have the best sponsorship platform in the world, which is football. The consumers like it, the retailers like it and that’s giving us excellent results. We continue to use those assets. They deliver good results. And we intend to continue using them.” Like the captain of a good football team, Perez has proven that keeping his team happy gets results. But as playing conditions in the financial services sector get ever tougher, and with competitors hot on his heels, Perez must now work harder than ever to ensure MasterCard remains at the top of the league.
www.bme.eu.com
85
EXECUTIVE INTERVIEW
Comply to succeed Monidee’s William Janse lifts the lid on strategies and procedures when adhering to compliance and risk management regulations. Compliance and risk management has risen in prominence for businesses of all shapes and sizes. What has driven this need to have correct procedures in place and dedicated compliance and risk professionals on board? William Janse. The rise in major international incidents due to corporate misconduct, the focus on short-term objectives as opposed to building long-term value, business decisions based solely on what is good for a single category of stakeholders (the shareholder), combined with the need to prevent acts of terrorism and international crime has driven a strong demand for increasing ethics, transparency and accountability of organisations. In many cases, these demands are fully supported by the public from a corporate social responsibility and ethics perspective, which further strengthens the need for strong compliance and risk management. In this regard numerous new legislation and reforms in legal and regulatory regimes have been imposed on organisations. Demonstrating compliance, a clear signal indicating that the risks and interests of all stakeholders are taken seriously, begins by determining which laws and regulations apply to your activities and entities. Once established, embedding in a sustainable compliance process is important to prevent incidents from happening. To do so, the right professionals, procedures and systems need to be in place (people, process, technology) to maintain a sustainable compliance process and establish a genuine ethics culture – ‘compliance is your concern’ so ‘do the right thing’. Organisations tend to have multiple business units and departments. Why is it important to ensure that your compliance is tailored to each area, instead of relying on a ‘one size fits all’ approach? WJ. It is important to have an univocal corpo-
86
rate (central) compliance risk management framework which is centrally managed to have an overview of all the areas of exposure (KYC, privacy, competitive practices, fraud, and so on) and associated sets of norms and controls in an organisation. To be able to align with the business lines and processes, the framework must be able to adapt to the internal and external business contexts and cultures in which the organisation operates, so that it can address specific (regional) activities (products and services), obligations and utilise best practices. Each area requires specific knowledge/expertise. Hence, a local or distributed approach is important. At corporate level you cannot have sufficient knowledge of all local business lines and processes and their internal and external business contexts and cultures. Strong co-operation between corporate and the business lines is essential to tailor the framework.
• Establish a genuine ethics culture and promote strong compliance and risk management – ‘compliance is your concern’ so ‘do the right thing’ • Rethink future financial (product) innovation with the current crisis and the globalisation of financial markets in mind • Address (business process) outsourcing; • Understand where requirements originate and responsibilities lie in complex and interrelated global economic systems • Keep up with growth of regulatory oversight across the globe • Address all stakeholders, including internal stakeholders as employees, stakeholders in the value chain as suppliers and customers, external stakeholders as investors, shareholders and communities • Ensure compliance risks are addressed univocally across all the business lines and processes with assessments executed consistently and systematically, instead of reactively and dissimilarly managed approaches (unified approach) Lack of clear accountability leads to corporate misconduct, non-compliance and other dysfunction that affects all stakeholders significantly. Investors are willing to pay a premium for well-governed companies. Can you give an example of how your solutions proved beneficial for a client recently? WJ. Together with a well-organised Corporate Compliance Competence Center at Eureko
William Janse, Bachelor of Science in Information and Communication Technology, is the responsible executive for information technology (financial, compliance and risk solutions) and marketing within Monidee. What are the main compliance and risk challenges that organisations are looking to manage today? WJ. Problems always have solutions. Take a good look at the challenges and develop a sustainable approach to managing risks and maximising opportunities throughout the organisation. You should:
(Achmea/Interpolis), we (Monidee) recently customised and implemented our solution tControl, known as CoTheSys within Eureko, which enables Eureko to: • Ensure compliance risks are addressed univocally across all the business lines and processes with assessments executed consistently and systematically, instead of reactively and dissimilarly managed approaches (unified approach) • Increase accuracy and visibility of compliance risk information • Reduce the cost and complexity of compliance risk management • Demonstrate compliance, a clear signal indicating that the risks and interests of all stakeholders are taken seriously • Be in control
www.bme.eu.com
Monidee_EXINT.indd 86
29/5/09 14:47:56
MONIDEE AD.indd 1
5/5/09 10:25:05
CAROL STERN:6may 29/05/2009 14:37 Page 88
CORPORATE GOVERNANCE
Playing by the rules There has never been more demand for the work carried out by the Open Compliance and Ethics Group as pressure grows on companies to improve their corporate practices. BM asks OCEG President Carole Stern Switzer for her verdict on the adoption of governance, risk and compliance by European companies. Can you describe the work that the OCEG does? Carole Stern Switzer. OCEG is a non-profit organisation and our mission is to assist companies to achieve principled performance through the application of improved approaches to governance, risk management, compliance, internal controls and the integration of these functions in the organisation. We define what is right for the organisation by identifying the mandated boundaries. These include the boundaries that are set by law and regulation, and also the voluntary boundaries that are set by the board and senior management of the organisation, which reflect its values, its culture, its appetite for risk and its desire for risk resiliency. We then identify what the organisation needs to do to ensure that it stays within those dual sets of boundaries while still moving as rapidly as it can towards the achievement of its business goals. How do the current issues affecting the global economy highlight the need for companies to adopt better governance, risk management and compliance practices? CSS. I think what we can see in the financial crisis is a lack of balance and the desire for short-term returns and immediate financial gains versus a longer term strategic view that would balance the well being of the organisation. What happens in organisations that don’t both establish their appetite for risk and their approach to risk and drive the understanding of that throughout the organisation is that individuals at every level make risky decisions every day. They define the organisation’s appetite for risk. In this financial crisis senior management made overly risky decisions, but they did so because they were not taking a holistic integrated view of what was best by balancing the well being of the organisation and ultimately shareholder value against that desire for quick high returns. When you’re engaged in a process of governance, risk and compliance (GRC) that is driving principle performance, you’re never going to lose sight of that strategic view and you’re never going to lose sight of the need to balance and understand the risk appetite of the organisation. How much of the crisis could have been prevented if these organisations had better safeguards in place? CSS. Well that’s hard to measure, but I sincerely believe that we would not be in the global financial crisis situation we are in if these major organisations had engaged
88
www.bme.eu.com
in proper identification and management of risk. I don’t think we would be anywhere near it. Does that also mean that we might not have seen the extraordinary financial gains over the prior several years? Maybe we wouldn’t have, but I think we would be better off. Do you think that these situations are going to prompt more organisations to put better GRC in place? CSS. I’ve seen a lot of evidence that organisations are recognising that they need to be much more risk aware, and risk resiliency is becoming a really
CAROL STERN:6may 29/05/2009 14:38 Page 89
key factor. Right now you might think that companies would be tightening the purse strings and not engaging in improvements to risk or compliance processes or technologies because they are cutting funding everywhere and to some degree that’s true. But I’m hearing that more and more companies are still planning on moving forward and in some cases more rapidly with improvements around risk management and around technologies that support more transparency of information throughout the organisation because they are less able to withstand a failure now. How much of a part does technology play in how companies can improve their GRC processes? CSS. I think technology plays a very large role today in the way that companies operate in a global and very complex structure, but you can’t just throw technology at the problem. You have to follow a process that takes you through having appropriate oversight, having that strategic analysis in place about what the organisation wants to achieve and how it’s going to achieve it and what boundaries it must adhere to and what boundaries it accepts for itself. You then have to determine the
“I sincerely believe that we would not be in the global financial crisis situation we are in if these major organisations had engaged in proper identification and management of risk” processes and policies and then you can determine what technologies you need. We’ve recently released what we call our GRC IT blueprint, and that identifies 72 different types of technologies that support different aspects of GRC. There is no one magic bullet. There are some very good over-arching GRC management platforms that have come to market in the last several years, but they don’t do everything. Also you cannot succeed if you don’t have clarity and the ability to move consistent information across the organisation for different uses. What are some of the biggest challenges that organisations currently face when it comes to putting risk management and compliance practices in place? CSS. The biggest challenge is historic development. Virtually no one is going to scrap everything they have and start from scratch, so you’re beginning with the challenge of understanding how things have been done in what we call silos of operation as they have grown over time, and a lot of things have grown over time in ways that you would never put them together now. Organisations that have merged or acquired other organisations often have contradictory policies or procedures or they have duplicative technologies, or they have information that can’t be easily reconciled, so that’s
the biggest challenge I think. Another big challenge is that people are comfortable with what they’re doing in their limited role. People like their silos. People like their spreadsheets. People like to hoard data because it gives them a certain amount of indispensability to the organisation, and overcoming that resistance to change is a very big challenge. How easy is it to recruit skilled professionals who are able to implement governance, risk and compliance measures within organisations? CSS. In my opinion a good executive, anyone with strong executive skills can head up a GRC improvement process. I don’t think that it has to be a lawyer, accountant or auditor. The organisations that have the most success with this are those where there is good and consistent communication between the chief compliance officer, head of internal audit and chief technology officer. These people have to function together as a team in order for the process to work. What we do find is that while these people need to work closely together, they have very different vocabularies. They speak very different languages in their professional lives, and so what we want to do is get them more comfortable with the language of each other’s roles. I think it’s helpful to have people who are well skilled in understanding the basic models like OCEG’s GRC capability model and that’s why we are in the process of creating an online course of recorded lessons that we call GRC fundamentals. What is the OCEG doing currently to encourage greater adoption of governance, risk and compliance strategies among companies? CSS. Well clearly the first thing, which really drives our mission, is the GRC capability model, and the GRC IT blueprint that goes with that model. We are also in the process now of beta testing something we call the Burgundy Book, which is basically a set of procedures that can allow a company to evaluate itself and to see how well its programme of following the Red Book, the GRC capability model, is going. In the next month or two we are going to be adding a community feature to the OCEG website so that members of the OCEG will be able to join communities together around specific interest areas and risk areas, do polls or surveys and share sample policies. We have right now more than 20,000 people who are members of OCEG and they are in more than 40 countries around the world, and so we’re beginning local chapters. We’re beginning translation of the Red Book into Spanish, Portuguese and Japanese, all of these efforts are undertaken by our members in a voluntary way and so these community groups will grow as the members drive them to grow. n
www.bme.eu.com
89
Everett ED:6may
29/5/09
14:29
Page 90
INDUSTRY INSIGHT
Verifiable access: in control and authorised Thomas van Vooren assesses compliance from the perspective of verifiable access to your assets and explains how identity and access management (IAM) supports this.
O
rganisations are facing increasing laws and regulations by government and regulatory bodies, partly as a result of scandals with root causes in flawed access control to information and transactions. This is apparent across industries with examples such as the Sarbanes Oxley Act for the US publicly held financials, the Health Insurance Portability and Accountability Act (HIPAA) for healthcare institutions in the UK and the Data Protection Act in the UK. Some of these acts are quite recent while others have been around since the late 1990s. Pressure from key stakeholders such as shareholders and employees (transparency and security) and the general public (privacy concerns) make even the old laws increasingly more actual.
“The bottom line to compliance from an access perspective is how to ensure appropriate and verifiable access for end users”
To organisations and the executives held responsible it is about being in control: Adhering to law, regulation and policy and being able to demonstrate it. In order to achieve this, processes and procedures must be in place and IT security improved. However, organisations need to do this in a cost effective way, balanced with business opportunity and needs.
Compliance cycle The bottom line to compliance from an access perspective is how to ensure appropriate and verifiable access for end users (employees, partners or even the general public) to information and transactions. This is a continuous process: the compliance cycle. The compliance cycle is a four-step process, addressing a question in each step: • How do I define authorisation and access
90
www.bme.eu.com
Thomas van Vooren is Competence Center Leader and Senior Consultant Identity & Access Management (IAM) at Everett. He has over 10 years of experience in IAM consulting, working for top 500 clients throughout Europe. He has also written several whitepapers and is a frequent speaker at IT conferences.
rights in line with policy and administer those? • How do I roll out resulting access rights and do real-time validation? • How do I check and report on policy versus practice? • How do I repair access rights discrepancies? It becomes costly to repeat if these steps are left to a manual process only. IAM, the combination of procedures, processes and tools to manage identities and access rights, offers capabilities to support the compliance cycle in all these steps and does it cost-effectively.
IAM capabilities When administering your policy, authorisation management solutions are available that allow access rights to be documented using roles or other mechanisms in a language that can be understood by your business. Typically this solution uses workflow in the approval process by the business. The administered authorisations are executed across the ICT landscape using provisioning solutions that store username, password and access rights in the ICT systems. The execution of authorisations is also supported through the use of access management: the ability to verify access rights as the end user is using the system, enforcing
policy in real-time and providing a centralised audit trail. Even with these solutions in place, it is still possible for access to be compromised via alternative paths or that access patterns are suspicious. Security incident and event monitoring allows the detection of such events followed by automatic lock down of the associated username and access rights or notification of the appropriate staff. Next to this real-time detection, reporting solutions are available to perform ‘sollist’ access comparisons and to provide dashboards with access history across ICT systems or other access reports required by auditors. Any discrepancies highlighted by the detection and reporting capabilities can be repaired using the previously mentioned authorisation management and provisioning solutions.
Conclusion By introducing IAM to support the compliance cycle, organisations become in control in a cost-effective manner. However, while the challenges with regard to access compliance are many, so are the IAM capabilities to address them. A big bang approach embracing all IAM capabilities at once can be costly. Therefore, it is recommended to identify your main goal and possible quick wins as a first step. At the same time, lay out a roadmap and build value iteratively from there.
EVERETT AD.indd 1
20/5/09 13:04:41
Carlsberg ED:6may
29/5/09
13:50
Page 92
MANUFACTURING
“Probably the best IT in the world”
Carlsberg, the world’s fourth largest brewer, is streamlining its IT operations and shedding legacy systems. Kenneth Egelund Schmidt, VP and CIO of Carlsberg IT, chats to BM about the challenges ahead as the business looks to go ‘glocal’.
D
anish brewing giant Carlsberg sold more than 12,000,000,000 and soft drinks here so IT is extremely vital,” Schmidt explains. “We have (that’s 12 billion in layman’s terms) litres of beer in over 150 marto make sure that we secure our day-to-day operations so that our products kets last year. It’s an instantly recognisable global company with come out in a timely fashion and meet the criteria surrounding logistics bein excess of 500 different brands cause commitment to our customers is exin worldwide markets positioned tremely important. We also have to create under the Carlsberg umbrella. The Carlsberg sufficient transparency within the business to group, the largest brewer in Northern Europe, act quickly and be agile enough to make facthas swallowed some key drinks rivals in recent based decisions, as well as leveraging our puryears, including Scottish and Newcastle in 2008 chasing powers.” Schmidt notes how Asia in a joint acquisition deal with Heineken. These Carlsberg’s vast quantity of transactions need Eastern Europe 11% acquisitions have significantly swelled the comto be “hassle free”, which can only be 43% pany’s stable of beer brands, and at the same achieved with efficient technology solutions. time spawned separate IT departments spread Its operations run 24 hours a day, seven days across different countries. Creating seamless IT a week so any blip in the logistics and transacNorthern and Western Europe operations across borders is a key focus for the tions can have drastic consequences. “There 47% business as it looks to become a bigger player is no doubt that IT is vital for Carlsberg and on the world beverage stage. since we rely heavily on logistics, even small Kenneth Egelund Schmidt is the man hiccups create business disruptions.” He also charged with orchestrating the day-to-day IT stresses that the ability to leverage synergies operations and aligning IT with the business and improve efficiencies across the group restrategies, having arrived just six months ago at Carlsberg’s IT headlies heavily on IT. quarters in Copenhagen, Denmark. He previously spent 18 years workFour years ago a separate tech entity, Carlsberg IT, was formed to provide ing his way up to CIO at Denmark’s Danfoss. “We move a lot of beers a wide range of business solutions, technology support and implement new
92
www.bme.eu.com
BEER SALES IN 2008
Carlsberg ED:6may
29/5/09
13:50
Page 93
systems for the smooth running of the group across Europe. It supports 10,000 end users in a particularly complex IT environment. “Carlsberg wanted one IT department to support the business strategy,” Schmidt explains whilst reaching for a glass of water. “Because a lot of money and people are organised around IT here, it makes sense that we have a unit focused 100 percent on IT as well as its delivery and value creation.” Schmidt says he prefers to have a “portfolio” of new technologies on his desk at any one time. “I try to have a portfolio of innovating products so that we are on the edge of how we can contribute to the business, because it is our obligation to be able to introduce new capabilities at the right time.” Like any business, the black or red ink at the bottom of the balance sheet is as important as rolling out new technologies, according to Schmidt. “We have business principles because IT is organised as a business within the group. We have to recover IT costs and we have to be focused like any other company.” He says a major IT transformation is in progress as the group strives to become a sleeker and more efficient organisation across different territories. “We are moving to become an integrated player with ambitious beyond Europe so we need to make sire that Carlsberg steps up to being a ‘glocal’ company because this is the next part in the evolution. In fact, IT is forming the platform for the ‘glocal’ approach we take here, and it also makes it possible to create a virtual, open business so that knowledge and tasks can travel around the organisation.”
Agreement Schmidt says Carlsberg, which employs a 45,000-strong workforce, needs to slash costs and standardise business processes so in April he put pen to paper to form three-year IT and consultancy services deal with man-
KENNETH EGELUND SCHMIDT www.bme.eu.com
93
ECHELON AD.indd 1
5/5/09 10:23:31
Carlsberg ED:6may
29/5/09
13:50
Page 95
CARLSBERG’S AGREEMENT WITH ACCENTURE WILL ENABLE IT TO:
agement consulting and technology services Speaking to this IT chief you get a clear specialists Accenture. The Bermuda-based firm impression of his passion for technology • Achieve strategic objectives and initiatives will handle the consulting and systems inteand the way it can truly transform a busi• Realise long-term benefits from reduced gration, programme management, application ness, both in back and front office. Schmidt IT costs development and maintenance. Carlsberg is describes himself as a ‘hands on’ technolo• Improve the pace of Carlsberg’s IT looking to standardise its IT operations and bin gy leader who spends most of his time application development and maintenance clunky legacy systems, as well as implement a changing processes. “I find it interesting process common enterprise resource planning platwhen looking at how we learn from and ab• Increase organisational flexibility by form. The architecture will be based around sorb new technologies as we move from having access to the right skills at the right time, thereby accelerating the SAP and Microsoft software. being a local to a ‘glocal’ company.” He mobilisation of resources “Entering this collaboration will provide adds: “It’s important to have a huge respect Carlsberg with access to additional IT refor the technology and be aware of its upsources and know-how when and wherever sides and downsides. I have to admit that needed, giving us the required scalability.” when I see great technology and systems, I can still get quite excited”, Schmidt also suggests the shared platform will create a “panhe reveals with a chuckle in his voice. European” company with shared business processes. It will also create a more seamless unity between the disparate entities, allow his organisation Investments to become more flexible with a global presence, as well as enable future And while some CFOs and CEOs may baulk at requests for investment in growth. However, he is keen to stress that this is not a true outsourcing deal technology, bosses at Carlsberg embrace its power to transform operations: because Carlsberg IT still handles the management and delivery functions. after all, they created the separate technology unit. “Within Carlsberg there Schmidt says one of the group’s Swiss breweries will act as a guinea pig for is a definite recognition of the importance of IT because it is a major conthe new platform but a full-scale rollout won’t take place until 2014. tributor in being able to carry out the planned transformation.” The infraJuggling all the everyday technology issues with projects and transstructure can be a different matter, though, says Schmidt. “It can be difficult formations in the pipeline is a common issue for CIOs today. It’s the same sometimes to argue how much should be invested on the infrastructure at Carlsberg IT. “The main challenge is to make sure I have a balanced apside but I am working hard on making sure we have a value proposition on proach so that we rationalise, make good decisions and have stable systhe infrastructure because it supports collaboration. Within the area of coltems, but at the same time make sure IT delivers with the transformation laboration we can show that there is value to be harvested – this could be of the business,” Schmidt says whilst leaning back in his leather chair. “For with messaging systems, IP telephony, and so on, and you can put this in me, it’s about keeping the right balance between the operational part and directly when you have a shared infrastructure. Many companies are not the forward looking part of Carlsberg. Like any other CIO, when you build aware of the huge benefits of just the common infrastructure,” he adds. For something you consume money but in order to build rationales and save the time being, Schmidt has his work cut out on the busy IT road ahead for money you have to build for the future. And, of course, we have the chalCarlsberg IT. “It’s important that we take small steps in the right direction lenge of introducing changes to the business and being agile and fast all the time – it’s a constant change, learning, improving and taking a furenough to cope.” ther step.”
www.bme.eu.com
95
CRM RT:6may
29/5/09
13:52
Page 96
HEAD-TO-HEAD
The customer is always right Adopting the right CRM strategy can be pivotal in leveraging an advantage over your competitors, as well as of course attracting and retaining customers. We mull over the key issues with two CRM specialists. These are extremely tough economic conditions, where attracting and retaining customers is of paramount importance. How can good CRM strategies help organisations to achieve these goals? Luke McKeever. A recent shift in the business priorities has seen growth strategies give way to retention strategies as organisations look to conserve and nurture their existing customer base. Customer satisfaction, loyalty and advocacy become the key themes. Loyalty is built on trust and dependability so the basics need to be covered; meet and exceed the expectations of your customers by providing consistent service processes across all communication channels. Responsiveness along with operational transparency will engender trust and loyalty within your customer base.
“CRM is a long-term commitment with clear objectives and milestones in place and a realisation that this will take a number of years to achieve” LM
tivity. Delivering superior customer service throughout the entire customer lifecycle is critical to maintain beneficial customer relationships. What are the common mistakes that organisations make with their CRM efforts? TZ. Organisations tend to focus on implementing formal processes and standardising business rules and in the process forget to include informal workflows, individual knowledge and buy-in from the users. A large portion of CRM installations fail on poorly designed processes and interfaces, so it’s imperative that CRM systems are easily customised and configurable to ensure maximum user adoption and usage. The CRM system also must be able to handle knowledge, especially tacit knowledge, and encourage users to increase the CRM knowledge base in order to enhance cross-team communication and efficiency while increasing sales and customer satisfaction.
LM. Historically we have seen organisations approach CRM as a technology solution. However the enlightened see CRM requires a mindset change within an Luke McKeever is CEO for Portrait Software. organisation. Customer centricity or branded customer service is a responsiKnowing when, where and what to communicate becomes the differbility that pervades an organisation and becomes entiating factor. Today, the beating heart of any customer centric strategy the responsibility of everyone. This has to be is intelligence; the more you know the better you can serve, retain and extop down, where there is clear corporate tend that customer relationship. Great customer advocates then become a alignment with a customer centric apkey tenant of your CRM strategy. The rite of passage is to serve well through proach to the market place and an consistent process, and use these interactions to learn and build intelliexecutive stakeholder in place. gence, using this to drive engaging automated customer communications, ensuring every customer interaction counts. Tieren Zhou. A good CRM strategy is essential in today’s climate, together with a CRM package that connects all the parts of your business. For a CRM strategy to work it will need to determine some fundamental elements such as who are your customers, how do they interact with you and how do you get value out of the relationship with them. The strategy will also need to cover your business processes, workflows and knowledge repositories to ensure maximum collaboration within your organisation, which in turn will lead to increased sales, higher customer satisfaction and higher produc-
96
www.bme.eu.com
PORTRAIT AD.indd 1
19/5/09 10:59:08
CRM RT:6may
29/5/09
13:52
Page 98
CRM is a long-term commitment with clear objectives and milestones in place and a realisation that this will take a number of years to achieve. Many organisations fail to put in place the basic processes that will ensure customers are well served and data is gathered and used to improve engagement over time. A customer relationship has a lifecycle and will change and evolve based on personal, social and economic criteria, hence continuing to listen and solicit customer feedback is fundamental to retaining and growing your customers. Failure to put in place measurement creates particular challenges. How can you measure your level of success and plan forwards without clear objective metrics – where are you today and where do you want to be in the future? Can you give examples of how your products and services have been beneficial for your customers recently? LM. Now, more than ever, time to value or short-term ROI matters. With over 20 years experience in delivering customer centric solutions Portrait Software’s solutions are engineered to deliver fast returns for our customers. Examples include:
TZ. There is still a figure growth in the western CRM market, however the biggest growth in the next five years will be in China and India, as well as emerging markets in Eastern Europe, Middle East and Africa. Within the CRM market the biggest growth factor is the move towards Software-as-a-Service (SaaS) together with total web delivery. I believe with the business networking and Web 2.0 applied to enterprise wave currently going, the CRM solution is and will be changing its core functions from vendors pushing messages to customers to vendors just participating in a customer and knowledge-centric community and market space online the Web 2.0 way. That means CRM solutions need to change their marketing model to message marketing success by monitoring the metrics related to business community portal. CRM solutions will be either including enterprise community platform or integrated with the existing enterprise community platform. Enterprise community portal will be a central part of a business, and of course an
“A good CRM strategy is essential in today’s climate, together with a CRM package that connects all the parts of your business” TZ
Nationwide Building Society – Portrait Inbound Marketing now delivers more sales than all other direct marketing combined. Lloyds TSB Insurance – Portrait Uplift Analytics for renewal management increased customer retention by over 300 percent. Visit Scotland – Portrait Campaign Management & Analytics for relationship marketing boosts Scottish tourism revenue. Merrill Lynch – Portrait Inbound Marketing drives more relevant customer dialog increasing product up take and improving retention by over 20 percent.
Tieren Zhou is the founder, CEO and Chief Software Architect at TechExcel.
US Bank – Portrait Uplift Analytics increased response rates by over 300 percent while reducing costs by 40 percent. TZ. The golden thread within TechExcel’s products and services is a knowledgecentric approach and this brings the customers’ business areas together with a suite of web-based products to enhance both productivity and increase customer satisfaction. We are continuously developing our product suites to make sure our customers have the best possible tools at their disposal, and we are always on the forefront in using new innovative concepts and technologies to deliver superior benefits to our customer base. TechExcel’s strength is not only our award winning products, it is also to work with our customers to deliver holistic solutions, including certified training courses from the Service Desk Institute, to maximise our customers return on investment. Looking ahead, how do you see the CRM market evolving in the next few years?
98
www.bme.eu.com
important part of CRM success. TechExcel is well ahead in this area and will shortly be releasing innovating knowledge-centric applications for this market segment.
LM. Channel diversity along with greater customer expectations will shape CRM over the next few years. The mobile generation will not be limited by a PC browser but will want to interact when and where is most convenient – for them. Customer service processes will need to be built in such a way that they can easily be adapted as both market and customer preferences change. Powerful analytics will keep the providers one step ahead of customers, pre-empting interactions and delivering relevance and value. From that point of view marketing becomes ‘always-on’, wherever the customer chooses to interact and marketing must optimise that opportunity to do the right thing. As customers rebel against poorly targeted campaigns, marketers will require more sophisticated tools to automate and more precisely target their offers. Tracking and predicting customer behaviour while monitoring trends and patterns across increasingly influential social media sites will direct marketers’ campaigns. A greater use of advanced behavioural analytics along with workflow based on marketing best practice to improve marketing efficiency will guide marketers to deliver the best next actions for their customers.
TECHEXCEL AD.indd 1
18/5/09 11:48:40
SANTOSH KUMAR SINHA:6may 29/05/2009 14:44 Page 100
CRM FOCUS
The future of CRM Santosh Kumar Sinha of Frost & Sullivan describes why there is growing demand for CRM applications.
T
he phrase ‘the customer is king’ has never been more apt than in the current market scenario. Global slowdown has forced companies to revisit their strategy and devise ways to boost their relationships with their customers. Companies are focusing more on retaining existing customers and increasing their loyalty to fight the economic slowdown. Getting more out of existing customers by identifying their individualised needs has become even more important. Concentrating on key customers in order to enjoy their continued loyalty is the strategy of companies across the globe. All this has brought Customer Relationship Management (CRM) services to the limelight.
Global market landscape The CRM market has witnessed healthy growth rates in the past couple of years and the trend is expected to continue. In 2008, the market registered a growth rate of 12 to 15 percent and reached a value of €7 billion despite economic meltdown. SAP has maintained its leadership in CRM followed by Oracle. Both the companies experienced higher growth in their on-demand software compared to that in their on-premise software. Riding on the increasing demand for Software as a Service (SaaS)-based CRM software, Salesforce.com has strengthened its market position further. There has been a significant increase in the demand for and acceptability of open source CRM software as well. North America and Western Europe are the largest markets for CRM software. Regions like the Middle East, Africa, and Eastern Europe have also registered high growth in the CRM market. In the Asia Pacific region, both India and China are attracting more CRM vendors due to long term growth prospects in these countries.
Open source CRM Open source CRM software has gained strength in the last two to three years. Ownership of code and the liberty to tailor different aspects of the software apart from a significantly lower price level has attracted many small and medium business houses to adopt such solutions. The number of open source CRM projects are on the rise with more than 350 projects being listed on SourceForge Inc.
Social CRM Earlier, CRM was more operational in nature. Customer insights were used to increase the employees’ effectiveness in managing the relationship with customers. Today, the customer is demanding more personalised products and an individualised relationship with the company they choose to do business with. CRM products have undergone remarkable transformation to meet this rising demand. Social tools such as wikis, blogs and enterprise mash-ups have been incorporated into CRM solutions.
CRM on mobile Quite a few vendors have tried to make CRM applications available on mobile. However, the complexity of providing such functionality on small screen thumb operated mobile devices and slow networks has hindered the success of such attempts. With new devices coming into the market and greater adaptation of 3G as standard for mobile devices, vendors are expected to achieve a higher success rate in their efforts. The focus on platform interoperability is also expected to increase the penetration of such applications in future.
Recent trends Higher bargaining power and the demand for personalised products by end customers, the advent of new technology like Web 2.0 and cloud computing, strong focus on the ROI of CRM software, and untapped demand for medium and small segment businesses have prompted CRM vendors to look for new technology and innovative business models.
On-demand CRM Under this model, companies generally purchase a license to use the software and the service provider manages the logistics and hosts the infrastructure at his premises. Companies can even choose to rent a solution and then decide whether to purchase the solution at a later date. With the software running at a centralised remote location, on-demand solutions provide lower software implementation and customisation costs as well as faster implementation.
100
www.bme.eu.com
Future outlook The future holds the promise for a high demand for CRM solutions. However, clients’ increased focus on ROI and investment requirements for such solutions is going to increase in the coming years. Customers are likely to demand more clarity on pricing and a stringent case for the return on their CRM software investment. Reduced funds are expected to increase interest in on-demand or SaaS-based models. This is expected to prompt more vendors to offer such services and experiment with unique pricing models, such as connecting the application’s cost with the customer’s profitability to gain market share. Vendors who are able to deliver high value solutions at low cost using innovative models are most likely to succeed in future. n
Santosh Kumar Sinha is Industry Analyst for the Information & Communication Technology Practice, South Asia and Middle East at Frost & Sullivan.
Oracle.indd 1
28/5/09 13:16:11
EXACT SOFTWARE:co proof 29/05/2009 14:43 Page 102
ASK THE EXPERT
Saving 75% with 2nd-tier ERP business software Roland Rott explains how 2nd-tier business software can cut companies’ investment by up to 75 percent, whilst streamlining business processes, increasing transparency and delivering high value.
I
n a normal economic climate, when striving to optimise their business processes and boost value, companies might automatically be compelled to choose a 1st-tier provider as their business software solution. Top market brands such as SAP or Oracle are widely believed to be safe and trusted choices, although they come at a significant price, require a lengthy implementation period, and may not even be optimally suited for every business because of their complexity. Today, in these challenging economic times, most companies are not in a position to simply accept paying the premium amount for any investment, which also applies to business software. As it has never been this important to have a strong software backbone to help streamline processes, increase transparency and gain control, companies are searching for cost-efficient alternatives to the pricey market giants. And there is an alternative – in the form of 2nd-tier ERP solutions. They can save companies millions on investment, implementation time and long-term cost of ownership, while delivering as much or more value, benefits and satisfaction. No matter what type of business software setup companies are currently using, 2nd-tier business software solutions like Exact Software are well worth considering.
Study According to a study carried out by the Panorama Consulting Group, companies can save up to 75 percent with 2nd-tier solutions within a much shorter implementation time. They were also found to yield up to 10 percent more employee satisfaction. In around three to six months, a 2nd-tier provider can help a company gain control, optimise cash flow, increase transparency, boost revenues, identify underperforming areas and increase reaction time – providing valuable agility in these challenging times. Fully integrated and standardised, 2ndtier alternatives can either complement 1st-tier solutions already in use at headquarters or they
102
www.bme.eu.com
efficient 2nd-tier provider whose solutions are specifically designed to suit the needs of SMBs or the SMB subsidiaries of larger companies. Combining global presence with local support, Exact provides companies with one standard product globally and complete integration of all business areas in one solution.
Customers
“If a company is considering which type of ERP software to implement, 2nd-tier providers present a costefficient and often more attractive alternative to the top-tier brands” can serve as comprehensive ERP systems, and they are generally perceived as more userfriendly by employees and IT. If a company is considering which type of ERP software to implement, 2nd-tier providers present a cost-efficient and often more attractive alternative to the top-tier brands. Additionally, in cases when a leading brand has not optimally served its customer’s needs or running costs like maintenance are a material factor, it could still be more cost-effective to switch to a 2nd-tier ERP system in order to gain significant overall savings and benefits. Exact Software is a cost-
Founded 25 years ago, Exact currently operates a network of subsidiaries in more than 40 countries worldwide, providing support to customers, such as Siemens, Toyota and Lufthansa, in over 125 countries. Exact’s solutions can be implemented more quickly than 1st-tier competitors and better suit a company’s needs without weighing it down with unnecessary bulk. Exact Synergy and Exact Globe – Exact’s fullsuite, front and back office business solutions – integrate all business areas to provide real-time enterprise resource planning, high information quality and streamlined processes for all of a company’s stakeholders, thereby increasing transparency. By reducing the number of different ERP solutions a business uses, Exact also lowers long-term cost of ownership, resulting in future economies of scale. The decision to invest should never be taken lightly, but it is particularly critical today. Studying the available options and their real return on investment, companies may be surprised to find that 2nd-tier solutions are the better choice in almost every scenario. After all, why pay substantially more for less satisfaction? n
Roland Rott is the Managing Director for the EMEA region of Exact Software, a leading provider of business software solutions. Rott is responsible for key global clients and has played a leading role in the development of the company’s international strategy. Prior to joining Exact Software in 1998, he was a successful entrepreneur.
EXACT SOFT AD.indd 1
18/5/09 11:32:13
104
www.bme.eu.com
LAMBORGHINI ED P104-108.indd 104
29/5/09 15:25:39
It’s 46 years since Italian tractor maker Ferruccio Lamborghini hatched his harebrained scheme to build a luxury supercar. But with the wheels falling off the car industry amid the deepening recession, can this luxury brand navigate the tricky conditions ahead? Sebastian López investigates and hears from Director of Brand and Design Manfred Fitzgerald.
www.bme.eu.com
LAMBORGHINI ED P104-108.indd 105
105
29/5/09 15:25:47
quick trawl through Lamborghini’s flashy looking website brings you to a grainy black and white clip of the late Ferruccio Lamborghini in a suit and dark sunglasses being interviewed whilst steering a tractor. A lit cigarette sits between his index and middle finger. The journalist perched on the front of the moving machine flicks a microphone back and forth between himself and Lamborghini’s chin. “What type of man are you?” the young hack asks inquisitively. “A normal chap who likes creating things,” Lamborghini responds nonchalantly. “A good worker in the morning, and a man who likes enjoying himself in the afternoon.” The interviewer suggests his subject is “very wise” in choosing to adopt this outlook. Lamborghini then offers a snapshot into his uncomplicated working philosophy: “I’m not interested in ending up like my colleagues, with heart problems.” A sagacious grin creeps across the tractor-maker’s face. The company’s serendipitous foray into luxury sports car production came after Lamborghini complained to his friend Enzo Ferrari about the gearbox on his recently purchased Ferrari. The Ferrari founder’s dismissive response was to tell him to stick to making tractors because the problem was down to the driver, not the car. Cue a defiant Lamborghini, vowing to build a sports car to rival a thoroughbred motoring icon like Ferrari, contrary to the vehement advice of those closest to him who said he would squander his wealth. He was accused of being pazzo, or crazy, but Lamborghini would not be deterred in his Herculean quest, and in 1963, aged 47, he created the eponymous ‘Automobili Ferruccio Lamborghini’.
A
in-house designers and engineers. Lamborghini has always had a cult following among petrol heads. Ferrari is a bit, dare I say it, ubiquitous. Lamborghini, on the other hand, is a more elusive breed that manages to conjure up an intoxicating mix of elegance with muscle. I have crazy visions of the designers using laboratory test tubes to mix the chromosomes of a testosterone-pumped heavyweight boxer with a svelte and graceful matador. Exotic names (albeit slightly unpronounceable) for the models, like Murciélago, all add to the alluring nature of the Lamborghini brand. Perhaps as a clue to the brute force contained within, a snarling bull features in the badge stamped on the bonnet. Ferruccio Lamborghini’s zodiac sign was Taurus, in case you were wondering. It’s at the Sant’Agata Bolognese factory showroom that I find Manfred Fitzgerald, Director of Brand and Design. All around us sit the fruits of his labour in shiny yellows, oranges and blues. Fitzgerald first arrived at Lamborghini in 1999 as the Marketing Manager and recalls how the business had lost its sense of direction. “Back then you didn’t have a clear idea of what Lamborghini stood for,” he explains. “If you went to a dealership you would find that everyone interpreted the brand in a different way, so I went out to create a corporate identity and corporate design.” A focused vision is vital, he says. “It is so important for a luxury brand like ours to have a clear idea and vision of where you want the brand to go. You have to be very consistent in your approach.” Getting customers to believe in the brand is what it is all about in the world of high-end motoring. When you slap down a deposit you are buying into a select club, not just blowing your hardearned cash on a lightening-quick car that costs about the same to run as a small African country.
Heritage
Market forces
The Lamborghini factory resides in Sant’Agata Bolognese, about 25 kilometres from Bologna. It is here that some of the word’s quickest, most expensive and most desirable supercars are handcrafted by the
Like much of the car market where one carmaker seems to be owned by another, Lamborghini is a division of Volkswagen’s Audi brand. Despite this, Fitzgerald is keen to stress that Lamborghini is a stand alone and autonomous company. “The whole of the R&D, as well as the design, is done here in-house. If we want to, we can tap
THE NUMBERS THAT COUNT
The iconic Countach was created in 1974 and production ran for 15 years
106
With a top speed of 340 km/h, the Murciélago LP640 is the fastest street-legal model
Lamborghini went bankrupt in 1978 and was sold to Chrysler
www.bme.eu.com
LAMBORGHINI ED P104-108.indd 106
29/5/09 15:25:53
into their research development facilities because it would be stupid if we didn’t do that. But my team live at Lamborghini because we are integrated into the company.” When the bean counters at Volkswagen took charge they introduced economies of scale. Profi ts soared and the factory was operating at full capacity. However, in 2008 the car industry was hit head-on by the credit crunch and subsequent meltdown. Global car sales have fallen through the fl oor and factories have shed significant staff numbers. Lamborghini, though, bucked the trend in 2008 with a pre-tax profit of €60 million – a 27.4 percent increase. But it wasn’t all smooth running; sales were fl at and much of the announced profi t came from cost-cutting measures. Unit sales rose by just one percent to 2430, which was short of the fi ve percent target. On top of this, the company’s largest dealer in the world – Lamborghini Orange County in the US – closed last year amid an accounting discrepancy whilst a third of the Sant’Agata Bolognese workforce was sent home during temporary shutdowns recently. CEO Stephan Winkelmann says he expects sales to decline and no growth in 2009 and 2010 but there are no plans to lay off staff permanently. Fitzgerald echoes his boss’ pragmatic approach to dealing with the economic climate. “We have a clear strategy for the future and if we stick to that we will weather the storm out there,” he reveals. “It’s about not being tempted to do something erratic – there are some quick wins but that is not us. Wealth is still out there and luckily people have enough money to buy our products.” Much of the wealth Fitzgerald identifies is being unearthed in the emerging countries and their inhabitants’ newfound fortunes. Russia’s nouveau riche and well-heeled oligarchs think nothing of splashing out a few million roubles on a supercar. Likewise, the ultrarich Arabs see a car like Lamborghini as a badge of wealth and status.
“We still have quite a lot of white spots on the world map so we still see potential to bring our products to the market without diluting our brand image and exclusivity” he says. Lamborghini is hard at work penetrating the Chinese market – the most populous nation with a burgeoning, cash-rich elite. “A couple of years ago, the Chinese did not know what Lamborghini was,” says Fitzgerald. ‘Is it a coffee brand or perhaps something to wear? Is it a car manufacturer?’ No, it’s a super sports car manufacturer and luxury brand. We have to be something that the Chinese would like to possess.” The tiger economies are far from impervious to the global economic crisis but Fitzgerald still sees China as an uncut gem. “China is still predicting growth this year of eight percent or more, which would be a dream in Europe. Luckily, we still find markets out there that have enough money at their disposal.” It’s also especially important that the Lamborghini brand and message translates across different countries and continents, says Fitzgerald. “We don’t have products for a particular market – we have a global product that has to work everywhere. We have to understand the market and penetrate our brand values, and we have to be understood as a luxury brand.” One of Lamborghini’s unique selling points is its option for customers to personalise their new car in order to stand out from the crowd (as if pulling up at the traffic lights in a €200,000 supercar isn’t conspicuous enough already). The options are bewildering, right down to the colour of the brake callipers. Fitzgerald says this customisation and whole customer experience is vital. He wants to the company to have a greater focus on the customer, although this would never extend to would-be owners influencing the design of the cars. And with Fitzgerald and his team already producing stunning looking cars coveted by the motoring press they probably don’t need any input from an over-zealous enthusiast.
€60 million Lamborghini’s 2008 pre-tax profit
€1,000,000 is how much the Lamborghini Reventón model cost the lucky few that got their hands on one
The first ever Lamborghini car was the 350GTV from
1963
Founder Ferruccio Lamborghini died in 1993 at the age of 76
www.bme.eu.com
LAMBORGHINI ED P104-108.indd 107
107
29/5/09 15:25:58
“Our obligation is to surprise people with the designs and let them see how we realise the dreams they haven’t dreamt so far,” he remarks whilst trying not to sound too much like a quote lifted from a glossy Lamborghini brochure. Fitzgerald explains how his team are able to design a car in 3D from the first sketch onwards, which speeds up the whole production process. For instance, the Murciélago Revingtón was designed in just four months. The team work hand-in-hand with R&D, too. “We don’t work in sequences where one person gets something and it then gets handed back for their approval. No, it’s an integrated process.” So where does he look for inspiration when designing a new supercar befitting the Lamborghini range? “Everywhere.” He expands: “We are so fortunate living in a country like Italy where you can get so many inspirations. As a global company, we have our ears and eyes open everywhere. We are heavily influenced by other industries – just looking at the automotive industry won’t get you anywhere. Our lives are moving and changing very fast; the way we commute and the way we communicate is changing so this inspires us for future products.”
Image is everything
“I discard around 95 percent of what lands on my desk in terms of product placement for big Hollywood films because they are just not a brand ‘fit’”
Like many of the luxury sports car producers, Lamborghini has done more than churn out cars – its merchandise is also a lucrative revenue stream. Indeed, you can find the Lamborghini name associated with everything from playing cards to coffee mugs. Fitzgerald suggests diversification is a necessity for a luxury supercar manufacturer. “A luxury brand is allowed to play in other fields. Obviously this [car making] is our core business, but the merchandising has taken enormous steps in the last couple of years. As long as you stay authentic and credible in what you are doing, any path out there is allowed.” Ferrari is thought to rake in around US$150 million a year through ‘brand extension’ and Fitzgerald says they are ahead of his company. “They [Ferrari] are in a different position to us,” he notes. “We are in
108
what you could call the ‘brand building’ phase and any step we take out there has to be considered more than once. I discard around 95 percent of what lands on my desk in terms of product placement for big Hollywood films because they are just not a brand ‘fit’.” On the subject of movie placement, Lamborghini was featured in the 2008 blockbuster movie The Dark Knight where Bruce Wayne (Batman) is seen putting an equally masculine Murciélago through its paces in the streets of Gotham City. A car’s appearance in a high-profile film can outstrip any advertising campaign and show the product off to a global audience. Fitzgerald says Lamborghini went through the script and felt that the film would suit their brand. It was a similar decision with Mission Impossible 3 when the producers pitched the idea of a Lamborghini Gallardo making an on-screen appearance. So how does Fitzgerald select that five percent of offers that land a Lamborghini on the silver screen? One major factor is who will drive the car. “I do not like to see our products being driven by villains because that would not be the appropriate move for us. Mission Impossible 3 was a luxury setting but it’s important that our products are perceived in a normal context. I’m trying to take us out of being a ‘niche of a niche’.” Lamborghini’s presence in the US box office has led to “huge steps” being made in the US market – the firm’s largest.
Manfred Fitzgerald
With the interview wrapping up, Fitzgerald offers an insight into what it takes to be head of brand and design: “You have to be consistent in your approach and also a bit stubborn, but don’t get irritated by what the people left and right of you are thinking. If you have a clear vision of what you want to achieve, you have to go for it.” It seems that having this maverick-like design attitude is translated in Lamborghini’s corporate vision, too. “We like to be in the driver’s seat, rather than the passenger seat,” he beams. Fitzgerald heads back the drawing board, so to speak. Outside the factory a white Gallardo (a colour that appears to be de rigueur at the moment) is fired up. A beastly cacophony emanates from the four chrome exhaust pipes protruding from the car’s rear. Seeing these cars in the flesh (or should that be carbon fibre?) it is difficult to imagine that the name Lamborghini was ever associated with a piece of farm machinery, but we have to thank Enzo Ferrari and the disputed dodgy gearbox for that. Oh, and a laidback Italian’s headstrong attitude and dogged determination. Bravo Ferruccio.
www.bme.eu.com
LAMBORGHINI ED P104-108.indd 108
29/5/09 15:26:00
Dedicated to business
200,000 Challenges 100,000 Executives One Community
MeettheBoss.com membership reads like an industry who’s who. CEOs, CIOs and other senior executives from leading organizations are just two clicks away. But there’s more. Weekly interviews with industry leaders are webcast on the site’s dedicated channels. These are combined with live, moderated discussion groups, video conferencing, IM and secure e-mail in one easy-touse app that’s dedicated to business.
New York 8:50 a.m. John is upgrading some core business functions. He wants to know how to ensure a smooth transition, so he video calls…
Dubai 4:50 p.m. Georgina, the turnaround expert who’s moving on to a new project in Japan, where…
London 1:50 p.m. Paul, who has seen the benefits of an upgrade and is now sharing project management tips with…
Tokyo 9:50 p.m. Ringo has the local knowledge. But he’s also planning for tomorrow, and that’s all about core business...
If your network isn’t focused on your business, change it. Join now: www.meettheboss.com MeettheBoss.com is simple, intuitive, unintrusive and secure. It’s also free to use. Membership restrictions apply.
MTB AD (Full page B2B Mag).indd 109
29/5/09 15:55:33
Mark Lund ED 4 pages:6may
29/5/09
13:59
ADVERTISING
110
www.bme.eu.com
Page 110
Mark Lund ED 4 pages:6may
29/5/09
13:59
Page 111
T E G O T N W I O H EAD ISING AH VERT AD After an illustrious career advertising everything from cars to supermarket chains, Mark Lund is turning his hand to getting the UK government’s message across. He tells Diana Milne why his role as CEO of the Central Office of Information won’t be easy.
I
t’s Mark Lund’s first week as CEO of the UK government’s Central Office of Information and already he is facing some of the biggest challenges of his career. Lund may have a multi-million euro marketing budget at his disposal, but getting the government’s message across to the public about such topics as how to prevent the spread of swine flu won’t be easy. The Central Office of Information is responsible for co-ordinating the government’s many information campaigns on everything from welfare benefits to sexual health. In the 12 months ending in March 2008 the government spent a total of €450 million on marketing and the COI was responsible for some of the year’s most creative and powerful press, television, radio and online advertising campaigns. Indeed it is one such campaign, that Lund describes as having had the biggest impact on his career: “The first campaign I got excited about was an advert to recruit people to the Metropolitan Police. It was very powerful in changing people’s views of the police as it asked people to put themselves in the shoes of a police officer as he or she confronted some of the ethical and actual dilemmas that came with the job.”
Changing direction As Chairman of the Advertising Association and CEO of top UK advertising agency Delaney, Lund, Knox and Warren (DLKW), Lund has masterminded some of the UK’s most high
www.bme.eu.com
111
Mark Lund ED 4 pages:6may
29/5/09
13:59
Page 112
profile advertising campaigns, including recent campaigns for Morrisons and Vauxhall Corsa. He acknowledges, however, that creating campaigns designed to appeal to audiences that are not often targeted by commercial advertisers, won’t be easy: “The younger and less affluent and the older and less affluent are both audiences that are less commercially targeted but that are very important to government.” This applies, particularly, he says, to health campaigns – Swine Flu prevention being a prime example.“In terms of a lot of the health communications there’s a challenge in terms of how you reach and find the right tone of voice for those audiences that are less targeted commercially,” he says. Another challenge is to continue to provide advertising that meets the more demanding needs of the 21st century audience: “The new communications world is a much more vo-
ciferous and complicated thing than it was even 10 years ago,” says Lund, going on to describe how, whereas yesterday’s communications model was based on “push”, today’s is very much based on “pull”. “The
“In terms of a lot of the health communications there’s a challenge in terms of how you reach and find the right tone of voice for those audiences that are less targeted commercially”
old model of communication was very much that we had a product that we told the consumer about in the hope that they would absorb the information in a passive way then react to it in a positive way. Now, the advent of widespread internet access means that the possibility of interactivity has become much greater. Ideally there would be an engagement which exists between the government and the citizen which allows the communications mechanism to be more effective.” He says he is very excited about the opportunity to take advantage of interactive digital platforms to push the government’s messages, particularly given the scope of issues he will be tackling: “If you’re talking about the range of things that the government is trying to shift it’s everything from eating more fruit to wearing a condom, renewing your road licence to wearing a seatbelt. That creates a much greater intellectual and creative challenge. Whereas in the commercial environment every piece of behaviour you’re trying to change comes down to either a different choice of brand at the point of purchase or the consumption of a more premium variant of the brand.”
ABOUT MARK LUND Mark Lund sits on the Council of the IPA and is a governor of the History of Advertising Trust. He is also currently Chairman of the Advertising Association. He began his career in advertising as an Account Management Trainee working on ice-cream and frozen food accounts at Lintas. He has also worked for Collett Dickenson Pearce, Euro: RSCG and Delaney Fletcher Bozell. In 2000 he and his partner Greg Delaney led a management buy out to form Delaney Lund Knox Warren, where he became Group Chief Executive responsible for all the companies in the DLKW group.
112
www.bme.eu.com
Mark Lund ED 4 pages:6may
29/5/09
13:59
Page 113
Falling numbers Working in public sector advertising also provides immunity from the financial woes affecting commercial operators, which saw total UK ad spend fall by 3.9 percent in 2008 and advertising spend in the fourth quarter of the year tumble by 9.6 percent year on year. The Advertising Association has predicted that advertising expenditure in the UK could grow by as much as 52 percent in real terms over the 10 year period to 2020. In the meantime, however, the sector has been hit hard with print media particularly affected. Print expenditure fell by 12.0 percent while expenditure on magazine advertising fell by 9.9 percent. The only medium that saw a rise was internet advertising, which rose by 17.3 percent. Lund however, maintains that since traditionally the industry has shown consistent growth, it will survive the storm unscathed: “All the historical precedent is that advertising spend rises fairly consistently. If you go all the way back to the Second World War, in the UK in no year has ad spend either grown or declined by more than five percent. Generally it’s a very consistent and steady market. But in times of sudden economic downturn mixed with an ongoing technological revolution, the beneficiaries have been digital online media and the ones that have suffered the most are the press.” The easy availability of statistics showing the effectiveness of marketing campaigns, means media is under the spotlight like never before, with the weakest vehicles quickly identified and disposed of by advertisers, says Lund: “People know much more rapidly whether what they are doing is effective or not.” In this increasingly cutthroat world creativity and innovation on the part of advertisers is crucial to their survival. But with companies forced to slash their marketing budgets how can they
The COI warns the public about a wealth of issues ensure that they survive the storm? Lund believes on that contrary that there is no better time for companies to advertise with the downturn creating ripe opportunities for cut price campaigns. “When you look at the long-term historical perspective those companies that continue to market and promote themselves during downturns generally come out stronger. Because at a time when your competitors are spending less, it is in effect, less expensive to buy share of voice and share of mind than it ever is during a time of prosperity. The market is less cluttered and the real cost of media goes down because demand goes down. You can then buy share of voice more cheaply and there is a very good historical correlation between share of voice and share of market.” Share of voice and ensuring that voice is heard loud and clear is now top of Lund’s agenda at the COI. But whereas his commercial counterparts will be seeking to gain market share, his remit will be to change hearts and minds – a challenge he admits requires a very different approach – particularly when what is at stake is the public’s welfare.
www.bme.eu.com
113
MARKETING FOCUS
Marketing budgets across Europe may be shrinking but there’s no better time to get your company’s message across, according to Donovan NealeMay, Executive Director of the Chief Marketing Officer (CMO) Council. He tells BM the latest marketing tricks his members have up their sleeves.
THE MARKETING GURU What is the feeling among your members regarding the effects of the downturn on the European marketing industry? Donovan Neale-May. We’ve just completed our latest Marketing Outlook Study and generally we’re not seeing direct predictions of imminent failure. In fact we’re seeing a fairly positive outlook. I think what you see and read in the newspapers is not necessarily reflected within marketing organisations themselves. However there is clearly a lot of tightening up of marketing budgets within companies and there are a huge number of marketing people that are on the street because of job cuts. Within marketing organisations I think they are looking strongly at the types of skills and proficiencies they need to actually embrace new digital marketing programmes and strategies. They are paying a lot more attention to the customer and to understanding who they are doing business with, who their most profi table customers are and what the lifetime value is of those customers. More traditional PR functions have been impacted more than the folks working in areas like search engine marketing, demand generation, Donovan Neale-May lead acquisition and search advertising. How many companies are cutting their marketing budgets? DNM. Well actually we’ve seen around 30 percent of companies increasing their marketing spend. Also it’s less about cutting budgets than redirecting spend.
114
It’s going to be more expensive and difficult to acquire new customers so companies are focusing on the customers they have and what to do with those customers relative to getting increased value from them or using them as agents to help introduce other customers to you. This situation is forcing companies to do something which they’ve been very poor at that is to grab more customer data, get deep inside it and figure out ways to get more tightly connected with the customer. The CMO Council has published a report claiming that marketing departments are not forming strong enough relationships with other parts of the business such as IT and finance. What could they learn from these departments? DNM. The marketing departments today have got to want to live, breath and eat data. The trouble is that so much data is being generated today and it is not being collected effectively, mined effectively or leveraged. There are so many different third party data sources that you can gather insights from. But companies don’t even necessarily use that data. With a lot of marketing folk their modus operandi is focused on spent, not around analytics or insight gathering. They need to be able to not just acquire a contact but track and monitor the return from that contact. Marketing departments need to look at hiring
www.bme.eu.com
Donovan.indd Sec1:114
29/5/09 14:40:16
ing analytics company. This features an intelligent agent, which you can programme to track certain topics that are being discussed in certain environments such as forums, bulletin boards, news groups and blogs. You can use it to track conversations around issues. So for instance a company like Shell could track conversations about environmental concerns or lawsuits or things that their company might be embroiled in from a programme reputation point of view. The future is about getting much smarter and using the new interconnected world that we live in. What are the benefits to marketing officers of using cyber-eavesdropping techniques? DNM. This technology allows marketers to track every nuance of discussion, to track discussions about fashion, electronics and all sorts of consumer goods. This allows them to predict trends more effectively and manage their demand and supply chains more adeptly. They could also identify potential threats that could be incursions into their market space. This technique should, if it is embraced properly and systemised, put companies at a significant competitive advantage. This sort of technology will transform the way people acquire customers, keep customers and more importantly, operate their marketing programmes globally on a much more efficient level
people from different backgrounds such as people with PHDs that can run algorithms. How are marketing companies taking advantage of social networking technology? DNM. It depends on the product they are marketing. If you are in a consumer business there are obviously some very creative ways to get your brand, or your experience or your product talked about using social networks. On a consumer level there are opportunities to virally communicate and to introduce conversations into communities that centre around new offerings, new innovations and new experiences. At the same time you can build a collectivised customer community, particularly on the b2b side. It’s about creating a shared interest group around themes, issues, needs and requirements, not necessarily about your product. You’re creating an affinity network of decision makers who have an interest and want to interact peer-to-peer. Trusted business networks are very powerful. They are the way people, in many cases, influence and shape huge amounts of spend. What do you think are the next big marketing trends? Can you predict any groundbreaking new marketing methods that may be used in the future? DNM. Well I think the future is all about automating on a massive scale and about interacting more with the marketplace and being far more agile and adaptive and responsive to shifts and trends. One of the trends will be cyber-eavesdropping – listening in to the conversations people are having on the web. For instance we’ve built a whole global community of mobile computer users and we use a system called Track the Yak which has been developed by an Indian market-
How will mobile technology change marketing techniques? DNM. The future is very mobile. The new markets around the world are being driven entirely by mobile communications and cellular technology. Places like Africa, Latin America and Eastern Europe don’t have structured markets, they have informal markets and the future for marketers there is to look at new channels for interaction. The mobile device is going to be the primary way to interact with the market and deliver contents and create relationships. When you look at text messaging applications it’s not just about games and content, it’s about delivering messages. So for instance a message could be sent out to farmers saying the climate is great and now is the time to spray their crops or to senior citizens telling them when to re-order their medication.
Donovan Neale-May is Executive Director and founder of the CMO Council – a global network of 3500 senior marketing and branding executives. He is president of GlobalFluency Inc. The company specialises in intelligent market engagement and has 70 offices in 40 countries employing 450 employees. Previously he held senior marketing positions in marketing, promotions and public relations agencies in Silicon Valley, New York, London and Los Angeles. For five years he ran Ogilvy & Mather’s west coast PR operations and managed communications during the formative years of Dell Computer in the mid 1980s. During his 30-year career Neale-May has consulted with over 300 leading multi-national companies, including Del Monte, Samsonite, Colgate, Lever, Polaroid and Kraft General Foods.
www.bme.eu.com
Donovan.indd Sec1:115
115
29/5/09 14:40:18
GREEN TECHNOLOGY
W
e are committed to being the ‘greenest’ technology company on the planet. To achieve this we have said that we need to look at our environmental impact. Although this means a holistic approach, we have found that there are four distinct categories of impact: • How we design our products • Our own operational impact, as well as our extended supply chain • How customers acquire and subsequently use our products • The end-of-life deposition of our products and their environmental impact
We are committed to leading the industry by designing our products for energy efficiency so we have made very specific targeted commitments. We have avoided US$3 million (€2.2 billion) in energy costs since 2005 based on a very targeted focus in the design phase of our OptiPlex products. We have committed to lead our industry in terms of efficient use of energy, purchasing clean and renewable energy, along with offsetting remaining impacts and achieving carbon neutrality. When you look at the carbon we are emitting relative to the revenue we generate, we produce around seven grams of carbon per dollar of revenue. We are committed to the fact that 100 percent of our energy needs for operating our facilities are from clean and renewable sources, which
In these carbon-conscious times ‘green’ issues are high on the corporate agenda. But computer-maker Dell is going one step further to slash its carbon footprint and make huge cost savings, says Director of Sustainable Business Tod Arbogast.
CHAMPIONING
ENERGY EFFICIENCIES 116
Dell.indd 116
www.bme.eu.com
29/5/09 14:46:51
“We have committed to reduce 20 million pounds of packaging, which will save us US$8 million (€5.8 million)” will eliminate our carbon impact. At the moment, around 20 percent of our energy comes from clean and renewable sources – four times the amount of our nearest competitor. Until we can procure 100 percent of our energy from renewable sources we are going to have a remaining impact, and we believe leadership dictates that you offset that remaining impact responsibly and achieve carbon neutrality. At Dell we have committed to reduce 20 million pounds of packaging, which will save us US$8 million (€5.8 million). We have also committed to enabling the recycled content use within our packaging, as well as curb side recyclability of our packaging. Finally, when it comes to end-of-life disposal Dell is the only computer company in the world that provides free and convenient recycling globally, irrespective of product purchase.
to manage the power state of those assets, so if a client is not being utilised over a pre-defined period of time we will automatically power it down. In the event that we need to re-awaken that asset, we can do that remotely, too. This allows us, in effect, to manage power in the most optimal way for that asset. That has resulted in Dell avoiding more than 20,000 tonnes of CO2 annually and roughly US$3 million (€2.2 million) of cost savings. Turning these computers off when they are not being used is saving us about US$1.8 million (€1.3 million) a year, as well as all the carbon reductions. However, when you look at our commitment to procure 100 percent of our energy needs from clean and renewable sources, we clearly have a long way to go. We lead our industry at the moment but there is a daunting challenge ahead of us. In the United States roughly three percent of the total energy output for the country comes from clean and renewable sources. Dell is operating its US facilities on more than 35 percent or 10 times what is available. Needless to say, we continue to find creative and innovative ways to partner with our public utilities but we will continue to be challenged in years to come. The key for us is that we are focusing our aspirations to be the greenest technology company on the planet, holistically across an entire lifecycle. Embedded in that lifecycle we are prioritising and driving demonstrable actions inside each of the elements. It is about helping to serve our customers – both on our commercial and consumer sides – because green is important to them. In some cases, it is for their own corporate responsibilities or they may have a strong tie with environmental practices within their home, or it is simply for the cost savings. We are hearing that customers do have a certain amount of trust for companies that are putting environmental considerations at the fore.
Dell produces grams of carbon per dollar of revenue
Green is clean In terms of energy efficiencies, we have taken a multi-approach strategy. One of which is a partnership with industry in organisations such as the Climate Savers Computing Initiative where we have taken a very active role. We were also the first in our industry to achieve an 80 Plus Gold-certification for server power supply, while we were able to release a product that was conforming to the 2009 climate savers’ requirements a full year ahead of schedule. A second area of our green leadership is ‘Dell Energy Smart’ which has a holistic approach to dealing with energy efficiency – from the design in terms of how we focus on energy efficiency at a component level to how we integrate software to optimise energy efficiencies. This produces the most energy efficient products in our industry. We also provide calculators that allow our customers to visually see and identify the carbon savings associated with a transition, as well as their potential savings associated with energy decreases. The final area is about innovation. How do we drive innovation in our products all the way from the desktop through to the data centre? It’s about innovation and delivering demonstrable value to our customers in terms of energy savings. A good example of this is the US$3 billion (€2.2 billion) we have helped customers avoid in terms of the costs of powering our OptiPlex products since 2005.
Computing power The PC-installed base managed by our enterprise is in excess of 50,000 clients distributed throughout our IT enterprise. We launched a programme where we were able
Tod Arbogast is responsible for managing Dell’s sustainability team and programmes. He manages the balance of Dell’s growth strategy with goals to minimise the company’s impact on natural and human resources. Elements of his role include managing company relationships with stakeholders that help Dell develop sustainable growth strategies, guiding Dell’s product recovery and recycling programmes, as well as climate change impacts.
www.bme.eu.com
Dell.indd 117
117
1/6/09 13:20:08
EXECUTIVE INTERVIEW
The move to green In a discussion with BM, Millennial Net’s Martin Hanssmann looks at the upsides to slashing carbon emissions for your business. Going ‘green’ has been on the agenda for businesses for a while now. However, will the economic crisis hamper these efforts or do you feel this is the ideal opportunity to slash carbon footprints whilst looking to make savings in these lean times? Martin Hanssmann. Smart energy consumption is an essential part of any green strategy, and energy savings, achieved with a rapid payback, is an essential part of any economic recovery strategy. This economic crisis, as with others in the past, is focusing companies on business fundamentals and competitive factors of survival. With capital being tighter, companies are also looking for pragmatic solutions, measurable results and relatively short payback periods. Doing more with less is a ‘lean’ and ‘green’ concept. Reducing energy waste is a way to do more with less while slashing carbon footprint.
MH. A common mistake companies can make when embarking on a ‘green’ drive is to go about it ‘blindly’. Surprisingly, we find many companies think their buildings are operating efficiently, when in fact energy is consumed by unnecessarily running lights, various equipment, and heating, ventilation and air conditioning (HVAC) systems. In many cases energy reductions are estimated and considered at the time of investment, but there is no monitoring to ensure that improvements deliver the expected results or that the results are sustained over time. The reality is that many improvements degrade without oversight. Energy consumption and green initiatives must be managed on a continuous basis as must any other asset. Executives understand the importance of visibility and controls to manage financial, supply chain and quality processes. Energy and green initiatives require similar visibility and control.
How can cutting carbon emissions and instigating energy efficiencies within your company deliver a competitive advantage? MH. Reducing energy waste cuts carbon emissions. Millennial Net provides energy management solutions that monitor and control energy consumption to improve efficiency and reduce waste. The key is to help companies align energy consumption and costs with business priorities. Companies need to better understand how energy consumption relates to their business. Benchmarks from site to site can be used to motivate managers and their organisations to improve. This enables continuous improvement programmes to improve energy efficiency. Their ideas, supported by information, results in changes to operations and more effective investments to upgrade buildings and equipment.
“With capital being tighter, companies are also looking for pragmatic solutions, measurable results and relatively short payback periods”
What are the common mistakes that companies could make when deciding to embark on a ‘green’ drive?
118
What technology solutions out there will allow companies to monitor and manage their energy usage? MH. An enterprise approach to energy management empowers management to improve. It enables them to establish energy policies, enforce compliance and measure performance. Information technology is a powerful and proven change agent. Advances in internet technologies and wireless communications enable broad and rapid deployment of an enterprise-wide energy management system. Robust wireless sensor network technology, such as Millennial Net’s MeshScape,
provides a means to implement real-time monitoring and control at the point of energy consumption. Key differentiators of MeshScape systems are responsive bi-directional communications and high performance in commercial and industrial environments. Millennial Net and partners, such as Switzerland-based LEM, develop MeshScape solutions for the European market for retrofitting buildings in a non-invasive manner and leverage existing building infrastructure. For example, within hours per site, companies can install wireless devices for interval energy metering (electric and fuel consumption) and other devices to monitor and control points of consumption (such as lighting and HVAC systems). The wireless devices deployed in multiple facilities can capture and communicate this information via the internet for enterprise-wide visibility. Analysis of the data helps companies better understand and manage consumption and implement sustainable green programmes. These end-to-end solutions are designed for scalability, robustness and low cost of operation. They are easily expanded over time to improve operational efficiency and overcome issues of aging assets. With a typical payback period of under two years, this is a pragmatic solution for economic and energy challenges, today and tomorrow.
Martin Hanssmann is President and CEO of Millennial Net – a provider of commercial and industrial wireless sensor network solutions. Hanssmann has over 25 years of automation experience. Previously, he served in a variety of management roles for Brooks Automation and Schlumberger. Hanssmann holds a degree in Electrical Engineering from McMaster University.
www.bme.eu.com
Millineal net.indd 118
29/5/09 14:40:58
MILLENIAL NET AD.indd 1
5/5/09 10:34:33
Stavros Dimas ED:6may
1/6/09
09:57
Page 120
GREEN GOVERNANCE
“We are building the future, today.” EU Environment Commissioner Stavros Dimas on the rise of eco-industries and eco-innovation in meeting carbon emission targets.
I
t is no secret that innovation and competitiveness go hand in hand. What is less well understood is that the health of the environment and the health of the economy are also fundamentally linked. Sustainable economic growth needs to be based on a sustainable natural environment. We are currently facing multiple global crises – a severe economic downturn but also the ecological crises of climate change and the loss of biodiversity. Each of these crises needs urgent political action. But there is one fundamental difference: our economies will recover in a few years but the environmental damage we are causing will take generations to repair. It is an encouraging sign that protecting the environment is no longer seen as a luxury that can only be afforded during the good times. Leaders everywhere have recognised that meeting environmental challenges offers opportunities to stimulate the economy and create new jobs. The US, South Korea, China and Japan are among those already realising that this is a triple win scenario – well designed measures can boost sustainability, jobs and growth. The Competitiveness and Innovation Framework Programme (CIP) is Europe's engine for green growth. It is the EU's main tool to increase Europe's productivity and innovation while balancing environmental concerns. It is a key to implementing our Environmental Technologies Action Plan (ETAP) and the Lead Market Initiative, which together help remove the financial and institutional barriers to eco-innovation. It is worth noting that half of the lead markets that have been identified to date are related to ecotechnologies. Eco-industries are one of the fastest growing sectors of the EU economy and they are an area where Europe is a global leader. Investment in clean technologies now represents around 18 percent of all venture capital in Europe. The market for green jobs is expanding rapidly. According to the UN, up to 20 million new jobs could be created worldwide in the renewable energy sector by 2030. The UN has also concluded that improved energyefficiency in buildings has the potential to create up to 3.5 million green jobs in Europe and the United States.
The road ahead We are building the future, today. And it is clear that those who take the lead will have a first mover advantage in developing the sustainable technologies for a rapidly growing world market. The need to build a resource-efficient, low carbon economy is no longer an issue for debate. The question now is how we are actually going to make this happen. And eco-
120
www.bme.eu.com
STAVROS DIMAS innovation is one of the keys, not only to meeting the EU’s environmental objectives but also to its future competitiveness. By 2020, we must cut our greenhouse gas emissions by at least 20 percent of 1990 levels, we need to improve our energy efficiency by 20 percent and increase the share of renewables in our energy mix to 20 percent. Achieving these targets will require a fundamental change in the way we produce and consume goods. Improving the environmental performance of products over their life cycle is essential. This is at the heart of our Sustainable Consumption and Production Action Plan. This brings me to the role of the Agency (EACI). Its members are key partners in helping us achieve the goals of the Lisbon Strategy for jobs and growth and the ambitious targets we have set in the climate and energy package. The CIP budget for eco-innovation may appear modest in view of these objectives (and I would hope that it is substantially increased in the future). But through synergies with other programmes – like Intelligent Energy Europe (IEE) and the Marco Polo initiative for sustainable transport – it is able to deliver very substantial results. We look forward to the eco-innovation projects the agency currently manages leading to new products on the market that can bring tangible benefits for the environment. I am particularly pleased to see that we are working with SMEs in important areas such as recycling and construction. This work will play a part in building the new low carbon industrial revolution. And with the second call for proposals about to be launched, we can look forward to many more green solutions for sustainable growth. Thanks to the agency’s work, we are on the road to a greener future, where business meets the environment.
STROMASYS AD.indd 1
5/5/09 10:25:59
Kofax ED:6may
29/5/09
13:58
Page 122
INDUSTRY INSIGHT
MONEY, MONEY, MONEY Thomas S. Senger on managing your cash flow and accounts payable (AP) department in an economic downturn.
C
ompanies are looking to AP departments differently these days. Due to cost pressure they need to turn them into a money-making entity. Organisations are finding out that negotiating early payment discounts and consistently cashing in on these discounts allows for far greater returns that positively impact the company’s cash position. Speeding up the AP process by automating it is the only way companies can expect to increase the number of discounts taken and turn the traditional cost centre into a money-maker.
electronic invoices and delivers a fully hybrid invoice processing environment in which both einvoices and paper invoices can be seamlessly processed. This single pipe for all incoming invoices reduces processing time and eliminates the possibility of lost invoices and automated data extraction replaces manual, time-consuming and error-prone data entry. The invoice approval workflow cycle is enhanced by automated data validation and proactive communications to suppliers. The combination of these capabilities results in an increased invoice matching rate and enhanced level of straight-through invoices.
Cash is king
Case study
In the current economic climate it is becoming increasingly important for companies to fully optimise cash flow. Suppliers have money tied up in accounts receivables and buyers have outstanding liabilities they need to take into account. Early or dynamic discounting can bring substantial benefits to both parties. Returns as high as 36 percent per annum on invoice amounts is enticing buyers to change their rhythm and pay ‘early’ instead of paying as late as possible and collecting low bank interest rates. To help companies achieve these goals Kofax offers invoice processing solutions that improve processing efficiency and effectiveness through a combination of intelligent data extraction, communication, error detection and analysis tools. The result is a high degree of automation that provides process-ready data to a company’s backend and approval workflow systems.
A large European retail company was looking to streamline AP operations while at the same time tightening relationships with their 2000 plus supplier base. By pushing the envelope in terms of AP automation they are able to drastically reduce invoice exceptions and as a result process invoices extremely rapidly. As soon as invoices are ready for payment, they are posted on a supplier portal. There suppliers wanting to improve cash flow can click on the invoices to have them paid without waiting for the payment term to run out. In return suppliers give up a percentage of discount. The longer the supplier waits and the closer he gets to the agreed payment term, the smaller is the required discount. Obviously suppliers can also choose not to be paid early and simply wait till end of payment term. However, in the current economic climate the retail company is seeing that more and more suppliers are looking to collect outstandings earlier in an effort to improve cash flow. The net result for the retail company is an immensely improved rate of return, that far exceeds the benefits of extending payment and collecting bank interest rates.
Multi source, single pipe The Kofax solution for invoice processing enables a company to capture and store invoices the moment they enter the organisation, regardless of the entry point or media type (paper, fax, email or electronic). The solution allows companies to easily enable suppliers to send
122
www.bme.eu.com
Thomas S. Senger is SVP, Applications Software Sales EMEA, for Kofax. www.kofax.com
CUSTOMER PAIN POINTS ISSUE: High process costs and inability to take early payment discounts SOLUTION: Control paper flow, reduce manual labor, add e-Invoices, enhance process transparency and improve invoice data quality by automating the process ISSUE: Inefficient, labour intensive processes that delay the effective processing of invoices SOLUTION: Automate manual tasks like data entry and validation using intelligent capture technology ISSUE: Increasing costs of handling high volumes of invoices from strategic suppliers SOLUTION: Easily enable strategic and semi-strategic suppliers to send invoices electronically. Enable hybrid paper and electronic invoice processing ISSUE: Inbound calls from suppliers to AP are driving up costs and reducing efficiency SOLUTION: Increase supplier satisfaction by automatically notifying suppliers of invoice status and payment date ISSUE: manual invoice exception handling is driving up cost and reducing speed of processing. High levels of outbound calls to suppliers SOLUTION: Automate validation of extracted invoice data and proactively notify suppliers of invoice exceptions
KOFAX AD.indd 1
5/5/09 10:23:55
INNOVATION
Cerf’s up In an exclusive interview, Vint Cerf, internet pioneer and current Vice President and Chief Internet Evangelist for Google, explains why infrastructure development is more important than ever in a tight economy.
hen Vint Cerf speaks about the web, people sit up and listen. Widely thought of as the founding father of the internet, Cerf, along with research partner Robert Kahn, designed the TCP/IP protocols that govern data transfer across the net along with its basic architecture. In 2005, the pair received the highest civilian honour bestowed in the US, the Presidential Medal of Freedom – recognising the fact that their work on the software code put them “at the forefront of a digital revolution that has transformed global commerce, communication and entertainment”. For many, Cerf is as close as you can get to internet royalty. However, it’s a title he’s reluctant to accept. “The internet has many fathers; there are lots of people who’ve contributed,” he says. “This is very much a collaborative effort, and over the history of the internet you’ll find that tens of thousands – maybe by this time, hundreds of thousands – of people have contributed over the years. This is one of those wonderful ideas where everyone has an opportunity to contribute – and they do! And that’s the real magic and power of the internet. It’s an open environment that everyone has an opportunity to share in and to contribute to, and that’s exactly what’s happening.” Indeed, the idea of openness and collaboration – and of sustaining the internet as an open network for consumer choice and innovation – is a subject close to Cerf’s heart. “Google believes in a very open internet environment,” he explains. “One where everyone has the opportunity to try out new products and services without discrimination. We also believe that you have a right to know exactly what you are getting. Suppliers of internet service need to be clear about expected performance and what you are paying them for.” In Cerf’s view, the internet should be an egalitarian entity used by anyone and everyone, one where suppliers of the service are unable to discriminate against a user merely because of who or where that user is. “We are arguing that the internet should be nondiscriminatory in terms of its access, although we accept the argument that for larger capacity you may have to pay more,” he says. “What we are after is an open
W
environment where both consumers and suppliers of applications are treated fairly.”
Investment Naturally, in order to attain the open environment that Cerf is so keen to see happen, the infrastructure itself needs investment. But in a tight economy, are companies in the mood to invest in internet infrastructure? “We have a situation where the incentives for companies providing internet access are distorted by a natural desire to maximise their investment to the detriment of innovation,” concedes Cerf. “I think we need to provide adequate incentives for all parties, those providing underlying facilities and those providing value-added services, to have fair and nondiscriminatory access to the underlying bit-carrying capacity of the internet. Monopolising provision of service does not produce innovation; in fact, it sometimes inhibits it. People want to know why they should invent a new, less expensive solution when they are able to charge more money for their service by sticking with the old way of doing it.” However, Cerf sees innovation as critical to long-term prospects, and as a result insists there must be some kind of incentive for investors to create the appropriate infrastructure. He believes that there will certainly be opportunities to find ways to invest in infrastructure, particularly in light of the current financial crisis. “Perhaps there are subsidies that could be provided? Maybe there are other tax benefits that could be provided? What we need to do is be creative about providing incentives for building infrastructure, and at the same time ensure that it is as openly accessible as possible to all parties who want to innovate on top of it,” he explains. He likens the shared asset to a road system – everyone drives on it and the roads are used simultaneously by lots of different users – which is exactly how packet switching works. “Packet switching may be a way, like the road system, to allow people to share common infrastructure,” says Cerf. “From my point of view, in order to create broadband access there needs to be a financial or other business incentive, whether that’s R&D tax credits or credits related to revenue gained on new investment – if there are ways of providing incentives to business for creating openly
“The internet should be nondiscriminatory in terms of its access”
124
www.bme.eu.com
VintCerf.indd Sec1:124
29/5/09 14:41:36
www.bme.eu.com
VintCerf.indd Sec1:125
125
29/5/09 14:41:40
THE FUTURE OF THE INTERNET?
Vint Cerf offers his thoughts: “Frequent speculation is that somehow as the internet gets larger and larger and more computers with more software and more memory flow into it that someday it will simply wake up and become self-aware. I am somewhat sceptical of this, although I will say that as we provide the internet with more and more information – and in particular the ability to experience the world the way we do through video cameras, microphones and sensors – the internet could potentially have a kind of sensory system like human beings do. “The question is, ‘How does the internet experience that information?’ In a human being, the information is sensed through our neural system and then goes into a neural network in our heads. The neural networks are extremely complex, and they are quite malleable. In fact, the imposition of sensory data into the brain physically affects the way in which the brain evolves. The internet could conceivably affect a similar kind of evolution, but it might require human beings to change the software because we don’t have self-programming systems at this stage of the game. “I think, though – in my science-fiction speculative moments – that if the internet could interact with the environment in ways like human beings interact then we might someday actually find that the internet or its successor could become self-aware. For me that’s still science fiction. But you can certainly see on another axis here that – independent of self-awareness – the network and the sensory systems associated with it can handle much more information than any individual human being could handle and could process that information with all the huge computing power that’s available, and so that’s a different kind of intelligence than what you and I have.”
sharable infrastructure, then that’s a hint of the direction in which one might go in this current climate where at least the present legislation is intending to provide a substantial amount of government support for investment in infrastructure of all kinds. Creating incentives for industry and the private sector to both build the underlying infrastructure and then participate in inventing new ways to use it is the direction that we want to be heading in,” says Cerf.
21st century infrastructure But away from the development of the internet infrastructure itself, Cerf sees great potential for expansion of internet services and applications. For example, during the Great Depression, President Roosevelt deliberately created a massive investment in physical facilities and infrastructure in the US, and Cerf believes that there is now a reasonable need and opportunity to do something similar in the current climate. However, he maintains that it is of vital importance to invent 21st century versions of those infrastructures. “I want to build the 2010 version of infrastructure,” he says. “So we need to ask ourselves technologically, what kinds of infrastructure could we build? What kind of infrastructure would create more opportunities for businesses to invent new products and services? In Roosevelt’s case he focused on this in the midst of horrible turmoil and joblessness; he saw an opportunity.
126
They say opportunity lies on the edge of chaos – maybe that’s going to be true today too.” Ideas for the 2010 infrastructure include ensuring that every new mile of highway or bridge that is built has conduits built-in so that it could carry fibre. This way the road wouldn’t have to be dug up later in order to pull fibre along that particular length of road. Other examples include the use of so-called Smart Grids. “For the first time in history, we may have the opportunity to not only adapt our supply of electrical power to demand, but have control over some of the energy-consuming devices in businesses and residences. We can communicate when to run the hot water heater or the air conditioning in order to moderate peakload demand, and if we manage the demand as well as the supply, then we may be able to avoid investing huge amounts of money in peak load capacity that we only use two or three percent of the time. Similarly, if we’re investing in new electrical grid distribution media, maybe that same framework will allow us to also invest in new high-bandwidth telecommunications facilities, fibre being an obvious example.” It’s about exploring the possibilities, and at the end of the day Cerf sees huge potential in terms of the opportunities the internet opens up for the businesses of tomorrow. “I think what companies need to do is to examine the products and services that they offer and the means by which they make those things known to others and ask themselves how the internet can enhance their ability to draw attention to their products and services – or even to deliver their products and services,” he says. “Google is an example of this. Our business is the selling of advertising, but the advertising is incidental to the use that most people make of our products and services – they’re looking for information, and we try to help them find it. Take Google Maps or Google Earth, for example. We didn’t get any direct revenue from the Google Earth or Google Maps system, although we have advertising related to it, and if people are there taking advantage of information that others have provided and also can see related information coming from our advertising, people click on the ads, and that generates revenue for us and sometimes also for the other people who provided the information.”
Business opportunities Almost invariably, improvements in technology lead to opportunities in the business world – whether by making it less expensive to provide a product or service, or by creating entirely new businesses or industries that nobody had ever thought of before. Cerf cites a couple of examples. “Look at education. Here, the product is learning; but technology opens up new opportunities with regards to how you deliver it. For many years, the way you delivered it was by having a professor up on the podium and students sitting in chairs taking notes. But we now recognise that not everyone can afford to go on a four-year course at a college and devote themselves exclusively to that. Nonetheless, they still have to learn new skills and knowledge in order to maintain the edge that they need for the jobs they’re doing. So the university, which is providing education as a product, needs to package not only the four-year degree and the two-year degree, but also the two-week special course or the part-time MBA program. In this instance, repackaging the product of education and delivering it through the network could be a very power-
www.bme.eu.com
VintCerf.indd Sec2:126
29/5/09 14:41:41
“Creating incentives for industry and the private sector to both build the underlying infrastructure and then participate in inventing new ways to use it is the direction that we want to be heading in”
ful revenue enhancer, to say nothing of growing a market that doesn’t exist compared to residential colleges.” The second example is that of information sharing. “People increasingly rely on information in order to keep their lives organised, whether it’s calendars, keeping track of their stocks, or keeping track of medical records,” he explains. “Most people probably visit more than one doctor and have medical records scattered around on physical paper in different offices. This means when someone new asks you for your medical records, you don’t have an easy way of gathering the data. So if we had a common ability to record our personal medical records, we could supply that information more easily and accurately – making this information more easily discoverable and analysable is a powerful tool.” Google has a number of applications that help people manage this information, such as Google Docs and Spreadsheets, and Cerf insists that it is the increased level of collaboration provided by advances such as cloud computing that is making the difference. “Companies that are trying to help people analyse, evaluate and accumulate their information can take advantage of the internet – and in some cases, of what Google offers – to help people organise their information and evaluate and analyse it.”
The value of collaboration It is this quality that most inspires Cerf about working for Google – the company’s commitment to organising the world’s information and making it accessible and useful. “That’s an honest motivation,” he says. “It’s true. The company really believes that this is what it wants to do, and that’s what people who work for Google want to make happen. I’m one of them, but just one of 20,000. It’s a wonderful feeling to have a company whose leadership believes that motto and wants to make it happen.”
He believes one of the keys to the organisation’s success is its ability to deal with scale – particularly given the rate at which information flows into the internet, the rate at which it changes and the rate at which Google has to keep track of that. The ability to manage all of that change and all of that increase quickly and responsively is really stunning,” he enthuses. “When you walk into one of the Google data centres, which most people are not gonna be allowed to do, it’s awe-inspiring. The physical scale of the facilities, and the number of machines that are made to work together – both the hardware and the software – is frankly mind-blowing.” Cerf also cites the firm’s internal structure – the quality of people it hires and their ability to work together and share information – as important. “The willingness to share internal information with a fairly significant part of the entire company really helps improve its likelihood of success,” he says. “One thing I’ve learned about companies that are successful is that virtually every employee, whether they are cleaning the floors or the CEO and everything in between, has a pretty good idea of how the company makes money. And if people understand how the company works, then they can reasonably ask the question – and I hope they do – of whether what they are doing today is helping the company do what it’s trying to do.” Ultimately, however, it is technology that really excites him. “For the first time in human history, computers are allowing us to magnify and leverage our brain power, whereas in all the previous history what we’ve done is magnify and leverage our muscle power,” concludes Cerf. “This is a big change in our human civilisation where we’ve mechanised something that never has been mechanised before.” And it is this – Google’s ability to leverage the power of the human brain to make it more capable than it ever has been in the past – that truly sets it apart.
www.bme.eu.com
VintCerf.indd Sec2:127
127
29/5/09 14:41:42
EXECUTIVE INTERVIEW
THE BUSINESS OF SUCCESS Corporate air travel is big business in Europe but we could be entering turbulence as the recession takes hold. To get a better view on the industry and where it is heading, we speak to Dave Jackson, CEO of 328 Support Services GmbH. Can businesses justify VIP/corporate aircraft in today’s economic climate? Dave Jackson. This is not really a new question, but is a question organisations should be asking themselves all of the time. Today’s global recession has raised the profile of the question again, as many companies ‘lay off’ employees in a bid to restore their trading position – any sign of a frivolous or unjustified expense is being examined, amongst those the corporate aircraft. We believe the case for efficient use of point-to-point or shuttle travel remains as strong as ever, in fact more so as some regional operators cut back on their routes, forcing certain clients back to a less efficient hub and spoke travel pattern. In the current economic climate rapid communication with employees, clients and other interested parties is best done face-to-face and this can be done efficiently and cost effectively with a corporate aircraft especially in a multi-site/multi-location environment. Having said that, there are expensive and less expensive ways to get from A to B to C and back to A. So in summary there is still very much a place for the corporate aircraft and it can fully justify its existence and future use. What is the future for long haul, such as intercontinental corporate jets? DJ. This is not an area we at 328 Support Services are heavily involved in, however I can offer a personal view. Beyond the need for head of state or government delegations with particular security needs, it is hard to see how today’s full service Business Class and First Class service offering from the major airlines can be beaten on a cost per kilometre/mile basis. The major airlines continue to support all of the most important intercontinental destinations and airlines such as Lufthansa and Emirates continue to develop that network. I believe international long haul on a major airline, perhaps complemented by a local corporate jet network, such as NetJets, is probably a more cost effective solution – certainly in the case of organisations with multiple travel requirements but perhaps only one or two aircraft. Within a region corporate aircraft can be repositioned much more quickly and cheaply, dead legs are less costly and on occasion could be dovetailed with scheduled airlines or a ‘by the hour’ provider.
128
Dave Jackson has over 25 years experience in the aviation industry since graduating with BA (Hons) in Marketing (Engineering) in 1984. His background has been sales and marketing and general management with a strong emphasis on business improvement and turnaround within global multi-division/multi site-environments, with companies such as Lucas Aerospace, Aviall Inc., and Hunting PLC.
Will ‘fractional’ ownership replace ‘by the hour’ usage models in the future? DJ. We believe both have a place and certain advantages dependant on specific circumstances. As I said earlier, all forms of spend, especially if it might be classified as ‘ostentatious’ will be clamped down on. No one wants to own up to being the guy responsible for the €25 million corporate aircraft sitting on the balance sheet and doing four hours a month flying. However, there are some great value propositions available, and there is a case for the corporate aircraft, either shared amongst geographically co-located businesses or individuals. The fractional model works especially well if supplemented by ad hoc charter. The ‘by the hour’ model exemplified by the likes of NetJets, avoids the balance sheet challenge and for low time users is probably still the best way forward. Is there a place for a VIP turboprop? DJ. Until recently, turboprops were starting to fall out of favour. I have boarded flights in the US where they have actually apologised beforehand because it is a turboprop. I think that has changed and therefore the concept of a VIP turboprop certainly within Europe, where there are not major speed advantages that can be achieved on journey times of say an hour or so due to distance, air traffic restrictions and so on, it is hard to separate a jet from a turboprop. However, there is a different cabin noise footprint and certainly a different ‘image’. We definitely see a tubroprop perhaps in a business class/corporate shuttle role more than say a full VIP configuration. Having said that, we have an enquiry for a turboprop Dornier 328 VIP right now – so maybe the turboprop really is back.
www.bme.eu.com
The business of success.indd 128
1/6/09 13:24:25
328 AD.indd 1
18/5/09 11:23:42
BUSINESS AVIATION
HIGH FLIERS Brian Humphries, President and CEO of the European Business Aviation Association (EBAA), tells BM why executives are shunning airlines in favour of private jets – despite the downturn.
130
www.bme.eu.com
Humphries.indd 130
29/5/09 14:35:38
THE SINGLE EUROPEAN SKY INITIATIVE here’s a lot the world doesn’t know about business aviation, according to Brian Humphries, CEO of the EBAA. Few are aware, for instance, that the sector is worth around €20 billion to the European economy – accounting for approximately 0.2 percent of the combined GDP of the EU, Norway and Switzerland. Neither would the average man on the street know that it employs 164,000 people across the region and that the business aviation fleet is among the most environmentally friendly in the world. More worryingly, says Humphries is that the fact that the public has serious misconceptions about the industry miscasting it as just a ‘rich man’s toy’.“We are a significant industry, yet in the US in particular we are miscast as a rich man’s toy,” he says. “In fact we employ a lot of people and we bring in a lot of money for the economy.”
T
The green defence The EBAA was founded in 1977, has 400 members from across the industry, and represents 800 aircraft. It is involved in helping to draft new legislation for business aircraft, acting as a mouthpiece for the industry at the EU Commission and in championing operators’ causes. Humphries is especially concerned about charges that business aviation is bad for the environment – a claim the EBAA vehemently denies: “The first thing to say is that business aviation often gets painted in a bad light but in reality it has a minimal impact on the environment. In 2008 we accounted for eight percent of the traffic and less than one percent of the emissions. The reason for that is our aircraft are small, clean, quiet and modern and they tend to fly direct routes. We only contribute around two million tonnes of Co2 which is equivalent to a small power station and accounts for about .04 percent of overall emissions,” says Humphries. He goes on to describe how some business aviation operators, including Netjets have introduced compulsory carbon offsetting initiatives for their passengers. However, he adds, efforts by the industry have been somewhat thwarted by EU regulations which require some non corporate business aviation operators to engage in carbon trading regardless of the relatively small amounts they actually emit: “We’ve really got quite a bad situation where on the commercial side if you emit less than 10,000
The SES is a European Commission initiative, which aims to harmonise the airspace throughout the EU and move from airspace management along the lines of national boundaries to functional airspace blocks. This would tackle some of the problems caused by the existing system of air traffic management, which includes air traffic control boundaries that follow national boundaries and having large swathes of European airspace reserved for military use when this is not in fact required. Humphries says: “The most exciting part of the Single European Sky is the introduction of satellite based navigation. This is going to open up a lot of secondary airfields to us where we’ll be able to operate in all weathers. We’re very excited about this initiative and we’ve been involved in it right from the start.”
tonnes, you will be excluded from emissions trading which is absolutely fine. But if you are a non commercial corporate operator, even a US operator coming to Europe for one flight then you will have to offset your emissions. What we’re trying to do is get a simplified procedure in place for those that emit less than 10,000 tonnes.”
Changing the rules Lobbying the EU to get a fair deal for business aviation operators is a major part of Humphries’ role. The EBAA is heavily involved at a consultation and lobbying level with the drafting of new legislation governing business aviation operators – including the Single European Sky initiative and the reviewing of current security rules affecting the sector by the European Aviation Safety Agency (EASA). The organisation is keen to ensure that European legislation takes into account the different requirements of business aviation operators from those of their commercial counterparts. This, he says, is particularly true when it comes to issues such as security. The EBAA is currently lobbying the EU commission to introduce new legislation that would improve the security on business aircraft while ensuring that the blanket security rules covering commercial airlines is not extended to business aircraft: Airline rules do not work for business aircraft. We can’t have a situation where there are male and female dedicated handlers for just three or four flights a day. So what we’ve said is that there should be a lighter touch on security for corporate operations. For smaller operations, aircraft up to 15 tonnes you don’t need the heavy-handed touch. And where you do think there should be screening you should be able to use other staff trained in screening. We train pilots to do basic servicing so why shouldn’t we train engineers to do basic screening?.” While the examples of security legislation and environmental legislation show the clear differences between the business aviation and commercial airline business models, the two share a common threat in the form of the global economic downturn, which has seen passenger traffic fall by around 20 percent across Europe. Humphries says the European business aviation industry in Europe experienced a three percent downturn in the latter part of 2008 – following a year in which it had grown at 10 to 15 percent.
www.bme.eu.com
Humphries.indd 131
131
1/6/09 13:25:18
VISTAJET AD.indd 1
5/5/09 10:27:09
FAILURE TO LAUNCH Passenger traffic, he says was down by 24 percent in February compared to the same period last year. “Passenger traffic was growing but now it’s taken quite a significant downturn,” he says. “The top level activities still continue – the corporate flying and the top level people with the big aircraft. That hasn’t seen as much of a downturn as the bottom end of the market which is more price sensitive,” Humphries goes on to say. “The US market has probably taken a bigger downturn than we have. So for instance if you look at the traffic going into Luton it’s down 30 percent (from the US),” Humphries goes on to say, adding that the manufacturers of business aircraft have been particularly badly affected by the downturn. Job cuts have been widespread across the industry with Gulf Stream cutting 1200 jobs, Cessna, 5000 and Hawker Beechcraft, 1200. “There are tough times ahead, uniquely tough times. The manufacturers are suffering because people are cancelling orders and walking away from orders. It’s true that they did have a very big back log. But you only have to look at the number of people that have been laid off to know that these are tough times,” says Humphries.
likely to increase rather than reduce because the quality of the airlines’ services is falling.” He does however acknowledge that while airlines may lose out when it comes to speed, they still have the edge over business carriers at Europe’s airports where commercial operators are given priority: “The facilities at the airports are fine,” says Humphries. “The biggest concern we have for the future, when growth resumes, is access to the airports and making sure we get fair and equitable access. The problem is that sometimes we can’t get in.” The reason for this, he explains, is that Brian Humphries on the business aircraft don’t have “grandfather demise of the businessrights” at European airports, meaning that class only airlines MAXjet, they do not have a right of access to certain Eos Airlines and Silverjet. slots even if they have been fl ying to that “The reason why these airairfield for a long period of time, unlike comlines failed was because of mercial airlines. Giving the example of how bad luck and bad timing and a this affects business carriers at the UK’s Luton combination of old fuel thirsty Airport, Humphries says: “Although we make aircraft, high fuel prices and up more than 20 percent of the traffic at Luton an economic downturn. Of we can get pushed out. Whereas if an airline course, the fuel price really has been operating to that airfi eld for a long affected them because they period of time, it has a right of access to use quite old aircraft.” those slots.” The EBAA is lobbying the EU commission to “Also it co-incided with the reconsider these rules and to treat business aireconomic downturn and The business advantage craft at airports, not in terms of individual opthe fact that a lot of people However, despite these concerns, he beerators, but in terms of an entity that should be downsized. It’s important to lieves the business aviation sector has distinct entitled to regular slots. Greater access rights remember that these aircraft advantages over commercial airlines, not least at Europe’s airports is more important than ever were not business aircraft – the fact that business aviation operators tend before argues Humphries, given the increasing they were all-business schednot to own the jets they are chartering and as popularity of business aviation and that fact uled flights. It was only if they they don’t sell seats on the planes they are not that the advent of lighter aircraft means it is no filled the seats that they had a affected by the number of passengers they are longer just a “rich man’s toy”.Lighter aircrafts chance of making money.” carrying: “The huge difference between airlines mean travel by business aircraft is now an afand business aviation operators is that we fordable options for many more companies, don’t sell seats, we sell the aircraft as a whole. claims Humphries: “I would say that the advent The passenger pays their set price then we don’t care if they put two of the very light jets has made business aircraft more available for passengers on board or eight. Also we optimise the schedule of the lower management. The new products we’ve got give customers a aircraft to the demands of the passenger. Whereas with airlines the much better choice. People can charter say a Falcon 2000 which costs passengers fits around their schedules.” around €4455 an hour or at the lower end, a very light jet which would Humphries believes that even in a time when businesses are tightonly cost about €1670 a hour.” ening their belts there is still room in the European aviation market The democratisation of the private jet industry through the availfor business aircraft. “I don’t think we compete with the commercial ability of lighter, cheaper aircraft, means business aviation operators airlines,” says Humphries. “Business aviation is all about getting to could soon be giving commercail airlines a run for their money. And your destination faster than the competition. If you are travelling as with many European airlines slashing routes, cutting staff and facing a team, to a destination that is not well served or to multiple destinapossible collapse, business aircraft could become the first choice for tions, then that is what business aviation is all about.” companies wanting to stay ahead of the competition. “The importance He adds that the financial woes affecting commercial airlines of time is what drives demand for business aircraft,” says Humphries. could create greater demand for business aircraft: “Airlines are cut“It’s for companies that need to be there in the right place and at the ting routes and services. So actually the need for business aircraft is right time to do business.”
www.bme.eu.com
Humphries.indd Sec1:133
133
1/6/09 13:25:20
ROUNDTABLE
Until recently, the European business aviation industry was growing at a rate of seven percent per annum, according to the European Business Aviation Association (EBAA). What were the main factors driving this growth? Bob Horner. Business aviation in Europe increased as a result of the overall growth of the global economy, including factors such as the expansion of charter organisations and the emergence of the Eastern CIS countries as important economies. With its comprehensive range of Learjet, Challenger and Global business aircraft, Bombardier was well positioned to benefit from the rise in European demand, which was also fuelled by the rise of the euro. James Philip Jordan. In the final analysis strong business aviation growth is always the direct result of strong economic conditions which yields strong profits and growth in personal wealth. Historically, growth in business aviation lags behind growth in corporate profits by 12 to 18 months. Many dozens of analyses have confirmed that this is the most significant variable that accurately predicts business aviation growth and decline.
Because the US and European countries have been about 18 months out of phase, Europe dominated total purchases in 2007 and 2008. This yielded a very strong euro which had a very positive effect on purchases in European countries. In addition, the significant expansion of the Russian economy and their massive investments outside the country did much to foster the boom as the need to fly to and from Russia became more essential. How will economic conditions in Europe affect business aviation operators? Shane O’Hare. These are undoubtedly very difficult times for business aviation, with European brokers reporting a 30 to 50 percent downturn in corporate market business compared with a year ago. But none of this changes the primary reason for business aviation. The equally significant fall in commercial airline traffic and consequent flight cancellations means that it is now becoming ever more difficult to complete timely business deals at destinations away from the main hubs, with many cities served less frequently than before, and some no longer served at all.
Once the preserve of company bosses, as well as the rich and famous, business aviation is increasingly being utilised by a wider spectrum of corporate travellers. BM tracks down three industry experts for their views on this burgeoning market.
134
www.bme.eu.com
AirTravel_RT.indd Sec3:134
29/5/09 14:46:19
BUS AIR INT ADS.indd 2
5/5/09 10:19:48
Business aviation in Europe is primarily a business tool both of large companies and governments, who represent some 80 percent of users. Royal Jet’s recently opened charter brokerage, based in Dubai, provides travel solutions sourcing appropriate aircraft for charter through a network of carefully audited operators. Already interEuropean bookings are showing a high level of uptake. The brokerage service is a key aspect of Royal Jet’s growth strategy and is in line with the company’s policy of increasing diversification into a range of complementary activities, which also include FBO (Fixed Based Operators) facilities, an aircraft management and acquisition consultancy, medical evacuation services and the core aircraft charter business.
will remain strong is that once business leaders experience our products they recognise both the direct and indirect benefits of travelling on a business jet. Only business jets can offer their passengers the most valuable reward – time. Business jets allow their passengers to maximise their schedules through increased direct flights, access to more airports that are closer to the end destination and eliminating wait times before boarding. Bombardier jets are designed as airborne
“The single best marketing tool business aircraft marketers have is the quality of scheduled airline service” James Philip Jordan
JPJ. As economic conditions weakened, demand for business aircraft weakened. Demand will increase as economic conditions are seen to be improving. In fact, many observers of the business aviation industry indicate that declining demand has already bottomed and anticipate increased retail sales by the end of the summer of 2009. Another favourable factor affecting purchases by EBAA members is the increasing requirements to travel to and from India and China, two of the most rapidly growing economies. BH. There is no doubt that corporate jet operators, like all businesses worldwide, are experiencing challenging times and the environment is changing fast. However, we are still seeing strong ownership and backlog from Europe. When the economy picks up, demand for business jet travel will follow suit. The challenge is really how do we best position ourselves to take advantage of the rise in demand when it occurs. How are business aviation operators competing against mainstream airlines who are increasingly improving their business class offerings? BH. A commercial business class flight and travelling on a business jet are two very different experiences. Part of the reason our industry
James Philip Jordan is the founding member of Business Air FBO and Business Air International Global Private Jets. Prior to aircraft sales, he was an aviation insurance specialist from 1988 to1993 and recently served a two-year term as Chairman of NARA (National Aircraft Resale Association). He continues to serve as member of its board.
136
offices, ensuring that productivity continues in-flight, in a fully functional environment that also ensures the privacy and secure setting required for confidential discussions and the comfort required for executives to arrive at their destination completely rested and refreshed – ready to take on the next assignment. To meet increasing demand, business jet charter models have adapted the concept of an airline model for the increasing number of travellers who want to benefit from business aviation, but aren’t ready to purchase their own aircraft. VistaJet and Jet Republic are European examples, while XOJet and Bombardier’s very own Flexjet operate in the US. By offering jet cards or even fractional ownership, these operators are capturing more and more people who would have otherwise used airlines flights. JPJ. The single best marketing tool business aircraft marketers have is the quality of scheduled airline service. Virtually every decision an airline wishes to implement is contrary to the desires of the travelling executive. The airlines want large aircraft packed with people flying to the fewest possible airports, the fewest number of times. The business traveller wants frequent service to nearby airports with lots of cabin room to work and relax. In summary, I doubt that you
Share O’Hare, President and CEO of Royal Jet Group, has over over 30 years of international aviation industry experience. O’Hare is an experienced global business strategist with an in depth range of specialisation skills spanning airline management operations, alliance management, services management and complex service brand and marketing knowledge.
Bob Horner, SVP of Sales at Bombardier, began his aviation industry career in 1978 with British Aerospace. He joined Bombardier in 1995 as Sales Director for Russia, UK and Europe and was appointed to his current position in February 2008. He is responsible for new and pre-owned Bombardier business aircraft sales worldwide.
www.bme.eu.com
AirTravel_RT.indd Sec4:136
29/5/09 14:46:29
BOMBARDIER AD.indd 1
18/5/09 11:27:14
have ever met anyone who does not desire to have their own private jet. The freedom and convenience private aircraft offer can never be overcome by commercial airlines. They can only compete against the cost of private ownership. SOH. The type of bookings we get are not comparable with those of mainstream commercial airlines as they fulfil a totally different need. Businessmen and businesswomen, and those on governmental business, appreciate easy access to a local airport, the elimination of wasted time and the benefit of direct routes and short sectors,
graphical location at the confluence of Asia, Europe and Africa also gives us advantage, both logistically and economically, in being able to service the demand for private aviation. When you add in the unseen costs of productivity, reduced waiting times, the possibility of flying to a business meeting and returning on the same day (usually not possible with scheduled airlines) and the confidentiality that comes with a private booking, then it often actually works out cheaper than sending executives on scheduled flights. So the private jet proposition is totally different from what commercial airlines offer. As well as the time savings, which are considerable when you compare what you would have to spend time-wise on a commercial flight being processed at the airport, having to fit your work schedule around the airlines’ schedules, not to mention your onward journey if the carrier’s destination airport is only a main hub and not near your intended destination, there’s also the privacy factor to consider as well as convenience.
“ When the economy picks up, demand for business jet travel will follow suit. The challenge is really how do we best position ourselves to take advantage of the rise in demand when it occurs” Bob Horner allowing more time to be devoted to actually getting business done. The elimination of ticket counters, baggage claim, airport crowds and waiting time all lead to a more pleasant and productive means of travel, as does knowing that a flight is far less likely to be cancelled. So, a business aircraft enhances the productivity of a company’s two most important assets: People and time. An airplane is simply a tool for doing business and the growing accessibility of private jet services has led to an increase in popularity over the past 10 years. In fact, the need for business aviation remains as strong as ever, which is why, after low cost carriers it is still the fastest growing segment in European aviation over the past decade. What is the typical profile of a business aviation passenger? Would you say the there has been a change in the types of passengers using these services? JPJ. For several decades there has been a very steady decline in business aircraft use only by very senior corporate officials. Today it is estimated that approximately 50 percent of passengers on private aircraft are middle management staffers, engineers, accountants, sales personnel. The utilitarian use of private aircraft by a vast array of noncorporate executives keeps staffing levels down, improves operating efficiency and greatly enhances employees’ loyalty. Most importantly, use of business aircraft in this manner is almost always cost effective once you factor in over-night stay costs, and reduced staffing benefits. Interestingly, restricting usage to only senior staffers is virtually never cost effective, just enormously convenient.
BH. The majority of our customers are corporate executives from both public and private enterprises. There are also a number of private individuals and some government clients as well. There hasn’t been a drastic shift in the profile of our clients per se, but it varies from region to region. For example, the Middle East is seeing a surge in charter operators, while in Europe, the majority of buyers are private or public companies. How good are the business aviation facilities and operating conditions at Europe’s airports? What improvements are needed? SOH. Our most popular hubs in Europe are London and Geneva, both of which offer private jet operators excellent facilities. JPJ. It’s all about geography, and politics. Because of customs, immi-
“An airplane is simply a tool for doing business and the growing accessibility of private jet services has led to an increase in popularity over the past 10 years” Share O’Hare
SOH. Given the current travel environment, private aviation is no longer viewed as a luxury for the elite few; it is a transportation necessity for corporate and governmental travellers alike. Although Royal Jet is Middle East based, nevertheless, Europe is a good source of business for us. All our African government business – of which we undertake a great deal – comes from European brokers and our geo-
138
gration and restricted real estate, European FBOs, in general, are not so good. TAG’s Farnborough operation is what European private jet owners deserve. BH. FBOs are an essential part of the equation when we’re looking at the advantages of business aviation. The convenience and timesavings of travelling by private jet would be minimised greatly if Europe’s business aircraft fl eet was not complemented by equally high-quality facilities. Overall, the current facilities for business jets in Europe are top-notch. They provide a seamless experience from the time a client picks up the phone to arrange their flight, to the time they touch down and are whisked off to their next meeting, hotel or home.
www.bme.eu.com
AirTravel_RT.indd Sec5:138
29/5/09 14:46:32
CATALOGUE PAGE BMEU:may09 28/05/2009 14:59 Page 139
Your World. Covered
MENA Edition
US Edition
Europe Edition
From the people you hire to the products you sell, if you’re in business, we’ve got it covered...
Business Management What business processes work? What are the proven, successful strategies for taking advantage of domestic and international markets? Business Management is about real, daily management challenges. It is a targeted blend of leadership and learning for key decision makers in government and private enterprise.
Also available for:
MENA US
Find out more: www.bme.eu.com
CXO Technology leadership is merging with strategic and financial leadership, and senior management is being called into a partnership for the future. CXO brings together a range of voices with one shared vision: to develop a strategy that considers business needs and technology’s role in moving your company forward.
NextGen Power & Energy A poll of 4000 utility executives posed the simple question: what keeps you up at night? The answers were costs, new technologies, ageing infrastructure, congested transmission and distribution, viable renewables and inadequate generation capacity. NextGen P&E covers them all.
Available for: Europec
Available for: US
Find out more: www.cxo.eu.com
Find out more: www.nextgenpe.com
Next Generation Pharmaceutical Approximately 50% of new drug development fails in the late stages of phase 3 – while the cost of getting a drug to market continues to rise. NGP is written by pharmaceutical experts from the discovery, technology, business, outsourcing, and manufacturing sectors. It is committed to providing information for every step of the pharmaceutical development path. Available for: Europe, US
Infrastructure Infrastructure provides insight on how developers can achieve critical objectives by integrating leading-edge solutions across their operations – helping them to make informed decisions about technology and operations solutions for all of their areas of responsibility. Available for: Europe, US Find out more: www.euinfrastructure.com
Find out more: www.ngpharma.eu.com
gdsinternational
www.gdsinternational.com
City Guide:feb08
29/5/09
14:47
Page 140
CITY GUIDE
140
Hong Kong As one of Asia’s most breathtaking destinations, Hong Kong is a hotspot for both business and pleasure. BM checks out what is on offer.
TIME: +8hrs GMT CURRENCY: Hong Kong Dollar POPULATION: seven million AVERAGE TEMP: 23°C
About Hong Kong has a population of seven million people, but at only 1108 km2 it is actually one of the most densely populated areas in the world. Renowned for its expansive skyline and natural setting, Hong Kong is also one of the world's leading financial capitals, and is a major business and cultural hub, having maintained a highly developed capitalist economy for decades.
CT FAST FA dogs and
mad midday ing ‘Only The say n go out in the ong: e K m g h n s Engli in Ho ords ginated sun’ ori rd wrote the w n Gu wa o y C a l D e n o N the Noo h has to g in rr ic wh refe way Bay, day in Cause ery day at mid v e d . re s fi e n bee lonial tim since co
Getting around Over 90 percent of journeys in Hong Kong are made on public transport, making it the most highly used network in the world. A tramway system covers the northern parts of Hong Kong Island, while across the Victoria Harbour, the Star Ferry service transports 53,000 passengers daily to and from the mainland. Elsewhere, the Peak Tram provides vertical rail transport between Central and Victoria Peak, and in the Central and Western districts there is an extensive system of escalators and moving pavements, providing access to Hong Kong’s steep and hilly terrains.
From the airport Hong Kong International Airport is the leading air passenger gateway and logistics hub in Asia, serving more than 47 million passengers each year. The airport is one of the most accessible in operation today, designed for maximum convenience with moving walkways and an automated people mover allowing quick and easy movement throughout the building. The North Lantau Highway on Lantau Island connects the airport to inner Hong Kong; it can also be reached via the Airport Express, a dedicated rail link, and bus, taxi and ferry services.
140
www.bme.eu.com
City Guide:feb08
29/5/09
14:47
Page 141
See The Man Mo Temple is one of the most important in Hong Kong. It was built in 1848 and is named after Man, the god of literature, and Mo, the god of martial arts. Elsewhere, Wong Tai Sin Temple is the most well known Taoist temple in the whole of Hong Kong, while a trip to Lantau Island brings visitors to the largest monastery. The 100-foot tall Buddha sits atop the 260-step summit. Similar stunning views can be had by taking a trip in a cable-pulled train up Victoria Peak – named after British monarch Queen Victoria. Hong Kong’s most famous hotel is The Peninsula so after all that traipsing around make sure you drop by for afternoon tea accompanied by a string quartet.
CT FAST FA l name
Relax
ia ng’s offic Hong Ko ngue-twisting to ial is the ng Spec Hong Ko Region, or trative Adminis Kong SAR. Hong
Hong Kong is a real shopper’s paradise. Areas throughout Hong Kong Island, Kowloon and the New Territories feature stylish malls, department stores, open-air markets, and well-designed shopping mega-malls that cater to every taste and budget. Those looking to haggle and score a bargain on anything from electronics to antiques should head to Stanley Market. After maxing out your credit card on designer goods why not try winning it all back on the horses? Hong Kong is obsessed with its racing and the spectacular Happy Valley racetrack plays host to some of the world’s finest flat racing. Entry is just HK$10 (€1). And after a night on the town with your winnings drag yourself down to Hong Kong Park for an early morning t’ai chi lesson.
FAST FA C
T
Eat Tien Yu For Hong Kong’s best dim sum meal with a view, head to this multi-level contemporary restaurant on the Peak. Dim sum HK$43-54 (€4-€5)
Hong Ko ng b 8000 sk oasts over y That’s m scrapers. o other cit re than any y and dou in the world ble the n in New Y umber ork.
Yan Toh Heen One of Hong Kong’s top Cantonese eateries, this elegant restaurant offers a daily changing menu, listing two-dozen varieties of dim sum. Dim sum HK$43-64 (€4-€6)
Sleep Four Seasons Hotel Hong Kong Overlooking Victoria Harbour and the financial district, this elegant property redefines luxury and excellence with exceptional accommodation that is ideal for business travellers. 399 rooms available. Deluxe harbour rooms from HK$7780 (€720) Kowloon Shangri-La Hotel This property is conveniently situated in the Tsim Sha Tsui shopping district with easy access to the Hong Kong skyline, financial district and busy Victoria Harbour areas. Over 700 rooms available. Double rooms from HK$3372 (€312)
www.bme.eu.com
141
The Knowledge ED:feb08
29/5/09
14:45
Page 142
THE KNOWLEDGE
142
Raise your glasses Clinch that big deal in style at Europe’s top hotel bars.
The Lobby Bar One Aldwych, London With 63 cocktails to choose from – including 22 martinis – you won’t go thirsty at One Aldwych’s Lobby Bar. But people watching is where the real fun starts at London’s most glamorous drinking spot. This stunning lofty space featuring modern sculptures and vast flower arrangements attracts the city’s social elite. It has been named one of the world’s top five hotel bars by the Sunday Telegraph and no other London bar has succeeded in knocking it off the top spot so far.
The Piano Bar Hotel Crillon, Paris The Grande Dame of the Paris hotel scene, Hotel Crillon offers old school charm and glamour by the bucket load. And its hotel bar, which was designed by the sculptor César and decorated by Sonia Rykiel, is no exception. With cocktails starting promptly at six, it also offers a selection of rare cognacs and armanacs for the more discerning drinker. A pianist provides the entertainment every night and during the day snacks are served.
142
www.bme.eu.com
The Knowledge ED:feb08
29/5/09
14:45
Page 143
Tom’s Bar The Augustine, Prague
Mandarin Bar Mandarin Oriental, Munich Award winning bar chef José Hernandez presides over proceedings at Munich’s Mandarin bar – creating bespoke cocktails for those who can’t pick from the vast selection on offer. Designed with comfort in mind, the bar’s overstuffed sofas and resident pianist make it the perfect place to relax after dinner and the ideal icebreaker for business meetings.
There can be few bars with as rich a history as Tom’s Bar at the five star Rocco Forte collection hotel, The Augustine. Situated on the site of a 13th century monastery, where several practising monks still live, the 101-room hotel is close to Prague Castle. Tom’s Bar is housed in the monastery’s former barrel-vaulted hall and features restored 19th century baroque frescoes. On sunny days cocktails are served al fresco on the cloister terrace.
Saphir le bar Fairmont, Monte Carlo Window seats are a must at Saphir le bar, which features breathtaking views over the azure waters of the sea below. On a clear day it’s possible to see both France and Italy at once and with the bar opened 24 hours a day guests can enjoy the spectacle from sunset to sunrise. A light menu is served and cocktails are the bar’s speciality.
www.bme.eu.com
143
Gadgets ED:feb08
29/5/09
14:30
Page 144
OBJECTS OF DESIRE
144
Technology for the mobile executive A glance at some of the gadgets designed to make your life easier.
<<< Sony Reader Digital Book If you are fed up with lugging dog-eared paperbacks around with you on holiday Sony could have the answer. The Reader Digital Book holds about 160 eBooks or hundreds more with optional removable memory cards. Its portable size makes it the perfect travel companion, allowing you to read a variety of books whenever and wherever you want. With thousands of eBook titles available at the eBook Store from Sony, you can choose to download new releases, classics and popular book titles. It’s available in silver, dark blue and red. Despite its advantages, critics argue that it takes the romance out of physically reading a good book.
Desirability rating >>> Nokia E75 The latest handset to roll off the Nokia production line is the stylish E75. First impressions are that this is a solidly-built phone with a fairly slim design (14.4mm thick), which is all the more impressive when you discover the slide-out, full QWERTY keyboard concealed underneath. The 139-gram E75 offers the usual features like internet access and email on the move, a 3.1MP camera, MP3 player, video calling, VoIP capabilities and Wi-Fi, whilst the GPS receiver is a handy addition. The vibrant 2.4-inch screen displays 320x240 pixels.
Desirability rating <<< Archos 5 60GB Relatively unknown manufacturer Archos had a long history of producing media players – long before the now ubiquitous iPod was just a twinkle in Steve Jobs’ eye. Its latest model is the Archos 5 Media tablet with a great 4.8-inch touch-screen display that fills the back of the unit. The basic model comes with a somewhat stingy 60BG, although there is a more expensive 250GB version. The built-in Wi-Fi and software means you can stream content from your home computer. Splash out on the additional DVP station accessory and you will be able to record your favourite programmes straight to the hard drive; perfect for catching up with re-runs of Dallas while on the road.
Desirability rating: >>> Lumix DMC-FX48K Panasonic has been churning out some great digital cameras of late, and its latest Lumix model – the DMC-FX48K – doesn’t disappoint. The 12.1-megapixel camera features a 25mm ultra-wide-angle Leica DC lens and a powerful 5x optical zoom, yet its slim profile makes it convenient to slip into a pocket. A welcome added bonus is the ability to record High Definition (1280 x 720p) motion images at 30 fps. And, using the DMW-HDC2 component cable (optional accessory), the video can output directly to a television for easy playback.
Desirability rating
144
www.bme.eu.com
COURION AD.indd 1
5/5/09 10:23:07
CENTRAL TEL ADS.indd 1
5/5/09 10:20:12