CXO 13

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HANDCUFFS AND HARD DRIVES On the beat with Met Police CIO Ailsa Beaton PAGE 84

LOYALTY BEYOND REASON Saatchi & Saatchi's Simon Francis reveals how to get ahead in advertising www.cxo.eu.com • Q3 2009

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SPECIAL REPORT: SIX OF THE BEST The superbrands beating the economic gloom PAGE 38

SPACE ODYSSEY Why Sir Richard Branson hopes to boldly go where no other entrepreneur has gone before PAGE 26

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COVER CXO EU13:july08

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HANDCUFFS AND HARD DRIVES On the beat with Met Police CIO Ailsa Beaton PAGE 84

LOYALTY BEYOND REASON Saatchi & Saatchi's Simon Francis reveals how to get ahead in advertising www.cxo.eu.com • Q3 2009

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SPECIAL REPORT: SIX OF THE BEST The superbrands beating the economic gloom PAGE 38

SPACE ODYSSEY Why Sir Richard Branson hopes to boldly go where no other entrepreneur has gone before PAGE 26

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ED NOTE CXO:july09 13/08/2009 10:37 Page 5

FROM THE EDITOR 5

Out of this world Sir Richard Branson’s latest venture is his riskiest yet, but it has infinite potential .

D

o you have €140,000 to spare?

Because that’s just about all you need to become one of the first space tourists to board Virgin Galactic’s historic flights to space.

When I began researching Sir Richard Branson’s most daring venture yet for this month’s cover story, the first thing that struck me was the simplicity of it all. Joining the Virgin Galactic adventure is a little like making a hotel reservation; you just log onto the website, click on book, fill in your details and wait for somebody to get back in touch. The aim of Virgin Galactic is to make space accessible and judging by the criteria for budding astronauts, it has certainly lived up to its promise. Just three days of training is required for those who want to take part and although health checks are compulsory, they are designed to ensure most people are eligible. But this inclusivity is not driven by al-

“Creativity is not something that is budget related. But there's a different style emerging and clearly wanton expenditure is not in” Simon Francis, CEO, EMEA, Saatchi & Saatchi (Page 32)

truism on Branson’s part. He sees this as a highly lucrative business opportunity with potential way beyond just flying tourists to space. When I interviewed Virgin Galactic president Will Whitehorn he told me that the company believes the space launch system and spacecraft it is developing could be used to carry out scientific research, such as investigating how to produce solar power or store computer servers in space.

He says that although initially space tourism will provide for the bulk of the company’s revenue, scientific research could eventually account for over 50 percent. It’s a good thing Branson and his team aren’t relying solely on space tourists to get this project off the ground because although 300 people have so far bought tickets to fly, the company is currently only selling a maximum of six tickets a month as the economic downturn makes space travel a luxury few can afford. But the point behind this and many of the other

seemingly risky business ventures Branson has launched, is that it isn’t today that matters, but tomorrow. His success has been built on the ability to foresee what the next big money makers will be. Currently, in the UK alone, 50,000 people work in space tourism ventures. That number is set to grow as scientists seek to look outside the Earth’s atmosphere for energy, communications and transport solutions. Today Virgin Galactic is Europe’s only commercial space operator but if it stays that way it could find itself rocketing to new heights as the leader of the European space industry.

“The biggest challenge for us is to make the Police Service the best it can be with shrinking resources” Ailsa Beaton, CIO, Metropolitan Police Service (Page 84)

“Business and IT, at this stage and in this century, must be intimately close. It should be one entity” Alex Pilar, supply chain CIO, DHL (Page 110)

Diana Milne, Editor

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CONTENTS:aug09 13/08/2009 10:33 Page 7

CONTENTS 7

26

58 Betting on a sure thing Betting exchange Betfair rose from the ashes of the dot.com crash and quickly became a red hot favourite among shrewd punters. CXO goes behind the scenes and meets CTO Tony McAlister

Space Odyssey Could Sir Richard Branson become the first person to put tourists in space? Find out in this exclusive interview with Will Whitehorn, President of Virgin Galactic

32

84 Handcuffs and hard drives CXO pounds the beat with Metropolitan Police CIO Ailsa Beaton and discovers how she is putting technology on the frontline

Loyalty beyond reason Saatchi & Saatchi dominates the world advertising scene and has the power to transform ordinary brands into global success stories. We hear from CEO for EMEA, Simon Francis

CONTENTS:aug09 13/08/2009 10:34 Page 8

CONTENTS 8

96

Werner Vogels

Money and morality

38

80

ASK THE EXPERT 44 Jean-François Scardigli, MetaWare and Richard Pegden, Micro Focus 74 Deborah Clark, Thawte, Inc

54 Sky-high tech thinking Taking technology to new heights with Lufthansa’s Dr Christoph Klingenberg

66 Phish tales Dave Jevans on the fight to reduce phishing crimes

38 Six of the best

72 Meet the gatekeeper

We profile six businesses that are booming despite the credit crunch and reveal why their customers keep coming back for more

With huge pressures on the shoulders of today’s security chiefs, CXO seeks the advice of Paul Wood, information security aficionado and Aviva’s CISO

EXECUTIVE INTERVIEWS 64 Herman Meuldermams, Escrow Europe 78 N. Ganapathy Subramaniam, TCS Financial Solutions 90 Matthew Light, Tempura Communications 93 Fredrik Sjostedt, VMware 114 Philip Edwards, Draka 122 Neil Rasmussen, Schneider Electric 130 André Bonvanie, NewsGator

46 Adapting to change Alan Roger outlines the importance of modernising outdated IT applications

48 Going public HMRC CIO Deepak Singh has one of Europe’s toughest technology jobs. In this exclusive interview we discuss his key projects, the impact of the recession and how he sees the role of CIO evolving

ROUNDTABLE DISCUSSION 102 Business Process Management

76 Islamic finance comes of age How Shariah-compliant banking is penetrating western financial institutions

96 King of the jungle

INDUSTRY INSIGHT 82 Haitham Abdou, ITS

Why Amazon’s CTO Werner Vogels is focused on transforming the internet behemoth into the world’s most customercentric organisation

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110 A logistical challenge

REGULARS

The complexities of running DHL’s IT with supply chain CIO Alex Pilar

116 In with the new Sanofi-Aventis CEO Chris Veiehbacher on mergers, mega trends and why he’s optimistic about pharma’s future

124 Building for the future, today

Objects of desire

By EU Environment Commissioner Stavros Dimas

126 A change of focus Jeff Hayzlett, CMO of the undisputed king of photography, Kodak, describes how his company best communicates with its customers

132 A social approach

By CRM expert Michael Thomas

Bangkok

14 The Brief 16 Insight 24 In My View 134 Leadership 136 Business Doctor 138 Books 140 City Guide 142 The Knowledge 144 Objects of Desire Leadership

Sky-high tech thinking

Chris Veiehbacher

54

116 110

A logistical challenge

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Park Hotel, Bremen, Germany 15 - 17 September 2009

Chairman/Publisher SPENCER GREEN Director of Projects ADAM BURNS Editorial Director HARLAN DAVIS Worldwide Sales Director OLIVER SMART

Next Generation Pharmaceutical European Summit 2009

Editor DIANA MILNE Managing Editor BEN THOMPSON Associate Editor JULIAN ROGERS

The Next Generation Pharmaceutical Summit is a three-day critical information gathering of C-level technology executives from the pharmaceutical industry.

Deputy Editors NATALIE BRANDWEINER, REBECCA GOOZEE, STACEY SHEPPARD, MARIE SHIELDS, HUW THOMAS

Creative Director ANDREW HOBSON Design Directors ZÖE BRAZIL, SARAH WILMOTT

A Controlled, Professional & Focused Environment The NGP Summit is an opportunity to debate, benchmark and learn from other industry leaders.

It is a C-level event reserved for 100 participants that includes expert workshops, facilitated roundtables, peer-to-peer networking, and coordinated technology meetings.

A Proven Format This inspired and professional format has been used by over 100 CIOs and CTOs as a rewarding platform for discussion and learning.

Associate Design Directors MICHAEL HALL, CRYSTAL MATHER, CLIFF NEWMAN Assistant Designer ÉLISE GILBERT Online Director JAMES WEST Online Editor JANA GRUNE

Managing Director EMEA OLIVER STEBBINGS Project Directors MARC BAKER, HELEN JACKSON Sales Manager GAVIN WILLIAMS Sales Executives RAY DAVIES, JOE HUNTER, IAIN GETHIN, JESSICA RICHARDS, LEWIS RINGHAM

Finance Director JAMIE CANTILLON Production Coordinators HANNAH DUFFIE, LAUREN HEAL,

“

A well organised and productive meeting with good topics and open discussion – worth the effort! Dr. Mark Burfoot – Executive Director, Pfizer

”

RENATA MLYNARCZYK Director of Business Development RICHARD OWEN Operations Director JASON GREEN Operations Manager BEN KELLY

“

This was a fantastic opportunity to meet our target market in one-on-one meetings, where we could listen to the customers’ challenges. A sort of voice of customer meets speed-dating event Mark Collins – Senior Product

”

Subscription Enquiries +44 117 9214000. www.cxo.eu.com General Enquiries info@gdsinternational.com (Please put the magazine name in the subject line) Letters to the Editor letters@gdspublishing.com

Manager for Informatics, Thermo Fisher CXO 4th floor, 3 Callaghan square, Cardiff CF10 5BT, UK Tel: +44 (0)2920 729 300. Fax: +44 (0)2920 729 301. E-mail: cardiff@gdsinternational.com

Legal Information

Find Out More Contact NGP at +44 (0) 2920 667 422 www.ngpsummit.eu.com

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 CXO.

GDS International GDS Publishing, Queen Square House, 18-21 QueenSquare, Bristol BS1 4NH. +44 117 9214000. info@gdsinternational.com

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UPFRONT CXO 13:25 June

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UPFRONT THE BRIEF

14

PANIC STATIONS As tens of thousands of workers across Europe are struck down with swine flu, experts predict the pandemic could have a detrimental effect on businesses.

As soon as business leaders had started to tentatively consider the notion that Europe could be emerging from the economic battering of the recession, they were hit by another painful blow – swine flu (H1N1). There were

nearly 18,000 cases confirmed in Europe as of mid-July but the true cost of the pandemic to industry could be astronomical with infected staff housebound for up to a fortnight. And according to the EU Health Commissioner Androulla Vassilou, 60 million people across Europe will need priority vaccination against H1N1.

In the UK, which outstrips the rest of Europe for the number of confirmed cases, the British Chamber of Commerce forecasts that one in eight employees could be

absent from work with swine flu by could be exacerbated by the arrival the end of August. Director General of winter and a second wave of reDavid Frost said: “If the projectported cases. This could paralyse ed figures for the number small business and leave of people contracting the bigger players seswine flu come to verely under-staffed. pass, companies will On top of this, people across Europe will need be hit by intense pethere are reports sugpriority vaccinations gesting some emriods of staff abagainst H1N1 sence. Both supply ployees are using the and demand could be imvirus as an excuse to suppacted and businesses need to plement their holiday allowance. be prepared.” Although in the past Indeed, employers suggest that month the number of infections has these absentee workers are causing dipped, the fear is that the situation more disruption that the virus itself.

60 million

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UPFRONT

THE BRIEF

FLU OUTLOOK

15

Reported cumulative confirmed cases of H1N1 in EU and EFTA countries as of 22 July

NEWS IN PICTURES

Disused cars stack up at a car recycling centre near Leverkusen, Germany. The socalled ‘bangers for cash’ scheme has provided a shot in the arm for the country’s ailing auto industry; new car registrations were 30 percent higher in the first seven months of this year compared to the same period in 2008

Confirmed cases in EU/EFTA countries 1 10 100 1000

10, 000 Source: ECDC situation report

The UK’s Employment Law saviour. Despite symptoms of Advisory Service told the fever, cough and fatigue, many Telegraph newspaper that it startpeople are still able to work from ed receiving complaints from emhome by computer and still have ployers as soon as a self-diagnosis access to their email and the comwebsite was set up last month. pany’s network. It’s not ideal but Some 1000 complaints have been it’s better than key workers missing received from managers confrom work for up to two weeks. Sue cerned that staff have exploited Hill, Managing Director of a small the situation to have an business told computextra week off work. ing.co.uk that compaExperts predict “Because the emnies should keep phasis has been assessing the situaon not going to tion and planning of the European your local GP but ahead for absenworkforce could be absent in winter using websites to teeism. “We’ve made assess the infection the facility for most and the risk to others inpeople to work from home stead, those who stay at home are available with virtual private netnot going to need a doctor’s note work connections and web mail. or have too many people calling on It’s important that my staff can them to see how they feel,” Peter work from home,” she said.

Mooney, the service’s Head of Employees still at work are advised Consultancy told the newspaper. to wash their hands often with soap But while offices and factories and water, especially after coughcould soon be devoid of staff (both ing or sneezing, and to avoid honest and dishonest absentees), spreading germs by touching their technology could be industry’s eyes or mouth.

A jobseeker trudges out of a UK employment centre. At least 200,000 foreign nationals will leave Britain every year as job opportunities become increasingly scarce, research suggests

It’s all hands to the pump as French oil and gas major Total records a 54 percent nosedive (€1.7 billion) in profits for the second quarter. Falling oil prices and a sharp decline in global demand have hit the industry hard

12%

Lord Sebastian Coe and British diver Tom Daley survey the progress at London’s Olympic Stadium. It’s three years until the opening ceremony and construction work on the centrepiece of the event is ahead of schedule. After the games the 80,000-seater stadium will be downgraded to 25,000 seats

UPFRONT CXO 13:25 June

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UPFRONT EUROPEAN NEWS

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GERMANY

FRANCE

There is hope that the German economy is on the road to recovery following the news that the country enjoyed a seven percent increase in profits in June. The figures, released by Germany’s Federal Statistical Office, showed the biggest rise in exports since September 2006 when they increased by 7.3 percent. Imports to Germany were also slightly up in June, rising by 6.8 percent compared to the previous month

French media giant Publicis has won the battle to acquire Razorfish, the second largest digital advertising agency in the US. The deal means it will acquire around a quarter of its revenue from digital platforms following the purchase of the €371 million business from Microsoft. Publicis, which owns Saatchi & Saatchi, acquired Digitas in 2007 and formed a partnership with Google last year.

Analysts believe it is now set to dominate the global digital advertising market. It saw off competition from WP and Dentsu of Japan to buy Razorfish.

The world’s largest utility company, E.ON has seen the first signs that demand for energy is stabilising following a major slump.

It has increased its 2009 outlook after announcing higher than expected first half profits.

The company now sees its full year net income falling five to 10 percent rather than 10 percent as interest payments and taxes will be lower than expected.

The company’s profits doubled between May and August due to the success of its energy trading unit. It has announced that its Deputy Chief Executive Johannes Teyssen would take over as Chief Executive following the departure of Wulf Bernotat in May.

UK The UK government has signed a deal to recover lost tax from Britons holding bank accounts in Liechtenstein. HM Revenue and Customs believes up to 5000 British investors have an estimated €3.4 billion stashed away in accounts held in the alpine tax haven.

Under the terms of the deal, investors will be offered the chance to volunteer details of their deposits in return for penalties. These will be capped at 10 percent for tax evaded over the past 10 years.

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UPFRONT

EUROPEAN NEWS

17

RUSSIA

NORWAY

SWITZERLAND

The latest Russian Federal State Statistics reveal the country’s economy shrank by 10.9 percent in the second quarter of this year. This exceeded the contraction of 9.8 percent that the country experienced in the first quarter. Russia, which in the past has relied heavily on oil exports, now expects its economy to shrink by as much as 8.5 percent this year.

Seven Norwegian towns have sued Citigroup for €140 million in losses after they purchased complex mortgage backed investments from the bank. They claim the purchases brought them to the brink of financial collapse after they lost tens of millions of dollars and all of their original investment in the funds.

The lawsuit is being brought

by Brenmanger, Hattfjelldal, Hemnes, Kvinesdal, Narvik, Rana and Vik which claim, in addition to a now defunct brokerage, to have lost €81 million collectively.

Zurich-based recruitment firm Adecco has reported a second quarter net loss of €147 million compared to a net profit of €212 million for the same period last year.

The figures reflect the sharp decline in the economy and consequently the job market in Europe. Adecco’s CEO Patrick de Maeseneire said the company has put in place a cost cutting exercise that has seen it cut its costs by 21 percent so far. He added that the company had set aside a further €40 million for cost cutting this year. Meanwhile it has agreed to buy the British retail company Spring Group PLC for UK£108 million.

Food giant, Nestlé, has announced disappointing sales results for the first quarter of the year, forcing it to lower its 2009 outlook. It achieved first half organic sales growth of just 3.4 percent. Originally organic sales growth outlook for 2009 was five percent. It has now been dropped to around 4.3 percent.

The firm’s Chief Financial Officer Jim Singh said the firm expects results to improve in the second half of the year.

UPFRONT CXO 13:25 June

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UPFRONT COMPANY NEWS

TWITTER IN A

18

TWIST

Twitter is consulting its lawyers after hundreds of documents were hacked into and published by a number of blogs, including TechCrunch. “We are in touch with our legal counsel about what this theft means for Twitter, the hacker and anyone who accepts or publishes these stolen documents,” said Twitter’s Biz Stone. In a blog posting he wrote, “About a month ago, an administrative employee here at Twitter was targeted and her personal email account was hacked.”

He continued: “From the personal account, we believe the hacker was able to gain information which allowed access to this employee’s Google apps account which contained docs, calendars and other Google apps Twitter relies on for sharing notes, spreadsheets, ideas, financial details and more within the company.”

MIND THE GAP

tributors to the skills shortage was the industry’s inability to attract students to the Despite the recession, the European conprofession: struction industry is still suffering from a “Construction has been notoriously bad critical shortage of skills, with 77 percent of at attracting students and other new entrants, professionals within the industry which has exasperated the industry’s claiming this will hinder the seclong-term skills development. tor’s development. The UKThere is no denying the imbased Chartered Institute of portance of graduate and Building’s third annual of construction apprentice recruitment as professionals said skills survey revealed that these employees represent their company had almore than three-quarters of the future of the industry. ready made construction professionals Over three-quarters (76 perredundancies believe there is a lack of skills. cent) of all respondents felt apThey said they felt the shortage is prenticeships should be mandatory largely due to companies being unable to on public projects, which would help to enemploy workers. A further 54 percent courage the employment of apprentices. said their company had already However, economic problems are made redundancies. forcing many companies to reMichael Brown, Deputy cruit fewer graduates and to Chief Executive of the cut the number of apCIOB, said one of prenticeships – just the biggest conto survive.”

54%

FAST FACT THE RESULTS ARE IN

Banking giant HSBC was fined

€3.5 million

in July for data security failings and for not having adequate controls in place to protect customer details

AUTOMOTIVE

On the CXO website (www.cxo.eu.com) we asked: Which industry will wriggle free of the recession first?” These are the results:

2%

CONSTRUCTION

23%

BANKING

48%

RETAIL MANUFACTURING

23% 3%

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UPFRONT

COMPANY NEWS

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MANAGEMENT SOLUTIONS

IT CHIEFS CAN’T BE BOTHERED WITH PASSWORDS

Latest integrated project and portfolio management solution announced

IT Security professionals admit that they know they should as they contain they are suffering from password fatigue sensitive and confidential information. when it comes to using their mobile de- Surprisingly, IT professionals are only vices, which leaves their data exposed to marginally better at using passwords personal and corporate identity theft if than the general population, with the these devices were to fall into the survey discovering 40 percent of wrong hands. That’s accordall users don’t bother with ing to a survey released passwords on their motoday by endpoint data bile phones. “It is protection specialists alarming to note that of all users don’t CREDANT the very people who bother with Technologies, who conare responsible for IT passwords on their mobile phones ducted the ‘mobile usage security are not much survey’ amongst 227 IT better at protecting the professionals with the majority information on their busidrawn from companies that employ ness phones than most of their comore than 1000 people. Thirty-five per- workers, who don’t necessarily know any cent revealed they just don’t get around better,” says Andrew Kahl, AVP of to using a password on their business Operations and co-founder of phones and smartphones, even though CREDANT Technologies.

Advanced Management Solutions, producers of the popular project planning tools Schedule Publisher and AMS REALTIME Projects and the AMS REALTIME Solution, have released the latest version (7.1) of their flagship product AMS REALTIME Enterprise. This flexible integrated project and portfolio management solution supports any organisation’s processes and projects.

In these days of fluctuating fortunes, organisations must gain and maintain control of their portfolio of projects. Executive decisions need to be based on trustworthy facts. Programme/project managers need tools to help them control and manage their projects effectively and to keep project plans up-to-date to reflect the progress being made. Team members working on projects need clarity about what they should deliver, and a simple way of reporting progress to project managers. Resource managers need to ensure that their staff are fully utilised and manage overloads so that projects are not adversely affected.

AMS REALTIME Enterprise Version 7.1 efficiently joins up the steps in your processes. It enables team members to update progress on their tasks, progress information to update the project manager’s project plans, project managers to adjust and reschedule their project plans, resource managers to manage staff overloads and ensure that project managers have the resources they need, and executives to see an up-to-date dashboard view of their portfolio of projects. AMS REALTIME Enterprise’s well designed database, driven by easy-to-use integrated applications, enables the slicing-and-dicing and summarisation required to support decision making for all the people involved in your organisation’s projects and processes.

40%

The sorts of information that IT professionals are storing on their smartphones and mobiles, many of which are totally unprotected with a password, include: Passwords & PINs

1%

Photos Credit card information

4%

Personal diary Diary appointment & meetings Bank account details

5%

Personal emails Business emails

7%

Please visit www.amsrealtime.com or call +44 (0)1753 607641 for more information or a demonstration (face-to-face or held via Webex).

Personal names & addresses Business names & addresses

12% FAST FACT

2hours The time microblogging site Twitter was offline in August following a Denial-of-Service attack by hackers

12% 16% 23% 66% 80%

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UPFRONT COMPANY NEWS

20

WHERE DIGIT-ALL GO WRONG? EU officials have warned that a “second digital divide” is opening up between Europe and Asia.

According to the European Commission, Europe risks losing its competitive edge in the information and communication technology market, after they found that Asia's economies were moving far quicker than Europe in both the development of wireless broadband and fibrebased networks. The Commission found that leading Asian economies, such as Japan and South Korea, are investing more into fibre broadband networks, which can run up to ten times faster than old, copper-based ones, and that the US dominates “the new interactive web habitat, especially blogs and social networks”.

Many countries in Europe, including Britain, were seen as pioneers when it came to rescuing the economy for so called “old industries”, but now it would seem that they are falling behind in the newer, digital markets. European Commissioner for the Information Society, Viviane Reding, said that Europe must establish a new “digital agenda” to help narrow the widening gaps.

According to the Commission, older, economically inactive and less-educated people remain excluded from the ‘digital age’. Despite notable problems which contribute to this “digital divide”, the Commission says that there have been significant digital advances in the past few years. It notes that 56 percent of Europeans were regular internet users in 2008, an increase on previous years, and that two-thirds of Europeans under the age of 24 use the internet every day.

If they seriously want to close the gap between themselves and Asia, the EU must help out countries such as Romania, Bulgaria and Greece, where internet use is below 35 percent.

Reding hopes to complete work on a new strategy for the development of Europe’s digital sector in time for EU leaders to approve it at either at their summit next year.

NEW CHAIRMAN APPOINTED The world’s biggest mining company, BHP Billiton, has appointed Jas Nasser, the former Ford CEO, as its new Chairman.

Nasser, 61, will replace Don Argus when he retires

early next year. Nasser, who worked for Ford for 33 years, joined the BHP Billiton board as a non-executive director in 2006 and is also a member of the board’s Risk and Audit Committee.

STREAMLINING COMMUNICATIONS Interoute recently became the first European service provider to supply Session Initiation Protocol (SIP) trunking to Microsoft Office Communicator Server (OCS), a platform for presence, instant messaging, conferencing, and enterprise voice for businesses. Microsoft OCS streamlines communications for businesses looking to connect their employees more effectively by enabling them to find and communicate with the right person, when they want, from the applications they use most.

By connecting Microsoft Office Communicator, Server R2 to Interoute’s panEuropean network via SIP trunking, enterprises can move straight to unified communications and VoIP, without having to discard their previous investment in PBX platforms or embark on expensive migration projects. Interoute pioneered its integration

with the Microsoft Unified Communications suite three years ago, integrating VoIP with Microsoft’s Live and Office Communications Servers (LCS and OCS) and offers Direct Dial numbers in 47 Countries. Interoute’s panEuropean network currently carries 500 million VoIP minutes each month for wholesale carriers and enterprises.

Interoute One, Interoute’s voice offering, provides a cost effective and flexible VoIP solution. All incoming and out going phone calls between offices and business partners who are using the OCS platform are free.

Enterprises can also benefit from dramatically cheaper telephone calls from and to virtually any communications device. Businesses can even avoid international roaming charges on all other calls, enabling international communication at a fraction of the price of traditional telephony. www.interoute.com

UNEMPLOYMENT UNDER THE MICROSCOPE

Eurozone unemployment stands at 14.9 million This is a rise of 3.17 million since June 2008 The number of people out of work rose to 9.4% in June – the highest in 10 years Spain holds the top spot with 18.1% unemployment The highest youth jobless rate is 6.3% in the Netherlands Source: Eurostat

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UPFRONT

COMPANY NEWS

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YOU CANNOT VIRTUALISE IN A VACUUM

YOU CAN QUOTE ME ON THAT

“Virtualisation is a proven soft- means recognising that problems ware technology that is rapidly will arise that cross typical IT bartransforming the IT landscape and riers, requiring that members fundamentally changing the way from different teams work together. The biggest inhibitor to comthat people compute.”

Factors such as consolidation, parable projects, like successful cost savings, dynamic provision- application deployments, is not the technology per se, but the ing, and migration are driving people and processes most IT shops to experthat develop and iment with some deliver the whole The form of virtual goal is project. machine product The goal is today. Gartner virtualisationresearch sug- ready IT network ready IT netand infrastucture gests that the work and major economies infrastructure – of Western Europe lag something built to be fluid, only behind the US in their intention to implement server vir- dynamic, and provisionable or, in tualisation but, by the same token, other words, immensely agile and we are some way from seeing full greatly to your company’s benefit mainstream adoption in this re- in terms of both cost and scalabilgion. We are feeling our way in ity.

“To meet our clients’ business partial darkness in many ways.

We know that there are clear ben- requirements, we need to be able efits to be had, but proof of con- to scale up and scale down very cepts and lab experimentation are quickly with no disruptions,” says Pat O’Day, Chief Technical only indicative on certain levels.

For all of their benefits, virtu- Officer at BlueLock. “The only al machines also add complexity, way we can do that is with the arscale, and management challenges. chitecture we’ve built using Planning to avoid showstoppers VMware and F5 BIG-IP LTM.”

“We are in turbulent times, volatile and uncertain. But we continue to steer a steady course through choppy waters” BP CEO TONY HAYWARD delivers his assessment on the economy after announcing a 53 percent slump in profits

virtulalisation

“It’s a win-win deal from my perspective” Microsoft CEO STEVE BALLMER confirms the landmark partnership that will allow Microsoft's Bing search engine to be used to power Yahoo’s search function

For more information, contact Nick Bowman, EMEA Corporate Communications Manager at F5 Networks, on 44 (0) 1932 582098 or go to www.f5.com 1 VMware, www.vmware.com/virtualization/ 2 Gartner, User Survey Analysis, Server Purchasing Plans, August 2007

FAST FACT

The total number of credit cards issued globally rose to

6.8 billion last year

“The monthly cost of the battery, plus the electric charge, will be less than the cost of gasoline” CARLOS GHOSN, CEO of Nissan, speaking at the launch of the Japanese auto manufacturer’s first electric car

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UPFRONT COMPANY NEWS

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BRANSON GOES GREEN Mega-rich entrepreneur Richard Branson looks as if he might be about to turn Virgin into a mean, yet green, moneymaking machine.

He has started the Virgin Green Fund and has already invested a reported €50 million of his own money into the project, and has now turned his attention to fundraising in order to add to the €170 million already in the green-kitty.

Branson’s green enterprise is defying the global economic downturn, reaching its current total through a panel of institutional investors and Branson himself.

The fund will eventually be used to invest in renewable energy projects. Critics of Branson accuse him of hypocrisy, because of the fact that he owns an airline, a socalled “dirty business”, while simultaneously campaigning for the environment. However, in response Branson has said, “We shouldn’t stop trying just because we have not yet put our own house 100 percent in order or because we think a

challenge is too great to achieve.”

Talking about one product he has ‘discovered’, isobutanol, he told The Times, "isobutanol is wonderful, it doesn't absorb water, so you can pump it in the same way as petrol. And you can make it from anything. Sugar is good. What if all the sugar that is now turned into soft drinks was instead, turned into clean fuel?” Other renewable energy sources that will be supported by the Virgin Green Fund include biomass and solar power.

Branson has already invested €2.5 million into the Carbon War Room, a New York environmental ideas incubator. He has also led a €10 million funding round in GreenRoad Technologies - a start-up that helps reduce car fuel usage. Then there’s the Virgin Earth Challenge, a €16 million prize fund which aims to find commercially viable green technologies.

The Virgin Green Fund will be based in London and San Francisco and will plough around €100 million into growing renewable energy sectors.

CYBER CRIME IS ON THE RISE There was a 250 percent increase in 2008 in the number of computer bugs used by organised criminals to attack the IT systems of individuals, small businesses, governments and commercial organisations.

THE TRUE COST OF FRAUD The UK is the second largest bogus information. The difficulmarket for first-party credit card ty lies with proving intent and as fraud after the US, with a a result financial institutions UK£610 million total loss in 2008 are forced to continue writing off meaning a UK£9 loss for each first-party fraud as credit risk. credit card issued in the Security expert Martin country. These alarmWarwick says banks can ing figures, reincrease predictabiliThe UK is the second largest leased by ty and identify pomarket for firstLafferty Group, tential first-party party credit card reinforce the fraud before it fraud, with a point that the reaches the colleccredit card intions stage. “By inmillion total loss dustry can no troducing advanced in 2008 longer afford to toleranalytics, banks can gain ate this issue. With firstaccess to rich information party fraud, the perpetrator will about each customer and form a take out a loan, open a bank ac- wider view of that customer’s hiscount or apply for a credit card tory. This will allow them to idenwith no intention of paying it tify suspicious customers and back. They often use a false iden- ultimately reduce bad debt levels tity, or apply for credit using and collections expenses.”

UK£610

FINANCIAL SERVICES SECTOR STABILISING? The latest UK job figures indicate that there has been some improvement in London’s financial services recruitment market during June. Despite there being 58 percent fewer new job vacancies coming onto the market compared with the previous year, new

job volumes were up 20 percent compared to May, reaching their highest level so far this year. The time it took individuals to find a new role during June was unchanged versus the previous month, taking candidates an average of 55 days.

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UPFRONT

COMPANY NEWS

23

THE BUSINESS EXIT New research reveals that 71 per- that on the day of actual sale, only cent of entrepreneurs consider 36 percent of entrepreneurs felt themselves ‘exit obsessives’ – boss- elated or happy, which was nearly es who think about selling their matched by the 32 percent who business on at least a monthly basis. said they were relieved and 26 And while one in four decide to re- percent who were filled with tire early following exit, 40 pertiredness, sadness or anti-clicent still need the thrill of max. On a financial running a business level, 59 percent of and go on to start entrepreneurs again. Just over overlooked of entreprenuers half of those their financial think about selling quizzed said they planning until their business still have some dithe last minute, every month rect involvement in despite more than the business they have three-quarters agreesold. The report, The Long ing that it is an important Goodbye: myths, realities and in- part of the process. Andrew Haigh, sights into the business exit process, Managing Partner at Coutts & Co commissioned by Coutts & Co, ex- said: “This report has shown that amines for the first time the chal- alarmingly, two-thirds of entreprelenges and concerns business neurs are risking long-term busiowners face during their prepara- ness success by not giving proper tion for and throughout the busi- thought to their exit strategies.” ness exit process. The study reveals

71%

MOBILE TECH TO SLASH CARBON FOOTPRINT Europe’s energy bill could be cut by at least €43 billion thanks to mobile technology, according to a report issued by Vodafone in collaboration with Accenture. This potential saving represents 18 percent of the UK’s annual CO2 output in 2008 and approximately 2.4 percent of expected EU emissions in 2020. However, this opportunity can only be realised if industry and governments collaborate, the report stated. It also found that mobile technology has the potential to be a major catalyst in driving carbon reductions across a range of industry sectors, and identified 13 opportunities that could enable carbon abatement across 25 EU countries.

FROM THE VAULT Back in issue eight of CXO, AL-NOOR RAMJI offered an insight into how mistakes attract the most attention when you manage IT for a telecoms company as large as BT. “If you haven’t done a decent job, people notice. If you have, nobody does.” As we discover, this is an uncomfortable truth, particularly for some involved in the radical overhaul of a global business’ entire technology infrastructure.

To read more, go the past issues section at www.cxo.eu.com

MI5 WEBSITE HACKED

Computer hackers have attacked MI5’s official website in an apparent bid to steal the identities of visitors to the site.

The hackers, calling themselves Team Elite, could have been able to download viruses onto the machines of anyone using the British Intelligence services website. The identity of agents and informers in terror groups such as Al Qaeda are held by MI5.

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UPFRONT IN MY VIEW

24 BRIAN GOLDER, CEO of toymaker Hasbro, on taking the brand to the next level.

Hasbro’s move into the movie business is part of the company’s vision to transform it beyond being a mere toymaker into an entertainment and intellectual-property powerhouse.

We made a commitment to re-invent, re-ignite and re-imagine our core brands in order to create new experiences for our consumers. We’re now putting our brands in front of consumers in a number of different ways, and Hasbro’s shareholders have benefited as a result.

We’re unleashing the creative power of the company a lot more than previously.

Consumers will very readily accept well-loved brands in new forms of entertainment and new experiences. So Transformers is a great example. It was a comic book animation and a toy line, and now it’s also part of the motion picture business. We’re developing it as a theme park attraction with Universal. We’re developing it in numerous other forms such as video games and online. And so if we can take our brands and reinvent them in an appropriate way for each of the consumer audiences that are most interested in them, then we will continue to grow our business and unleash the potential of those brands around the world.

Hasbro strives to make sure branding or the message remains consistent across all those different platforms and channels.

Up until recently we’ve been working to restructure the company and focus more on our brands, and it took about six years to get where we are today. Now we’ve restructured as a global brand organisation, we have global brand leaders for our biggest properties and those leaders are responsible for the architecture of each of those brands.

The focus is on re-inventing the business.

We want to create an array of experiences. What we need to do now is to be very imaginative about how we reinvent the core toy and game business, and how we tell stories for those brands across a number of formats. The last two quarters have proved to be the most challenging in the current economic cycle, but we’re confident we have the brands and the strategy to succeed.

Despite these tough economic conditions we can emerge stronger from the downturn.

Our goal, first and foremost, is to develop tremendous value for our shareholders, which is really all about Hasbro having the tools necessary to re-invent, re-imagine and re-ignite the growth of our brands across multiple platforms. We need to keep our heads down and focus on that, irrespective of the environment, recognising we need to be cautious about the utilisation of our cash, have a strong balance sheet, and continuing to generate growth in earnings and revenues over the long term.

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UPFRONT COMPANY INDEX

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COMPANY LIQUIDATIONS SOAR Figures revealed today have shown that company liquidations in the UK are at a 16 year high, however the numbers show a significant slow down in the rate of firms going under.

The number of companies liquidated between April and June in England and Wales totalled 5059, which is stable considering the rise in recent months. Whilst it’s still the highest figure since the second quarter of 1993, the rate of insolvencies has slowed from 57 percent to 37 percent in the past three months.

The insolvent company figures were made up of 1457 compulsory liquidations and 3598 creditors voluntary liquidations. Other corporate insolvencies increased by 22.7 per-

DON’T MISS... cent to 1529 in the second quarter of 2009, including 345 receiverships, 1027 administrations and 157 company voluntary arrangements.

The number of administrations was down 22 percent.

In comparison, a record 33,073 people in England and Wales were declared insolvent in the second quarter of the year. This is a 27.4 percent rise on last year accounting to the Insolvency Service and the highest since it was formed in 1960.

The data also showed that the property sector was still the worst affected sector by the recession, accounting for a third of liquidations. Manufacturers were also hit hard, as were companies in construction, retail and the motor trade.

Quarterly Liquidation Statistics: a comparison of compulsory and voluntary liquidations in England and Wales

1100 2068 1340 2295 1494

1st Quarter 2008

2nd Quarter 2008

2623

3rd Quarter 2008

1560 3055

1579 3362

4th Quarter 2008

1st Quarter 2009

32 LOYALTY BEYOND REASON Saatchi & Saatchi’s Simon Francis reveals how to create a superbrand

0 Compulsory Liquidations 0 Voluntary Liquidations

COMPANY INDEX Q3 2009 Companies in this issue are indexed to the first page of the article in which each is mentioned.

Aabar Investments 26 Act Now 32 Adeptic 36, 125 Advanced Management Solutions 19, 120 Amadeus 54 Amazon 96 Anti-Phishing Working Group 66 Apple 38 Ascentn EMEA 102, 107 AstraZeneca 48 Attaccama 9 AT&T 110 Aviva 72 Betfair 58 BHP Billiton 20 BlueLock 77 Bombardier 128 BP 21 British Airways 38 BT 23 Butler Group 46 Cadbury 38 Canto 11 Capgemini 48 Carlsberg 38 Centrica 48 Christian Steven Software 98 CRM Association 132 Deutsche Poste 110 Deutsche Telekom 54 DHL 110

Draka Communications 86, 114, 115 eBay 58 Emerson Network Power 57 Escrow Europe 6, 64, 65 Exact Software 61 Exel 110 F5 Networks 21, 67 Frost & Sullivan 109 Google 58 GSK 38 Guinness 32 Hasbro 24 HMRC 48 HSBC 16 IBM 54 IDS Scheer 102, 105 Interroute 20, 100 inubit 53, 102, 103 ITS 2, 3, 82, 83 Jaguar 48 jCOM1 102 Juniper Networks 70, 71 Kodak 126 Lufthansa 54 Marshal 51 McDonald’s 38 Meet The Boss 92 Mercedes IFC MetaWare 40, 44, 45, 69 Metropolitan Police Service 84 MI5 23

Micro Focus 40, 44, 45, 69 Microsoft 21 NetOp 88 NewsGator 130, 131, OBC Nissan 21 Novell 4 Oracle 13, 58 Pampers 32 Panasonic 144 Philips 48 Royal Dutch Shell 38 Saatchi & Saatchi 32 Samsung 144 Sanofi-Aventis 116 Scaled Composites 26 Schneider Electric 47, 122, 123 Sony 144 TCS Financial Solutions 78, 79 Telefonica O2 110 Tempura Communications 90, 91, IBC Tesco 38 Thawte 74,75 T-Mobile 32 Total 15 Toyota 32 Twitter 16 Virgin Galactic 26 Virgin Group 26 VmWare 93, 94, 95 Vodafone 58

58 BETTING ON A SURE THING A look behind the scenes at betting dot.com phenomenon Betfair

84 HANDCUFFS AND HARD DRIVES Technology on the frontline with the Metropolitan Police Service’s CIO Ailsa Beaton

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SPACE ODYSSEY

Sir Richard Branson has paid €70 million in a bid to become the world’s first space tourism operator. But how risky is his investment and will the credit crunch mean a crash landing for the project? Diana Milne meets Virgin Galactic president Will Whitehorn to find out.

I

t’s the 30th anniversary of the first moon landing and, if Sir Richard Branson has his way, just two years away from another giant leap for mankind – space tourism. Will Whitehorn, President of Virgin Galactic, has just given a speech at the London headquarters of the Royal Aeronautical Society at the organisation’s first Space Tourism Conference. It’s a sign of the times. What was once regarded as a harebrained scheme and headlinegrabbing stunt by Branson is now the subject of a two-day conference attended by the world’s aeronautical elite – and Whitehorn’s speech is the star attraction.

Afterwards, over lunch, he relives the scepticism he encountered from the scientific community when Virgin Galactic was first launched in 2004 – and how much their attitudes have changed since then: “The initial reaction was, ‘we’ve heard it all before, people think they can build things to get to space cheaply but it has never turned out to be the case’. I think what’s happened now is that the interest in the scientific community has grown exponentially with the witnessing of the technology actually starting to come together and work.”

To boldly go For Whitehorn and his team the Virgin Galactic project has reached a turning point, with ideas that have been five years in the planning finally becoming a reality. A week before the Space Tourism Conference, Whitehorn was in New Mexico where ground was finally broken on the construction of Virgin Galactic’s first launch site: Spaceport America. The

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Are you game?

Booking a Virgin Galactic ticket is remarkably simply. You simply log onto the website, click ‘book’ and fill in an online reservation form. There are three tiers of astronaut reservations. The first 100 to fly pay a deposit of €140,000 – the full price of a ticket. This list is now closed to new reservations. Pioneers, passengers who will fly in Virgin Galactic’s first year of operation, pay a deposit of between €80,000 and €124,000: Those that have made reservations to travel immediately after Pioneers pay a deposit of €14,000.

All passengers undergo three days of training where they experience zero gravity in the WhiteKnightTwo carrier aircraft, which will feature a duplicate SpaceShipTwo cabin. Passengers also undergo medical checks, though Virgin Galactic claims these are unrestrictive and that the vast majority of people will be deemed fit to fly.

110,000 square foot facility will be the site of Virgin Galactic’s €212 million space launch system, which will rocket its space launch vehicle, VMS Eve and spacecraft SpaceShipTwo, into space. On board won’t be professional astronauts but passengers who will have paid €$124,000 for a ticket and undergone just three days of training before taking their place in history as the world’s first space tourists.

The hugely complex and high-risk project represents a massive investment for the Virgin Group – €70 million so far. And Whitehorn admits that there were many times along the way when he wasn’t sure that the gamble would pay off: “There were times when I didn’t think this was going to happen. We’ve had numerous occasions when we weren’t sure whether the technology would work in different areas.” He goes on to say, however, that many of the technical problems have now been ironed out. VMS Eve has already undertaken 16 test flights, with Sir Richard Branson on board for one of them, and SpaceShipTwo, which is modelled on SpaceShipOne, originally designed by the renowned aeronautical engineer Burt Rutan, is on TOP: Sir Richard Branson with Buzz Aldrin MIDDLE: Will Whitehorn (L), President Virgin Atlantic, Sir Richard Branson (C), founder Virgin Group, and Stephen Attenborough (R), Head of Astronaut Relations, unveil a scale model of Virgin Galactic's SpaceShipTwo BOTTOM: Sir Richard Branson with Burt Rutan 28 www.cxo.eu.com

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The visionary The original SpaceShipOne and now SpaceShipTwo, Virgin’s passenger carrying aircraft, were designed by renowned aeronautical engineer and founder of Scaled Composites, Burt Rutan. Rutan designed SpaceShipOne in 2004 and it went on to become the first privately manned spacecraft to exceed an altitude of 328,000 feet. In 2005, Rutan formed a partnership with Sir Richard Branson to set up a new aerospace production company, which would build a fleet of commercial sub-orbital spaceships and launch aircraft, and would own the designs for SpaceShipTwo and White KnightTwo.

target to be unveiled at the end of this year. “The space port is under construction, the spaceship is nearly finished,” Whitehorn explains. “The rocket motor is now firing and it is performing excellently so I’ve gone from probably seeing hundreds of stumbling blocks two or three years ago to seeing no real stumbling blocks now.”

Cash flow One problem that can’t be fixed at Virgin Galactic’s labs, however, is the effect of the economic downturn on ticket sales. To date, the company has sold 300 tickets, with customers paying an initial deposit of €14,000 each. Its aim, says Whitehorn, is to have sold 700 tickets by the time it starts flying commercially and to have accumulated €56 million in deposits. Whitehorn says sales have been affected but that it is currently on track to reach its target, selling

around five to six tickets a month: “Ticket sales were affected by the credit crunch but less than we expected. We had a few cancellations, particularly from one or two people that had been affected by the Bernard Madoff scandal who lost all their money. But sales are now at the same level as they were before the credit crunch began. We’re selling on average five to six tickets a month which puts us on track to get to 700 tickets in the next two to three years.”

Ticket sales are crucial to Virgin Galactic’s success in the early years; however, the company sees an exciting long-term future for the technology in scientific research.

To date, says Whitehorn, scientific experiments in space have been hampered by the fact that existing space launch systems are too expensive to use for the purpose. Virgin Galactic’s relatively cost effective solution could see it being used, for example, to produce solar power in space, or to store servers in space. “There are three or four things happening at the moment in the world of science, which are really exciting if we can find cheap ways to fly to space. The technology is there. The problem is that the space launch systems were designed 60 years ago for big old-fashioned rockets and it costs hundreds of millions of dollars every time a launch is done. We won’t get the breakthrough in space, industrially and scientifically for the next generation unless we find much cheaper, more environmentally friendly ways to get there.” He goes on to say that as other uses for Virgin Galactic’s technology are found, space tourism could end up acA diagram showing the Virgin Galactic spaceships’ dimensions

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counting for just 50 percent of its profits: “In the early years, space tourism point outside the atmosphere. That would be a really exciting breakthrough. will be the source of the economics to make this work. “80 perThat means people could travel from London to Australia in two-and-a-half cent of this business will be space tourism. And as we move hours – and not only that but they wouldn’t be putting fossil fuels forward that percentage will diminish over time as all into the earth’s atmosphere in doing so.” these other industrial and scientific applications start to be utilised. Eventually I can see space tourism falling Getting on board Virgin has invested to 50 percent.”

Given the huge potential of the technology as a form of Ironically, however, one of the biggest potential low carbon travel and a catalyst to scientific research, it is uses for Virgin Galactic’s craft doesn’t involve space disappointing that as a British company, Virgin Galactic has in space tourism tourism at all. Ultimately, Whitehorn believes that had to build its first spaceport in the US. The main reason is projects SpaceShipTwo could be used as a form of low cost, low that the technology came from America but also because at carbon, high speed commercial air travel – taking paspresent the UK lacks the regulatory framework needed to supsengers from one side of the world to the other outside the port the development of space tourism – a bone of great contention earth’s atmosphere. “I think the potential for that is huge,” says with Whitehorn, particularly as Lossiemouth in Scotland had put itself Whitehorn. “We want to give this system the capacity to get from point-toforward as a potential location for the spaceport: “I think it’s quite likely we

€71 MILLION

Virgin Galactic: FAQs How often will the flights take place?

Initially, there will be one flight per week. As operations progress, this will increase to one and potentially two flights per day.

How many passengers and pilots will there be on each flight?

SpaceShipTwo will carry six astronaut passengers and two pilots.

What does the space flight consist of?

The spaceship hitches a ride up to around 50,000 feet attached to a specially designed carrier aircraft, ‘the mothership’. Once at 50,000 feet, the spaceship is released from the mothership and ignites its hybrid rocket. The spaceship then begins a climb to over 360,000 feet. This climb takes about 90 seconds and will reach a speed of just over three times that of sound. Shortly before the apogee

30 www.cxo.eu.com

(maximum altitude) of its flight path, the spaceship feathers (folds its wings) in preparation for re-entry into the earth’s atmosphere, drawn by the Earth’s gravitational pull. As the spaceship meets the resistance of the upper atmosphere, the feathered wings act as air brakes, safely positioning and decelerating the spaceship, allowing for a carefree re-entry into the earth’s atmosphere. At approximately 60,000 feet, the spaceship’s wings are re-configured into their original position, allowing for an unpowered (glide) landing back at the spaceport.

What is feathering?

In the past, re-entry into the earth’s atmosphere was one of the greatest risks associated with space travel. However, Burt Rutan’s feathering design has significantly reduced this risk. In space, the wings are folded up to provide a shuttle-cock or ‘feather’ effect, giving the spaceship extremely high drag for

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would have had to do this project in America anyway because the original technology came from America. But clearly this is a system that doesn’t have the old problems of old ground-based rockets, which were difficult to launch in Britain because of the high population and the weather. This is a system that could work here albeit in less populated areas like the North of Scotland or Cornwall. The fact is that even if we could come to an area such as Lossiemouth and they welcome us with open arms to operate there in the future, we don’t have the legislation to allow us to do it.”

Whitehorn believes that the UK’s slowness in introducing this legislation is foolhardy given the potential future value of the space industry.

“In Britain alone nearly 50,000 people currently work in space-related activities and in Europe the number is probably treble that. And if we had cheap ways to get to space there would be so many more things we could do.” He reveals that Virgin Galactic is in talks with the UK government to resolve the issue and that it hopes the situation will change within the next 18

months. In the meantime, he says, he expects there to be a wave of private investment into space-related ventures: “Now that realisation about the potential of the space industry has come about (and it really has come about just recently) I think you’ll see a wall of private sector investor money going into space over the next 10 years, the likes of which we haven’t seen since the internet revolution.”

His prediction has already come true. Shortly after the Space Tourism Conference, Virgin Galactic announced that Abu Dhabi-based Aabar Investments will invest around €200 million and take a 32 percent stake in Virgin Galactic’s holding company, valuing the business at €640 million. The Middle East has already been touted a possible location for Virgin Galactic’s next spaceport and the strategy is in line with the UAE capital’s aim to become a world centre for scientific research. Given this latest announcement, it is even more crucial that Europe catches up – or it could find itself a loser in what has become the 21st century’s space race.

re-entry. This allows the re-entry deceleration to occur at a higher altitude and greatly reduces the forces and heating on the structure. Also, the ship, in the feathered configuration, will align itself automatically such that the pilot has a lesscritical flight control task. Burt Rutan describes this as “carefree reentry.” Once in contact with the atmosphere, the feathered wings position the vehicle to the correct altitude without pilot input.

major benefits in weight, power output requirements and resilience. Secondly, the feathering mechanism means that these spacecraft do not require specially designed (and historically unreliable) thermal protection systems used by the Space Shuttle. Thirdly, SpaceShipTwo will be air launched, not ground launched. This has important benefits for both safety and environmental impact. SpaceShipTwo is being built following a design brief that deliberately seeks to avoid unnecessary complexity and, in particular, moving parts. This is a very different concept than that which applied to the space shuttle and one that is key to safety and reliability.

SpaceShipTwo’s rocket propellant system will be a single hybrid rocket motor rather than the separate solid and liquid rocket boosters/engines used by the Space Shuttle. There are great safety advantages to the hybrid system, which requires far less power than the Space Shuttle due to weight and scope of flight.

What is the difference between a Virgin Galactic spaceship and a NASA shuttle?

The Space Shuttle was designed to carry significant payloads and people into orbit rather than people only into sub-orbit.

However, there are some key design differences which represent important developments in the future of safe and commercially viable space travel. Firstly, SpaceShipTwo is being built from composite materials not metal, creating

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MEDIA

Saatchi & Saatchi has consistently dominated the world advertising scene and has the power to transform ordinary brands into global success stories. Diana Milne catches up with its CEO for EMEA, Simon Francis, and asks how to get ahead in advertising.

LOYALTY BEYOND REASON

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H

e may not be a household name but Simon Francis is the brain behind some of Europe’s best-known advertising campaigns – from Pampers and Toyota to Guinness and T-Mobile. As Saatchi & Saatchi’s CEO for EMEA he has the power to make or break a brand and to create what he de-

scribes as “lovemarks” – products which attract “loyalty beyond reason” from their customers.

His fi rm has dominated the global advertising industry since the 1970s and currently employs 6000 people across the world, with 150 offices in 86 countries worldwide. In the past five years alone it has won 3500 awards for creative work, most recently scooping six Lions at the Cannes International Advertising Festival 2009 for its T-Mobile ‘Dance’ advertisement.

The T-Mobile campaign featured real life footage of 350 people breaking into a spontaneous dance routine at London’s Liverpool Street station among the rush hour crowds. The footage was later shown across online, direct and retail channels, as well as through a specially created YouTube channel. It encompasses, says Francis, what advertising in 2009 is all about and reflects the dramatic technological changes that are shaping the industry. It is no longer enough to target a captive audience on prime time television. The fragmentation of the media landscape and the vast array of media choices available mean advertisers must try harder than ever to engage with consumers on all fronts; through digital, television and print but, most importantly, through word of mouth. “Technology has completely transformed the industry,” says Francis. “It’s very challenging to go to market with push messaging right now because the audiences’ choices of media are so fragmented. Maybe 15 to 20 years ago, 34 percent of the UK population would be watching Coronation Street.

You could reach 34 percent of the population in a 30 second advertising slot and talk to people of all social typologies. Now the average rating is much lower for all TV programmes because there are so many different channels and shows.”

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Falling revenue The decline in print and television advertising in the past decade has been well documented. According to the latest figures by the Advertisingg Association, newspaper advertising fell by 12 percent last year U alone and TV advertising dropped by five percent. in the UK Mean Meanwhile, internet advertising rose by 17.3 percent. Given

The hit

the figures does Francis believe there is still a future these

ile b o M T atured

fe advert ncers 350 da

fo traditional media in Europe? “We would say our for p primary media now is people. They do the marketing work for us. The traditional media are still amazingly good conversation starters. And if you look at our case h histories they make full use of traditional media to start a socal networking conversation. But that is now carried on through social media, such as blogs, Twitter and Facebook If you have an idea that is so compelling, arresting and book.

enjoyable then people will come to your idea and propagate it.”

The pressure for Francis and his team to come up with these compelling ideas is growing in the face of harsh economic conditions and their clients’ ever shrinking advertising budgets. “We’ve seen, on average, advertising budgets shift 10 to 20 percent south depending on which market you are in and how the client is placed,” says Francis. “Clearly some market leaders are more resilient and have carried on and maintained their expenditure. Some of the middle ranked and smaller players have found it more challenging and they are the ones that have been the most impacted.” He goes on to say that advertising markets that have suffered the biggest impacts are in the UK, Spain, Italy and parts of Russia.

While he maintains that shrinking budgets have not stifled creativity, he says that economic conditions are setting the tone of today’s advertising campaigns, with a move away from extolling the virtues of excessive spending and an emphasis on what consumers are really looking for: “Hope, joy and optimism.” Francis adds: “Creativity isn’t something that is budget related. But there’s a different style emerging and clearly wanton expenditure is not in. It’s not appropriate and many people won’t be advertising in that way. But many people are looking for optimism, for hope and for humanity, and these seem to be becoming recurrent themes”. He goes on to say that with recessionary conditions, it is the products that can offer that “emotional connection” with the consumer, which will beat the competition, even products that are offered at a lower price with the same functionality. “In an age where there’s not much money around and times are tough, people will, of course, look to compare and contrast brands and services. Those brands and services that can offer an emotional reward, beyond just the functionality of the A section of Saatchi & Saatchi campaigns

products, are the ones that get loyalty beyond reason. The brands that can offer hope, joy and an emotional connection to the consumer are the ones that will prosper when all the other brands will suffer.”

Creating lovemarks Saatchi & Saatchi’s belief that customers’ buying choices are made on the basis of emotion, not rational thought, drives its creative processes. It aims to make every brand in its portfolio a ‘lovemark’ and, when creating a new campaign, it embarks on a complex process of analysis to establish the emotional connection the product has with consumers.

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“We do extensive research on our client’s business where we look at how

based on how well a product or service performs for them but also for

respected they are and how loved they are. We plot them on a map versus

the world at large. The advice we’d offer our clients is to align their in-

the competition and then we work out a plan to either increase the level

ternal impact on the world to what the consumer wants and to build that

of respect towards the brand or increase the amount of love it engenders

into our ‘lovemarks’ thinking.”

among consumers. Then we put together a plan accordingly. For many

He cites the example how this strategy was used to create a cam-

brands it’s about the emotional side of things rather than the functional

paign for Pampers, which he regards as one of Europe’s most successful

side of things. It’s a very scientific plan constructed to build ‘lovemarks’

‘lovemarks’. “At pampers we put in place a programme where every time

over a period of time.”

somebody bought a pack of Pampers one euro went towards a vaccine

Increasingly, says Francis, companies must prove their moral cre-

that would save a child’s life. It was an extraordinary programme we put

dentials in order establish an emotional connection with an increasingly

in place with UNICEF and it’s a great example of how a brand can change

socially conscious consumer – with sustainability and corporate social

the world and offer mothers an emotional reward whilst at the same time

responsibility becoming key differentiators between brands. With this in

driving the business forward.”

mind, last year the company acquired the environmental sustainability agency Act Now run by Adam Werbach, one of the founder members of Greenpeace and the youngest ever member of the US-based environmental organisation, the Sierra Club. “‘Lovemarks’ are all about standing for something,” says Francis.

“We’re incredibly proud of all our campaigns and hate them all in equal measure”

“And increasingly many consumers will make choices and decisions

Great minds It is the job of Saatchi & Saatchi’s 2500 strong European creative team to come up with the ideas that will build emotional connections between brands and consumers – a process which Francis says relies for its success on the team being “incredibly brutal creatively”, an approach characterised by the company’s catchphrase for the process; ‘let’s kill some puppies’. “It’s a crude phrase but it’s true. You fall in love with your ideas and you don’t want any harm to come to them but to get ideas such as the T-Mobile campaigns, you have to be utterly brutal and use consumer testing and gut instinct to make your choices,” he explains.

Describing the process he says: “We have these huge tribes where we have creatives from all over the world to work for two intense days where we fi ll rooms and rooms with ideas which we will whittle down to 10 or 15.

Then through consumer research we whittle them down to one or two.

We do some development work before one comes out at the end of the process. But first we have to kill some puppies.”

Despite having won countless awards for his teams’ creative work, Francis says he is by nature, never fully satisfied by the outcome of a campaign. “We’re incredibly proud of all our campaigns and hate them all in equal measure. Th is uncompromising, perfectionist approach extends to Saatchi & Saatchi’s working culture which Francis admits, is not for the faint hearted, with anybody not deemed to embody the agency’s values, quickly weeded out. “It’s a tough place to be if you want to cruise. It’s a very tough place if you are not creative or you won’t put yourself at the service of an idea. For every single individual we have a peak performance appraisal system. We are quite brutal with people that don’t match our spirit.” That spirit is built on Saatchi & Saatchi’s twin pillars of philosophy: ‘Nothing is impossible’ and ‘One Team, One Dream’. Francis says the strong emphasis on good teamwork is the real key to Saatchi & Saatchi’s success in the cut throat competitive advertising world: “In many agencies people don’t work together and egos get in the way,” he says. “Profit and loss accounts get in the way, and reporting lines get in the way. Saatchi is unlike anywhere else I’ve worked before, where we have one team, one dream.”

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of the

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SPECIAL REPORT

Out of the gloom overshadowing the European economy an army of superbrands have emerged victorious, with glowing financial results despite the downturn. Here we profile six credit crunch survivors and reveal why their customers keep coming back for more.

I

n today’s economic climate bad news dominates the business headlines – with companies more likely to go bust than boom. It’s a case of survival of the fittest where only the companies with the strongest foundations, the most loyal customer followings and the best marketing campaigns will pull through.

The fate of companies is also dictated by changing consumer spending habits during a recession. According to the latest 100 Most Valuable Global Brands survey, certain credit crunch related retail trends have emerged including a rise in the popularity of brands claiming to offer value for money. Meanwhile, consumers are also increasingly turning to ‘tempting treats’ such as fast food, cigarettes or alcohol. Products that offer consumers the opportunity to enjoy pleasures at home are also booming, with computer games, video rental and takeaway pizza bucking the trend. However, according to Joanna Seddon of Millward Brown Optimor, which compiled the survey, the biggest weapon a company can have in its arsenal is brand strength. She said: “In the current environment where the value of many businesses has fallen, brand has become even more important because it can help to sustain companies in tough times.”

Here we analyse the secret behind the success of six of the brands that are prospering despite the downturn. And we list some of the less fortunate companies that have fallen victim to the credit crunch curse.

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1. Tesco As the world’s third largest retailer behind Walmart and Carrefour, Tesco has retained a vice-like grip over the UK grocery market. From humble beginnings as a stall in the East End of London, today the company employs 468,000 staff worldwide and has 4308 stores around the world, including 2282 in the UK. Rising food prices and the economic downturn have not, so far, harmed Tesco. Last year it achieved record profits of €3.4 billion a rise of 10 percent. Its sales increased by 15.1 percent in 2009 and group profit before tax grew 5.5 percent. In the first quarter of this financial year it announced that its like-for-like retail sales had increased by 4.3 percent with new stores contributing 4.3 percent and Tesco Personal Finance adding a further 2.2 percent. The retail giant’s international sales increased by 20.1 percent including particularly successful growth in Asia, where sales rose by 43.8 percent. As well as international expansion and aggressive marketing campaigns – including those targeted against its main UK rival Asda – Tesco also attaches a high priority to technology as a business enabler and recently carried out an application modernisation exercise to help strengthen its US presence. The project focused on its Continuous Replenishment system, which assures stores are always fully stocked with the products which customers want.

2. McDonald’s Fast food chains are one of the few businesses to profit from a recession and none more so than McDonald’s, which continues to dominate the European fast food market. In the second quarter of this year the company’s sales increased 6.9 percent in Europe, 3.5 percent in the US and 4.4 percent in Asia Pacific, the Middle East and Africa. Globally, its sales grew 4.98 percent. And it seems that arguably the least discerning diners are in the UK, France and Russia where McDonald’s experienced the strongest sales performances. Jim Skinner, CEO of McDonald’s, said he believed the chain was attracting a larger volume of customers as incomes fall in the wake of the economic downturn: “As consumers find themselves more cash strapped and time-challenged, they continue to count on McDonald’s for value, convenience and variety across our menu. I am pleased with the McDonald’s results and remain confident in our outlook for the year.”

The strong McDonald’s performance in Europe reflects the US chain’s focus on strengthening its international presence. Today, over half of the company’s total sales come from outside the US and last year they accounted for 60 percent of its €1.66 billion revenue.

An aggressive marketing strategy, combined with cash strapped consumers switching from bistros to burger joints has seen the McDonald’s brand increase in value by 34 percent this year according to the 100 Most Valuable Global Brands survey.

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3. Cadbury Chocolate has always been considered a pick-me-up for those feeling down in the dumps. It is therefore little surprise that with the gloom and doom of the recession permeating most people’s lives, more and more of us are reaching for the confectionary. This sweet-toothed craving has been Cadbury’s gain, with net profits tripling in the first half of 2009 to €362 million compared to €130 million during the same period last year. On the back of these bigger than expected profits, Cadbury, whose products also include Halls sweets and Trident gum, confirmed that chocolate sales climbed 10 percent with a market share gain in the UK and healthy growth in South Africa and India. “Our growth in the UK is particularly strong, driven by consumers pulling back to buy affordable indulgences,” said Todd Stitzer, Cadbury's CEO. The company’s strong performance was also boosted by record sales of Easter eggs as well as Wispa bars and Giant Buttons.

Advertising plays a key role in enticing consumers to purchase their sugary favourites so the fall in advertising rates due to the recession has been to Cadbury’s benefit too. However, Cadbury’s good fortune can’t all be attributed to chocolate and sweets; the demerger of its Americas Beverages business last year and the offloading of its Australia beverages business to Japan’s Asahi Breweries made a significant difference to its bottom line.

Stitzer said his company expects full-year costs to fall by €17.5 million after two years of factory closures and job culls.

4. Apple When times are tough you would think new shiny new gadgets are the first thing consumers would choose to do without as they hold onto their existing computers, MP3 devices and mobile phones. Try telling that to tech giant Apple who has bucked that philosophy with a 15 percent jump in profit in the three months to June. Despite a reported three to five percent dip in the overall PC market worldwide, the Seattle-based firm sold 13 percent more laptops than a year ago. Sales for the whole company grew by 12 percent to €5.8 million. The company has also been buoyed by the phenomenal success of its iPhone. Launched in 2007, the featured-packed device has taken the mobile telecoms market by storm with 5.2 million units flying off the shelves in the second quarter alone – seven times more than what was sold in 2008’s second quarter. The release of the latest version, the iPhone 3GS, along with price cuts, is expected to swell figures further. “In a better economy I think we would have sold even more,” Apple Chief Financial Officer Peter Oppenheimer said in an interview when discussing overall sales.

One downside has been the fall in iPod sales but the company says this is to be expected as devices like the iPhone include integrated MP3 players.

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THE OTHER SIDE OF THE COIN Companies that are feeling the pinch

• British Airways

5. GlaxoSmithKline (GSK) When you’re in the pharmaceuticals business any disease or virus outbreak can send your profits through the roof as governments clamour to get their hands on a potentially life-saving (and financially lucrative) vaccine. At pharma giant GSK bosses have been accused of profiteering from the H1N1 (swine flu) outbreak by charging the UK’s National Health Service (NHS) €7 for the vaccine that costs little more than €1 to produce. Several politicians want an inquiry into whether the UK government is being ripped off. Others have suggested introducing a windfall tax on pharma firms profiteering from swine flu. Despite the furore, GSK’s Relenza inhaler, which is an alternative to Tamiflu, is expected to produce sales of €700 million, according to media reports. GSK also manufactures antiviral masks. Deliveries of the swine flu vaccine are also expected in September just before a potentially bug-ridden winter arrives, which would swell the company’s profits further. Amid accusations that it was cashing in on the crisis, GSK recently reported profits of €2.45 billion (up 11 percent) in the second quarter, while CEO Andrew Witty described the swine flu outbreak as a “significant financial event for the company”.

6. Carlsberg European consumers may have cut down on unnecessary spending but one indulgence they are determined not to give up is beer. Indeed, it seems they regard it as a necessity not a luxury, judging by Carlsberg’s latest figures. The Danish beer maker reported net profits for the first half of this year of €427million – up more than a third from the same period last year despite the recession. Meanwhile net sales rose by nine percent. Carlsberg is one of the world’s largest brewery groups and its portfolio includes the likes of Carlsberg, Pilsner and Holsten. Over 45,000 people work for the group and in 2008 the company sold over 120 million hectolitres of beer, which is about 100 million bottles of beer a day.

Carlsberg’s beers are currently sold in 150 countries worldwide and in the first half of this year it gained market share in most markets in Asia and Europe, with particularly strong gains in Russia. It continues to dominate the beer markets of Northern and Western Europe. Despite its continuing success this year however, Carlsberg released a statement saying it expected to encounter tough market conditions, particularly in Russia where it predicts the beer market will drop by five to six percent. As a result, it has reduced its net revenue outlook to €8.1 billion from the previously stated €8.4 billion.

We all know the airline industry is experiencing some bumpy turbulence after last year’s spike in fuel prices alongside plummeting passenger numbers – BA, however, is in freefall. Business travellers provide the bulk of BA’s profits but the downturn has seen corporate travel slashed. This contributed to BA reporting a pretax loss of €172 million for the second quarter.

Passenger numbers fell 12.5 percent. In June, CEO Willie Walsh asked thousands of employees to work for free for up to one month in a bid to keep BA in the skies. The airline has also scrapped sandwiches on short-haul flights, a decision forecast to save €25 million a year.

However, BA does expect its fuel bill to be between €525 and €580 lower this year compared to 2008.

• Nokia At one time the Finnish mobile phone manufacturer was sitting pretty at the top of the telecoms tree. It’s still the market leader but the recession has battered its bottom line – second-quarter profits nosedived by a whopping 66 percent to €380 million. In the three months to end of June, Nokia shipped 103.2 million phones, down 15 percent year-on-year and 11 percent on the first quarter. As well as the economic climate hurting sales, the much-coveted Apple iPhone ruffled the feathers of traditional phone manufacturers to become the smartphone of choice for today’s twenty somethings. Nokia has counter punched with its rival to the iPhone, the N97, although this flagship device has received mixed reviews.

• Royal Dutch Shell What a difference 18 months makes. At the start of 2008 oil supermajor Shell announced record annual profits of around €17 billion – about €1.2 million every hour.

Fast forward to last month (July) and second quarter profits sunk 70 percent to €1.6 billion and sales fell 51 percent compared to the same period a year earlier. “There is an ample supply [of oil] and not enough to go around,” Shell’s CEO Peter Voser was quoted as saying. This is in stark contrast to just over 12 months ago when the price of crude rocketed to stratospheric heights of US$147 a barrel as demand soared and speculators jumped on the wagon. Shell has said it will continue with cost-cutting measures after notching up savings of €500 million in the first half of the year, and has axed 20 percent of senior management positions.

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ASK THE EXPERT

The major trends for mainframe replacement As a result of the current economic climate, there is a growing trend towards organisations migrating applications off mainframe environments and on to open systems such as Linux, Unix and Windows. Jean-François Scardigli and Richard Pegden ask what are the drivers behind these initiatives?

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he demand placed on CIOs to reduce costs has increased during the economic downturn. Mainframes often carry a relatively high operational cost and as a result, more organisations are migrating away from mainframe environments. Many organisations have been able to drastically cut operating costs using a migration strategy, including the French Social Security (CNAM), who migrated 11 mainframes totaling 12,000 MIPS to Unix. This resulted in a staggering estimated €45 million TCO (total cost of ownership) reduction. The EADS subsidiary, Eurocopter, was also able to significantly reduce costs by migrating their time management system off the mainframe and onto a Windows environment. This allowed Eurocopter to finally turn off their mainframe environment, resulting in significant cost savings.

Working with software from Micro Focus, Bernhard Gebhart, Applications Manager at Eurocopter, was delighted with the results. He states: “The project paid for itself in considerably less than a year. This solution has been live for over two years now and we are very satisfied with it. The project involved so few problems we could say it was a shame we didn’t have to migrate other programs.”

Many more organisations have been able to utilise application migration as a strategy to reduce costs by upwards of 50 percent.

Mitigating risk Risk mitigation is at the forefront of any executive’s business planning.

Application migration can offer a low risk, high return alternative to re-write or

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replacement strategies which can be extremely costly and lengthy, often with no guarantee that all existing business logic will be maintained. Through working with effective technology and partners, organisations can utilise application migration to mitigate risks. Automation capabilities of conversion software like MetaWare’s, ensure that the likelihood of errors linked to, or introduced by human intervention is reduced by up to 100 times, compared to re-writing or implementing a packaged application. Areva and Eurocopter have successfully applied this strategy to mitigate the risks and reduce the delays of implementing packaged applications (SAP) in their business, using these tools.

Driving innovation In today’s increasingly competitive markets, organisations have to look to innovate to be able to keep pace with their competition. Organisations can significantly reduce the time-to-market of new IT solutions and services through application modernisation projects, and in particular, through application migration projects. Migrating applications to new technologies can significantly decrease development processing time and thus enable development projects to complete faster. This in turn enables companies to focus more time and resource on innovation. Organisations have been able to cut the costs of providing new functionality by up to 60 percent as a result of migration projects. They can adopt a two-phase approach to migration. The first step is to migrate the application ‘as-is’ off the mainframe and onto a new plat-

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form. Once this is complete, the associated cost savings can be invested into modernising the application to fit the business needs. This may include improving business process integration or making applications available to new geographies, for example.

Increasing productivity Migrating platforms can enable organisations to improve productivity, as certain processes in a mainframe environment may take a lower priority behind production-related tasks and can often take hours to run. Migration off mainframe architecture not only reduces the associated costs of enterprise applications, but can also improve productivity. Orange Business Services has improved the productivity of 200 business users by 30 minutes per day since the move to Unix platforms, representing a saving of above €1 million per year.

“By migrating or re-hosting applications, organisations can take advantage of the lowest risk strategies while maintaining competitive advantage”

Tesco By migrating or re-hosting applications, organisations can take advantage of the lowest risk strategies while maintaining competitive advantage. At Tesco in 2007, international growth was the driver for the company’s migration strategy, with plans to open new stores in the US. As featured earlier in CXO, Tesco’s proven competitiveness in retail is in no small part dependent on its highly effective IT systems, and the team was confident that the effectiveness of their operations would be key to their success in new markets. This is especially true for Tesco’s innovative Continuous Replenishment (CR) system, which drives store ordering and makes sure that what customers want is always available while minimising waste. This unique application was developed by the Tesco IT department in the UK and encapsulates decades of retail expertise and experience.

The CR application plays a key part in generating tens of millions of euros in profit for Tesco in the UK and, more importantly, provides a very significant improvement in customer satisfaction. The challenge was that this highly sophisticated store ordering system resides on an IBM z/OS mainframe in the UK, and Tesco wanted to make this intellectual property and associated competitive advantage available to the rest of its group where the data centres are based around IBM p Servers running Oracle Retail under AIX. However, guiding Tesco’s decision about how to achieve this was its common operating model, which defines how to build a set of repeatable processes and systems to support international growth. This involves the establishment of a standard computing platform using consistent technologies and then ensuring that all key applications can run in this environment. An important aspect of this flexible approach is that all versions of the enterprise applications have to be derived from common sources, even if they run on different platforms. This is essential to ensure that enhancements and fixes only have to be developed once and can be propagated consistently and quickly.

Solution Tesco’s executives knew that for global success they need to ‘think globally and act locally’. This meant that an instance of the crucial CR application would be needed locally, running on existing Tesco servers within their international operations to manage the local supply chain. The solution they chose enabled Tesco to address the legacy issues without changing the IT architecture within the existing international operations structure.

The solution was to migrate and replicate the critical application. Tesco needed to enable the vital z/OS based CR application to run on its AIX servers. Micro Focus’ application migration and modernisation solution was chosen to port the CR application to the IBM System p server running the AIX operating system, and integrate it with the existing Oracle Retail solution. Work on the project started in autumn 2006 and by January the Tesco IT team had a version ready to demonstrate and test on the new environment. This was a reassuringly short time to deliver this unique and very sophisticated functionality. Also, compared to the long and risky alternative of developing a new application for the IBM System p server, or adding the functionality to Oracle Retail, the project was remarkably risk free and straightforward.

Tesco went live with its powerful replenishment application in July 2007. The migration approach Tesco chose has the added benefits of preserving the unique, proven functionality of the CR software and meeting the goal of a common source stream for both versions of the application. Establishing the crucial CR application on the flexible IBM System p server platform has moved the common operating model strategy forward by a major step. Tesco are now poised to release their unique CR functionality, which provides such a competitive edge in the UK, throughout their international operations. It can do this cost efficiently as it can deploy this major improvement to its supply chain system on existing data centre environments, with suitably sized servers, for each specific international operation.

As shown by Tesco, technology has to be approached from a business perspective. As other companies across all geographies face the challenges of today’s economic climate, the benefits of application migration strategies become more compelling for effective cost reduction, increased innovation, improved productivity and risk mitigation.

Richard Pegden is Product Marketing Manager at Micro Focus. Pegden spent 10 years in the service management industry, notably at BMC Software as Product Manager for BMC Service Desk Express and IT Systems Management Express, delivering a number of strategic initiatives.

Richard is ITIL-certified and has a BSc.(Hons) in IT and Society.

Jean-François Scardigli is EVP of Sales, Marketing and Alliances at MetaWare, a provider of conversion software for mainframe re-platforming. Scardigli has spent 15 years in the software industry, notably in sales management positions at SAP. He is specialised at promoting innovative automated conversion software through technology and consulting partners.

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APPLICATION MODERNISATION

ADAPTING TO CHANGE Alan Roger, Senior Research Analyst at Butler Group, outlines the importance of modernising outdated IT applications.

ALAN ROGER

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roponents often repeat defensively the adage that ‘legacy’ indicates something that actually works reliably, having long passed the teething problems that beset some new applications for long periods. Although amusing, that is too glib an assessment for there are real problems, at operational and strategic levels, in depending on legacy technologies. One of the major associated problems is whether skills will continue to be available to meet the support and maintenance needs of organisations’ legacy applications. The coding language used is the crucial factor here – in the case of many, the skills base can be seen dwindling dangerously, and inevitably the costs of those skills when needed will rise due to the laws of supply and demand. Ultimately, skills shortages can prevent the organisation from considering certain avenues of change – or be

a barrier when there’s a need to comply with regulations or legislation. When these problems are encountered, continuing corporate life with the applications in question must be seen as constituting a real risk. Another major headache can be the platform on which an application is run becoming obsolete. Even before reaching that point, however, infrastructure platforms can introduce problems as they age, in failing to integrate with an organisation's security, application management, application integration, or reporting facilities, any of which introduce risk and extra cost.

Changing processes Adopting a packaged solution is one option, but inevitably business processes have to be changed to adapt to what the new application supports, and any customisation to support the organisation’s needs will have to be paid for, and supported for the lifetime of its use. In making a decision on the approach to take, many organisations assess the value that is represented by their existing applications, and look for some way to continue to benefit from their past investments in them.

Where the coding language is the source of the problem, there are an increasing number of options to translate code to a more modern

language. Applications represent part of the organisation’s intellectual property (IP), and when you consider all the business rules and other logic that are bound up within them, and the fact that they are part of what makes the organisation tick, translation can be seen as a way to preserve that IP. Although translation is a specialist field, and projects can take a while, the time taken may well not compare too badly with the demanding option of defi ning and writing something from scratch. One characteristic of that approach is that it tends to take some of the organisation’s key people out of their main roles for a while, which may not be considered viable or desirable.

Migrating an application from an obsolete platform to a more modern system is not just a lift-and-shift operation, but nevertheless it can be readily achievable in many cases. The choice of new platform might well be limited by factors such as the application code language, or the database, so in some cases there might be decisions involved about re-architecting elements of the supporting technologies – but the objective of migrating something to be near like-for-like must be borne in mind. In the case of either translation or migration, though, it should be considered whether there might be a degree of redundancy in the existing application.

Investigating the options During years of changes and re-design, areas of code become ‘cut off ’ within many applications, and investigation of what code may be left behind can avoid the cost of migrating and testing code that would never be used.

Either of these approaches can enable organisations to retain the value of their IP, while taking advantages of the benefits of using modernised applications or platforms.

Rationalisation of the variety of technology within the organisation should enable savings to be made, and be more efficient in terms of sustaining fewer supplier relationships, and potentially benefiting from discounts. After translation or migration, the benefits of being able to integrate applications better and use them more flexibly are substantial, as these will be essential organisational capabilities in the near future, enable the value within applications to be shared by partners and customer, and potentially to add to revenues.

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GOVERNMENT

With an annual €1 billion budget to juggle and the pressure of managing the mammoth IT operations of Her Majesty’s Revenue & Customs (HMRC), CIO Deepak Singh has one of the toughest technology jobs in Europe. CXO travels to Westminster in the heart of London to discuss his key projects, the impact of the recession and how he sees the role of CIO evolving.

Before HMRC you worked in various roles at the likes of AstraZeneca, Jaguar and Philips. What would you identify as the key differences between the public and private sector from an IT standpoint?

Deepak Singh. The first is sheer scale and complexity. I don’t think I have come across a private sector organisation that has the same level of complexity as HMRC, given the range of sophisticated products involved in managing a tax administration. Deeply complex legislation and tax policies result in a highly differentiated and diverse business model which makes the work of the HMRC CIO even more difficult.

Given that HMRC supports virtually every man, woman, child and business in the country, our scale is huge and covers everything from Self Assessment to Corporation Tax. Secondly, the cultural differences are massive. In the private sector you find a very common purpose around shareholder value, the customer agenda and the financial success of the business. In the public sector you tend to have less focus on those outcomes and much more focus on public sector values, and providing effective services for the citizens who use those services. It’s a different culture in that people are much more passionate about the service agenda as opposed to the financial results and outcomes a private sector organisation would look towards.

There is this perception there is greater pressure on transparency or accountability in the public sector when completing IT projects on time and within budget. Do you agree?

DS. No I would not agree; it may appear to be more difficult to be clear on accountability in the public sector but the reality is that accountability is even more demanding and stringent. Accountability is more layered be-

“I don’t think I have come across a private sector organisation that has the same level of complexity as HMRC, given the range of sophisticated products involved in managing a tax administration”

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cause of the political aspect and much more complex because, as well as public accountability, IT projects face the scrutiny of Parliament and its powerful committees. Not forgetting close media interest and also in depth examinations by bodies like the National Audit Office. Overall, accountability in the public sector is much more demanding given the spread of customers and how Government IT impacts on citizens in a much more real way than a private sector organisation. There’s nowhere to hide in the public sector.

How has HMRC progressed with efforts to slash the running costs of its IT infrastructure by 10 percent?

DS. We achieved this target back in December 2007 so we are going even further and have a number of internal activities that will involve fundamentally re-architecting our outsourcing arrangements. Th is doesn’t just mean we want to reduce the prices of services we have purchased but is more about looking at how we work and the accountability we have across the outsourcing organisation and internal organisation. We are also looking at how we work with our business and how we consume as well as procure IT services from within the HMRC construct. We want to

have much clearer understanding and better planning around the propositions we want to put forward and how they turn into IT solutions.

A huge outsourcing project continues to be the 10-year Aspire outsourcing deal with Capgemini. Is it correct that you have extended this contract three years to 2017?

DS. Soon after the Aspire construct was created we had the merger between Customs & Excise and Inland Revenue, which has gone really smoothly. We are now constructing the future of our outsourcing arrangements to drive transformation at pace. Th is will be achieved through the outsourcing arrangements with Aspire, so that we can leverage the global skills, capabilities and expertise that key players like Capgemini have. Pre-merger with Customs & Excise, the Inland Revenue spend was projected to be around €3.5 billion to 2014. We are currently projecting that we are in the region of €8 billion, partly because of the Customs & Excise merger. It also reflects the sheer amount of investment that has gone into modernising the department As a consequence there has been a huge investment in IT, which was not in the original expenditure projections, to enable that transformation.

GOING

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DEEPAK SINGH ON THE CHANGING ROLE OF THE 21ST CENTURY CIO: “Most CIOs that I have met are technologists and don’t speak the language of the business. They manage the business by fear and they find it difficult to get a seat at the table in terms of their voices being heard, so they are going to have to fundamentally change. You are seeing a prominence of CIOs coming through that are not traditionally from an IT background and I think this will become much more dominant in the future. It is saying that we want IT people who are much more akin to the business agenda as opposed to what the technology agenda is. I always believe that it is far easier to teach people about IT than it is to teach them about business.

So the IT industry is going to have to change and it can’t be full of hobbyists and it’s got to be much more about people who are passionate about the customer and the business agenda and those who really understand how IT can enable that from a business perspective rather than a technology perspective.”

HMRC is working with the British Bankers’ Association (BBA) to establish a secure electronic data transfer with the banks. What benefits will this deliver?

DS. The secure electronic transfer solution has moved beyond the pilot stage and we have implemented it with two key BBA members. It means we can simply automate a lot of the data movements between ourselves and external third parties like the fi nancial institutions and the insurance companies. It also means that we have a much more streamlined process, with auditing capabilities. More fundamentally, doing these things electronically, as opposed to through manual handling, means we have created a much more secure environment. Within the next two years we expect the vast majority of BBA members to be transacting with us through the electronic transfer solution as opposed to through ‘removable’ media solutions. For instance, HMRC currently handles 40,000 media movements such as tapes, CD-ROMs and USB sticks, which are all securely protected through additional layers of encryption that we introduced in the last year or so. Th is will no longer be necessary using the secure electronic data transfer solution.

On the subject of security, what have you done to tighten your defences since the loss of two unencrypted discs containing child benefit-related personal data on 25 million people?

DS. We now have locked down the use of CD-ROM and USB devices pretty much overnight on the back of the child benefit data loss. We have encrypted every single laptop and only use USB-encrypted devices. We have also tightened up the accreditation of our applications to ensure they are secure and meet the standards that exist across government. We successfully protect against 11 million intruder attacks every single year and we are not aware of anyone who has managed to get through. We have done quite a lot in terms of the technology to the point at which now the vulnerability and the impact of a data loss, be it the loss of a laptop or USB device, is much lower given the fact that we have pretty sophisticated and advanced encryption on these types of devices. The agenda has moved much more towards getting cultural and process issues associated with security embedded as a discipline.

That is not saying that our staff within HMRC are not security aware because this is at the heart of any tax administration. The confidentiality of tax-payer data is an ethos that we have had for a long time. It is also not so much about understanding why security is important, but is about making sure our staff are enabled by having the correct and simpler processes by which to handle customer data.

Why is a robust IT infrastructure so essential to the successful and smooth running of HMRC? DS. The world is moving much more towards a society that requires interaction in a much more flexible way – be it through the e-channel, text messaging, email or telephone. We have to make sure that our IT infrastructure is flexible enough to support the changing needs of our customers. The backbone of this is that if you assume that society will move to a self-serve agenda, whereby they can access services at their convenience as opposed to HMRC’s convenience, then inevitably you have to invest in robust ‘always on’ infrastructure. We still have a long way to go with seeing how far our customers move in terms of their channel shift but we are seeing this through self-assessment and other regimes. Therefore, our IT investments are going to have to be much more 24/7 and stable to enable our customers to access our services at their convenience.

HMRC’s website has crashed in recent years under the strain of the sheer number of people trying to file their self-assessment tax returns online. What are you doing to make the site as stable as possible?

DS. We received close to six million self-assessments online last year and 40 percent of those returns appeared within the last month of the 12month period for returns. So there is this huge exponential growth in returns expected in the last month of fi ling. We have made huge investments in the stability of our online portal over the last two or three years.

Last year was the fruition of that investment in terms of making sure all of the components of our IT infrastructure were stable, resilient so that we don’t go through the same scenario that we had on January 31st 2008.

Last year we had a 50 percent upturn in customers fi ling online and we did this with 100 percent availability without any real difficulties. The service is stable and highly resilient.

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Presumably late filing would be solved by education?

DS. We have struggled with how we educate and enable our customers to smooth out the peaks and troughs that we get through selfassessment. What contributed to the 50 percent uplift in returns made online was the shift of the deadline for paper returns to October 31st. Th is said to our customers that they have a choice: if they want to use paper-based returns then they have a much more limited window by which to transact with us. Those that are prepared to move towards an online channel have the extended deadline of January 31st.

It still doesn’t fully remove the peaks and troughs and we have to both educate and enable our customers to see the value of fi ling in a much quieter period.

We don’t want to necessarily incentivise our customers fi nancially because it is tax-payers’ money but at the same time we have got to make sure people understand the benefits of doing this.

DS. I think that is absolutely true. The agenda has shifted fundamentally. I think businesses, both private CIO to fill a job labelled the and public sector, “biggest and most challenging are going to be in Europe”. much more cautious about, one, Deepak Singh is due to step down as their investments IT chief in September and be replaced and, two, the value

by Transport for London (TfL) CIO Phil of those investments Pavitt. The job, which was advertised and the benefits they with a starting salary of €125,000 but get from them. They with potential for the right candidate will be much more to earn double this, was described as cautious about the “biggest and most challenging in how they manage Europe” earlier this year. Pavitt has money and will expect been CIO at TfL since 2007 – his first those organisations to be public sector role after opting for lean, including the IT funcsemi-retirement when he departed tion. That requires a different from Centrica. mindset, it requires IT lead“Our intention is to have Phil at ers to take on a slightly least up to speed on the basic things different remit that is not by the time he starts in September” just about modernisation says Singh. “There will be a two-week but about getting your own handover period where we will take house in order. It is about him through the challenges that we making sure you are efficient face as an IT function, right through in how you manage your into some of the operational issues that ternal IT processes, how are being managed right now.” you procure IT and This is obviously a very tough that you leverage time for all businesses – both in much more the the private and public sector. What opportunities effect will the recession have on HMRC’s IT budget? that the IT DS. Anyone who works in IT is always challenged to manage their costs in industry is providing CIOs. For example, the whole concept of cloud the most efficient way. Most CIOs and IT Directors do not go out and spend computing whereby you buy services in the ‘cloud’ as opposed to creatmoney for the sake of spending money. So this is a permanent agenda, ing them yourself is all playing towards the agenda of making sure IT whether in an economic downturn or otherwise. That said, the economic can be seen as a commodity and delivered through the most cost effecconditions that we see are going to lead to a much tighter squeeze on public tive means. I think you are going to see CIOs and IT leaders much more expenditure than we have ever seen before. The agenda coming to the fore akin to that agenda than they ever have been in the past. and being given much more attention by CIOs is the cross-government Also, I don’t think the IT industry itself is going to be any less afagenda i.e. how we can more holistically leverage across the public sector fected by the downturn than any other industry sector. Typically, backthe opportunities to reduce our costs through economies of scale and by office functions get affected by monetary or fi nancial squeeze and IT using the corporate buying power of the public sector as a whole. For extends to be a back-office or corporate services function. I believe there ample, the plan to consolidate our data centres, from 138 across the whole is still plenty of growth in the marketplace, plenty of opportunities for public sector, to less than a dozen is a massive cost saving opportunity. So IT to play a supporting role and as a consequence of that, the economic the agenda is shifting much more towards shared services across governdownturn will have a short-term impact. But investment in IT is not ment and making sure we can achieve greater economies of scale. really an option – it is obligatory for all organisations given that IT is an enabler of transformation and an enabler of more efficient and There is a danger that this recession could affect the next generation effective services for our customers. In short, there is enough growth of IT leaders coming through. However, you were quoted recently in the IT sector that will happen over the next fi ve to 10 years and that as saying the “next generation of IT leaders will be born out of this will overcome some of the short-term difficulties in the next two to crisis”. Do you still believe this? three years.

WANTED

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AVIATION

SKY-HIGH TEC With German national carrier Lufthansa on target for a mammoth technology overhaul, we hear from Dr Christoph Klingenberg, the new Head of Information Management and CIO of the airline’s passenger business.

D

r Christoph Klingenberg has only been behind his new desk as Lufthansa’s Passenger Airline’s IT chief since April but his in-tray is already overf lowing. With his predecessor Christoph Ganswindt swapping Lufthansa for Deutsche Telekom, Klingenberg is busy getting to grips with overseeing a huge IT infrastructure migration project amid probably the toughest economic period ever seen for the airline industry.

Nevertheless, a buoyant Klingenberg has a clear vision of his role ahead. “The expectation is that I can strenghen the bridge between the various functions and the IT people” he remarks calmly. “It is certainly too early to judge whether I have achieved this but it is certainly my aspiration.”

Prior to his latest appointment he was Luft hansa’s Senior Vice President of Direct Services for four years, responsible for the planning and operation of all Luft hansa domestic and European direct fl ights not routed through the company’s Frankfurt and Munich hubs. And

although he has a computer science background, he joins a growing list of business executives being handed top tech jobs across Europe. It seems that having a purely IT career is not always a golden ticket to the best CIO and CTO roles out there as organisations seek out business savvy individuals who can carry over their skills and experience to the world of technology. And with Klingenberg having worn various hats during his 13 years at Luft hansa, this no doubt furnishes him with a greater holistic overview of the airline’s operations.

Klingenberg also reveals that while it is certainly “tempting” to become a very much hands-on technology chief, he foresees the role being much more about steering the IT function in the right direction. “It’s about setting the IT strategy and setting the rules for an architecture so you know what the systems we employ will look like in five to 10 years time. It’s also about the path we take to get a more consistent computer and architecture landscape, as well as what governance rules we should establish to arrive at that plan.”

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CH THINKING IT Migration

users travelling with different status levels.” CITP will also enable the 21 The bulk of his work (as it was with his predecessor Ganswindt) is full Star Alliance members to better respond to market conditions and focused on the mammoth Common IT Platform Initiative (CITP) – a change class usage or schedules quickly to improve yield. multi-million euro project powered by Amadeus to migrate Star Alliance Like many of the legacy carriers dominating the skies, Luft hansa’s partners’ loosely connected IT infrastructures to a common platform.

IT systems, especially those that handle departure control and check-in The goal of the CITP is to better serve customers, slash IT costs and boost functionalities, need to be switched in the long run. Indeed, some of its the speed of launching new products to market. The switch over has been older systems are between 15 and 30 years old, which creates maintecarved into three key parts, with the first achieved 18 months ago when nance and upgrade problems amongst other challenges. Luft hansa was the old inventory systems were migrated. Th is fi rst stage alone reduces one of the fi rst Star Alliance partners to shift its inventory system to Luft hansa’s IT-costs considerably. “The ticketing function will be the CITP, which was a deliberate move according to Klingenberg. s, “and o being a late follower of developments that we moved over in November 2010,” Klingenberg explains, “Instead of one or two years later we plan to migrate the whole of the could not shape, we thought it would be a good idea to departure control systems, such as check-in and flightt shape shap this development and partner with Amadeus handling at the airport.” in order to get a system that would suit our needs.

Lufthansa will W can exert a lot of influence to get our functions For this IT chief the benefits have been clearly We switch over its a processes into the new system, but of course visible thus far: “It has already been a huge economic and ticketing system in t benefit to migrate the fi rst step,” says Klingenberg. this is much easier to get done if you are the fi rst c “The other steps will bring lots of new functions, company to migrate rather than the 25th.” such as being able to accommodate customers much As well as CITP, Klingenberg is also busy with faster at the airport or offer, for example, dovetailed the self-service check in functionality, designed to me services to the different frequent flyer programme make life easier for passengers, as well as improve effi-

2010

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ciencies and cut costs for the airline. In Frankfurt, manual check-in capacities have been reduced for economy class passengers as they can check in using the internet, their mobile phones or the kiosks at the airport, which has created “big value” for customers and the airline according to Klingenberg. He adds: “The customer can be master of his own destiny and it creates value for us because we can free up resources at the airport reducing those manual check-in functions.” So how has the response been from customers? “Generally, it has been very positive,” he notes. “It has been an especially positive response from those who are checking in and reserving their seats using their internet-enabled phones whilst on the move.”

To keep Luft hansa operating smoothly the passenger airline wing of the group is powered by some 200 systems managed by 400 staff. Luft hansa opts not to do programming and coding in house; instead these functions are outsourced to the likes of IBM, Amadeus and Luft hansa Systems.

Haircutting The CITP transition and other new technology implementations coincide with a period where the airline industry is sustaining a severe battering from the turbulent economic conditions of the past two years. The recession and cuts in corporate travel, combined with extremely volatile fuel prices have grounded some carriers and left the likes of British Airways with mounting losses and staff layoffs. Like any industry the airlines need to cut costs where necessary, and Luft hansa is no different in that regard. “Our [IT] budget has had a haircut of 10 percent, which means we are mainly cutting external expenses,” the CIO remarks. “All the IT projects have to jump some tough economic hurdles, and the payback has to be within a couple of years but we identified some projects that we could postpone without much harm to the business. And we feel it is valuable to have the know how, especially when it comes to supporting all the big projects we have here.”

In these lean times where every euro counts, IT can sometime feel the force of budget cuts as a prudent CFO takes a tight hold of the company’s purse urse strings. Without technology, however, the airline industry would be crippled. crippled “You won’t fi find nd a manager in the airline business who tells you that IT is an unnecessary expense,” Klingenberg states. “Our CEO has been a huge promoter of the CITP, for example. He sees it as an enabler for consolidation.

“Every airline has its own IT system and they don’t really talk to each other. So problems can be overcome once we migrate a lot of airlines to the new Amadeus system. I would say it has been rather easy to convince top management to free the funds to support this project,” Klingenberg concludes.

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ENTERTAINMENT

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With around 6.4 million transactions completed every day, online betting exchange Betfair is busier than all of Europe’s stock exchanges combined. It’s a British phenomenon born in the aftermath of the dot.com crash that has become a red hot favourite among shrewd punters. Julian Rogers goes behind the scenes and meets CTO Tony McAlister.

I

t’s a Thursday morning in July at Betfair’s headquarters in Hammersmith, London, overlooking the River Thames. Tiger Woods has just teed off at the British Open on a windswept Turnberry course while England’s cricket team is about to lock horns with Australia in the second test match of the Ashes. There’s a buzz in the trading room as call handlers match bets from punters over the phone while arm-chair gamblers ‘back’ and ‘lay’ (see page 58) on Betfair’s website. Computer screens in the room are a frenzy of activity as money from all over the world comes pouring in for Tiger who is now a clear 2/1 favourite. Today’s going to be one of the busiest betting days of the year.

Betfair currently boasts more than two million registered customers from more than 140 countries.

At peak periods the site has to be robust enough to stand up to 450,000 page views per minute and 1000 bets a second. Keeping this extremely complex site running smoothly 24/7 is the responsibility of the company’s ebullient American CTO Tony McAlister. Although having only been in the tech hot seat for six months, McAlister is relishing the job so far and the technology challenges ahead as Betfair looks to penetrate new markets around the world. He is also in awe of what founders Andrew Black and Ed Wray have created in nine years, turning the company from internet upstart into the world’s largest betting exchange with a 90 percent share of the market. “I get to stand on the shoulders of giants, as Isaac Newton once wrote,” McAlister explains. “What the company does today is because Ed Wray and Andrew Black created the exchange nine years ago, which is a pretty incredible foundation for me to build from.”

When the company launched in June 2000 just UK£30,000 was matched between punters on the opening event – the Oaks horse race. Fast forward to July 2009 and a wallet-busting UK£53 million was matched on the five-set thriller between Roger Federer and Andy Roddick in the men’s Wimbledon final. Th is was a record for Betfair. “The volume [of bets] here is astronomical,” McAlister enthuses. “Th is creates the obviously huge challenge of maintaining the appropriate level of uptime and response time for our customers.” And while the site started life as a sports exchange, Betfair now houses an online casino, poker room, games and more. Unsurprising, the role was somewhat of a baptism of fi re for McAlister who

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HOW IT WORKS has 30 years’ experience in systems development in non-gaming related industries across Europe and the US. He admits that although he enjoys sports, the only wagers he has ever struck were in his homeland on casino blackjack or the odd game of poker. Getting his head around how the exchange works, the markets and gaming on offer, as well as gambling rules and legislation, was initially a tough hurdle. “It’s been a pretty steep learning curve,” he admits.

“However, I am more excited about the job today than when I fi rst took it, mainly because of what I have learned about the industry, the company and the growth possibilities, as well as the tools and the pretty amazing people I have here to help solve problems.” He also reveals that his impression during the interview process was that this was more of a technology company than a betting company. “After six months I can strongly say this is indeed what it is. is.”

Place your bets now For McAlister and his customers, speed is of the essence. A significant chunk of betting activity on the site occurs ‘in play’ right up to the finishing line or the final whistle. But while cricket matches can last five days, other sports like a five-furlong

A

t Betfair punters with differing opinions on an outcome can wager with each other instead of using a traditional bookmaker. For instance, John thinks footballing giants Barcelona (2/1) will beat a star-studded Real Madrid in the Spanish capital. He wishes to bet €10 at 2/1, which will return €20 plus his €10 stake (€30 in total). On the other hand, Jack believes Barcelona won’t emerge victorious so ‘lays’ (accepts) John’s €10. If Barcelona lose or draw he pockets the €10 but if they win he pays John €20 as well as his original €10 bet. Betfair then charges commission of between two and five percent (commission is reduced the more you use Betfair) on winning bets.

If you don’t fancy the odds on offer you can ask for a better price. Likewise, you can determine what odds you offer when you lay a selection. It’s then up the other players whether or not they chose to place a bet with you. More importantly, because you are betting with individuals you can often get better odds than those on offer with a bookmaker who has to factor a profit margin into his odds.

At Betfair all bets are matched anonymously with gamblers all over the world and you can wager on a bewildering array of markets (9700 a week) – from popular sports and events like horse racing and tennis to the more obscure such as water polo and this summer’s hottest temperature.

In-play betting: not for the faint-hearted

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Tony McAlister

“One of the things both I and the company believe in is investing in a business during a downturn”

horse race lasts around one minute from start to finish. Punters will be backing, laying and trading their positions in play as the sprint unfolds. “Speed is key because I have to get those bets matched very quickly for the customer,” he explains.

“When [David] Beckham steps up to take a penalty people will be trading their positions at this point so if I am a second late the shot has already been taken.”

Betfair claims that 99.9 percent of all transactions are executed in less than a second – the average time is 23 milliseconds. The complex IT infrastructure powering Betfair is an Oracle database. In fact, the California-based fi rm rates Betfair as one of it’s top five customers, alongside the likes of eBay and Google. “I have some of the most sophisticated Oracle PL/SQL developers in the world,” says McAlister. “We push that database probably as hard as any Oracle customer, which creates a lot of opportunities from this database that they don’t get to see from their other customers.”

As well as his engineering team at Betfair HQ, McAlister also has 65 local developers and staff at his disposal in the Romanian city of Cluj, dubbed the Silicon Valley of Eastern Europe. This Betfair-owned facility is responsible for around a quarter of the company’s development projects and is focused on innovations. “We have given them some of our product sets to build and it is our intention to double the size of the team in the next couple of years. It is also allowing me to stretch my development team outside of London and I am looking at other parts of the globe too.”

McAlister recently returned from Romania to welcome the team onboard and spent a few weeks in the US in June interviewing people with a view to expanding a technical team across the pond.

The right architecture The globalisation of the back-office functions mirrors the exchange’s desire to crack new markets as it becomes an increasingly recognised player and international brand. However, McAlister is forced to create what he calls “jurisdictional architectural” due to the legal constraints of

2001 First in-play market offered on UEFA cup final between Alaves and Liverpool. Betfair merges with rival Flutter.com

1998 Software engineer and former professional gambler Andrew Black formulates the idea of being able to buy and sell, or back and lay, sporting event outcomes in a similar 62 www.cxo.eu.com fashion to buying and selling shares

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2000 Site launches with its first market being the Oaks horse race, won by Love Divine. UK£30,000 is matched on the race 2003 Betfair wins the Queen's Award for Enterprise, in the Innovation category, on the recommendation of the British Prime Minister

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operating a betting exchange in certain countries. “As we expand globally ability to do this?’. Keeping your eye fi rmly on what the business is trying we realise that we need to build our solutions and products and services to achieve and not being distracted by your ‘IT blinkers’ is key. Indeed, so that they can easily be turned on or off depending on the regulatory McAlister says he always “stays close” to the business. requirements. Therefore, I have to make sure my technical architecture “I have been in technology almost 30 years now but I have always matches the business architecture and go into a region and use one prodviewed myself as a business person first and foremost. I work directly uct but not another and then a different product in another region. That with the business and get to know it very well and work closely with my has created a pretty difficult challenge for the technology department commercial counterparts. I attend all of their meetings, stand in there here.” McAlister has spent a great deal of time recently in the company and do strategy sessions with them, and these might not have anything of Betfair’s legal team and the regulators to better understand what he to do with the technology itself.” can and cannot do in certain regions. The company plans to overhaul its platform in order to react nimbly to legal changes in countries where it Back a winner does not yet operate. The idea is for a ‘Betfair in a box’ system that can be As the interview winds up I pick McAlister’s brains on how the rolled out should laws allow Betfair to enter. blackening recession will impact on Betfair and its technology functions.

One medium McAlister has been keen to get his teeth When a recession bites people will look to curb their expenditure stuck into is Betfair Mobile. This stripped down verand gambling gambl could be one pleasure to get the chop. McAlister sion of the site allows users to place bets and check k believes however that the company will emerge from the odds through their internet-enabled mobile downturn down stronger and healthier, which is why investmen in IT people and technology is being made now. phones. And with previously experience as CTO ment At peak periods up to “On of the things both I and the company believe in is of Vodafone’s mobile content division, he is “One inv confident he can leverage its power. “Mobile is investing in a business during a downturn,” McAlister sug a perfect example of what was traditionally in suggests.

“The whole world knows the market now is in bets are matched pr the internet boom, around 1999/2000, one-toa pretty difficult fi nancial situation. Betfair is cautiously every second optim one marketing. With mobile I really can do that optimistic that we are doing OK and we do believe the market will turn around. My goal is that when we come out because you have that computer in your pocket and an of this rec I can get to you anywhere you are and likewise you can recession, we will have a stronger architecture, better ile and products and services, a more efficient development process and get to me.” He continues: “I want to leverage mobile use the power of the exchange to push our mobile products more have a globally dispersed technology team.” strongly than most people are doing today.”

Staying in tune with where the business is heading and its requireWith all of these back-office and customer-facing technologies on ments will be paramount for this IT chief. “I need to align my technical his plate, it’s clear to see why he feels Betfair is more about technology architecture with the business architecture so I have got to build an inthan gambling. And while his remit is to align the IT architecture with novative platform that can change quickly into different shapes and sizes the business architecture, he has found technology can prove to be a real that I cannot even see today.” game-changer. “Sometimes because the company is very technically foIn case you were wondering, Tiger Woods struggled with the inclemcused and very innovative, the technical architecture can influence the ent weather and crashed out of the British Open before the third day’s business architecture. I can go to them and say ‘do you know I have the play. This time the layers got it right and bagged some juicy profits.

1000

2005 Named the UK's seventh fastest-growing technology company in The Sunday Times Tech Track 100. Betfair is granted a licence in Austria, its first outside the UK

2009 A record UK£53 million is matched on the men’s final at Wimbledon between Roger Federer and Andy Roddick

2006 French, Bulgarian and Czech language sites are added, taking the total to 18 worldwide. An online casino launched

2004

Successfully migrates 300,000 customers to Betex, its new platform. Also hosts its first online poker tournament with UK£100,000 prize money

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2008 Registers its two millionth customer. Wins an unprecedented second Queen's Award for Enterprise, this time in the International Trade category

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ESCROW EXEC:co proof 13/08/2009 10:37 Page 64

EXECUTIVE INTERVIEW

Fail to prepare and prepare to fail Burying your head in the sand when it comes to business continuity planning is just not an option today. CXO hears more about this critical function with industry expert Herman Meuldermans.

In the current economic climate why is it so important to have business continuity systems in place?

Herman Meuldermans. Escrow is a legal, technical and administrative arrangement in which an asset (e.g. source code) is deposited into safekeeping with a trusted third party – the escrow agent. If contractual conditions are met, the escrow agent will deliver the asset to the party prescribed by the contract, mostly the user of the technology. These days, trust between business partners tends to be institutionalised. Over the past few months we’ve seen that the complex business relationships as we know them, essentially are based on mutual trust. What happens if trust suddenly disappears? The thing collapses.

Business partners still like each other, and want to continue doing business with each other. But they are careful, more than ever dependencies have to be secured. That’s exactly what we do. We could state therefore that the current economic climate is in favour of products such as ours, offering security and guaranteeing business continuity.

What business continuity challenges are businesses currently facing?

HM. There are a lot continuity challenges, of course. The one that’s very often forgotten, or that’s being thought of too late, is the dependency of a supplier. When it comes to IT systems or technology in general, this dependency can be very, very critical. As well as any other company, suppliers, due to the economic game, can win, can lose, and can fail in delivering the expected service. This can have very nasty consequences. Realistic suppliers are aware of their position and take pro-active action. Together with their service agreement, they offer an escrow contract to their clients. Thus they show themselves as a reliable partner, they turn their weakness into a strength. We help them do this.

cluding shareholder perception. Production and service issues come next, followed by marketing and sales. People are important too and a huge effort is put into human resources programmes. In this context, also knowledge management is very often mentioned. All of this is administrated by huge and sophisticated IT systems, costing immense amounts of money in both development and support. Is continuity of this critical infrastructure assured to an acceptable level? Is there an escrow-arrangement in place ?

Even a company relying on its own personnel when it comes to IT or technology development is essentially dependent from them. If the team disappears, what happens to the knowledge of the system? Escrow services reach beyond the safeguarding of a depot. The technical team will always verify if the depot is what it’s supposed to be; the administrative support team will update the depot at least once a year, thus continuously guaranteeing maximum usability to the user.

Whether technology is created internally or externally, due to the structured and updated verification service, continuous use of the system is guaranteed.

“When it comes to continuity, a lot of company issues are almost naturally thought of”

What common mistakes do companies in Europe face when it comes to business continuity?

HM. I wouldn’t call it a mistake, rather a lack of awareness. When it comes to continuity, a lot of company issues are almost naturally thought of. On top, of course, management teams think about financial conditions, in-

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You talk a lot about dependency between users of technology and the suppliers of it.

What’s the use of escrow services for suppliers? Aren’t they considered to give away their intellectual property?

HM. Indeed we speak of beneficiaries when we mean users. If something goes wrong, they receive the deposit, including source code. But I don’t agree with the statement that suppliers give away their intellectual property. They don’t. On the contrary, they

secure it by depositing it.

Our contract very clearly states that the IP remains property of the supplier, whatever happens. When a deposit is given to a user, he obtains the right to further develop the source code for his own purposes, nothing else and certainly no commercial objectives. A very significant penalty is foreseen in the contract. n Herman Meuldermans, General Manager of Escrow Europe, holds a university degree in Social and Political Sciences from the Catholic University of Leuven. He started his career as an account manager for ING Insurance in Belgium and later worked as a principal consultant for almost six years for a Dutch consultancy bureau.

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SECURITY

David Jevans discusses the challenges of fighting a global war on phishing and crimeware during the financial crisis.

Phish tales W

hen I founded the AntiPhishing Working Group in 2003, I thought that we would have eliminated phishing by mid-2004. How wrong I was.

The Anti-Phishing Working Group (APWG) was founded to bring together the diverse communities of banks, ISPs, e-commerce companies, security vendors and law enforcement agencies. Our core philosophy was to create a forum where these diverse players could talk frankly and honestly about the evolving phishing attack situation, without fear that these conversations would become public. Th is format proved to be immensely successful, and the APWG now has over 1500 member companies and government agencies.

In 2003, phishing attacks spread from attacks against eBay and PayPal customers to a wave of coordinated attacks against the customers of Australian fi nancial institutions. In the summer of 2003, these attacks were then aimed against customers of UK fi nancial institutions and in late 2003 US banking customers began to be targeted.

This global pattern indicated that cyber criminals were becoming just as organised as traditional crime gangs. They were testing new techniques in smaller markets like Australia, where users are easily targeted by their network address and because there are a smaller number of financial institutions. The model was then perfected and expanded in the UK, where there were still a small number of institutions, and an easily targeted customer base. The scam was then scaled up to the US market, particularly targeting customers of the top few banks.

It became clear that one particular group could not solve the phishing problem on their own. It would require cross-industry collaboration. Thus the APWG was formed.

As phishing scams became ever more sophisticated and professional, members of the APWG were able to discuss the evolving tactics and best practices for detecting these attacks, shutting down the phishing sites and tracking and reducing losses. In closed-door APWG meetings, members were able to discuss the indirect fi nancial losses from phishing attacks; for example, the costs of call centres receiving tens of thousands of phone calls from consum-

ers when a major attack was launched.

The APWG publishes monthly reports that track phishing statistics around the globe. These statistics allowed us to see patterns where some fi nancial institutions would be attacked with much more intensity than others. Eventually it became clear that one significant factor in the number of attacks that an institution faced was related to how easily criminals could transfer funds out of compromised customer accounts. We also began to see cross-channel fraud, where account numbers and PINs were used to create ‘white plastic’ ATM and debit cards.

Financial institutions started to realise that the phishing problem spanned all types of fraud, and was involved in ATM, debit card, cheque card, wire transfer, ACH and account opening fraud. More recently we have been seeing the telephone banking channel used as an attack vector, where phishers send out emails requesting customers to call a fake call centre, where the IVR system is used to collect account numbers and PINs from customers without them ever having to visit a spoofed bank website.

The cyber criminals fight back Th rough 2005 and 2006 the security community began to develop anti-phishing technologies and service offerings, such as outsourced takedown services, to get spoofed websites shut down in a timely fashion. The phishers responded by increasingly hosting their spoofed websites in foreign countries, making takedowns very time consuming, requiring foreign language skills and extended working hours to deal with sites hosted in varying time zones.

For every defensive measure that is put in place by the industry, the criminals react with a creative new approach to continue their fraudulent activities. For example, the security and web browser community began to track known phishing sites and share those web addresses as a block-list, which would allow browsers and email servers to prevent users from receiving known phishing emails or visiting known phishing sites. One of the prominent phishing gangs, known as the ‘Rock Phish Gang’, responded by using tens of thousands of sub-domains on their phishing sites, thus overwhelming the block-lists.

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Another example of escalation in the war against cyber fraud was the invention of fastflux technology by the leading phishing gangs.

Fast-flux is a DNS technique used by botnets to hide phishing and malware delivery sites behind an ever-changing network of compromised

A very disturbing trend over the last year has been the use of social networks to spread crimeware and phishing. There have been attacks against users of MySpace and LinkedIn that have infected tens of thousands, and in some instances up to a million users in a very

“We expect that the current global financial crisis will continue to give phishers new ways to create believable social engineering attacks” hosts acting as proxies. A sophisticated type of fast-flux is when multiple nodes in the fraud network register and de-register their addresses as part of the DNS record list for the DNS zone.

This makes taking down phishing and crimeware sites extremely difficult, as they are hosted on many machines with changing IP addresses.

The APWG and our members have been working with ICANN, the Internet Corporation for Assigned Names and Numbers, to create policies for rapid takedowns of fraudulent domain names that are being used to host phishing and fast-flux sites. This has been a multi-year effort, and there is still much work to do with policy and education among the registrar and registry communities.

short time frame. These attacks do not rely on traditional email, as they spread inside the social networks using their internal web-based messaging systems. Th is can make these attacks very difficult to track and profi le.

2009 and beyond We expect that the current global fi nancial crisis will continue to give phishers new ways to create believable social engineering attacks to steal account credentials and to spread crimeware. In the fourth quarter of 2008 there were numerous attacks against customers of major fi nancial institutions that were being acquired or were in the news as receiving government aid. In 2009 we can expect

an increase in money mule recruitment scams, where criminals recruit unemployed consumers to act as online funds transfer agents, or to reship goods that were purchased using stolen credit card numbers.

The rapid and continuous evolution and expansion of online fi nancial fraud through phishing, crimeware and social engineering is something that requires a coordinated global response from the fi nancial services industry, ISPs, security vendors, e-commerce merchants and law enforcement agencies. The APWG and our members have been working to expand our systems and tools for secure collaboration and data sharing. We have facilitated the sharing of phishing site URLs between members, and are expanding this to allow fi nancial institutions and security researchers to share information about fraudulent websites and IP addresses of known and suspected cyber criminals.

In these challenging fi nancial times, it is more important than ever for the fi nancial services industry, the security industry, ISPs and law enforcement to work together to share information and pool our resources to keep our customers safe, and to secure our assets.

Come and join us.

David Jevans is the Chairman of the Anti-Phishing Working Group. For more information, please visit www.antiphishing.org

CRIMEWARE ESCALATION

O

ver the last several years we have seen phishing augmented by the spread of malicious software that is designed to steal online account details. This malicious software that is designed for electronic crime has been dubbed ‘crimeware’. The crimeware wave seems to have started in Brazil in 2003, and has spread around the world. Crimeware variants are merged with remotely controlled malicious software to create networks of hundreds of thousands of compromised home computers (botnets) that are used by cyber criminals to launch phishing, crimeware and spam attacks.

The botnet explosion since 2006 has infected millions of personal computers around the world that are being used by criminals without the knowledge of the person who owns the computer.

Recent activity in the crimeware landscape is the evolution of targeted crimeware that is designed to get on to the computer of a targeted employee in a large corporation or government agency. Once that person’s computer is infected, the criminals can upgrade the crimeware to add new functionality to compromise other computers, steal

intellectual property, create backdoor access paths into the corporate network, or even to run customised software to generate transactions inside the company network. This represents the ultimate professionalism of the cyber crime industry, where crime gangs plot attacks for many months, and using highly sophisticated crimeware and targeted social engineering to get it into corporate networks. This is called ‘spear phishing’.

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EXECUTIVE INTERVIEW

Putting data at the heart of your business Juniper Networks’ Trevor Dearing speaks to CXO about managing a data centre to get the best performance.

How can IT managers achieve cost savings and a better data centre performance at the same time, especially in today’s economic climate?

Trevor Dearing. Most data centres have evolved over a period of time and much of the network architecture is consistent with that used in traditional campus networks. Capacity and resilience have been designed into networks by adopting a multilayered approach with a onefor-one redundancy to deliver the same performance in the event of failure as you would expect normally. Equally, in a drive to make the data centre more secure and provide protection for users and applications, a very complex security infrastructure has been built in parallel

TD. Unless you are building a new data centre, it is not always easy to start from scratch. The easiest fi rst step is to move to a more powerful integrated security platform. Instead of racks of separate security devices, a single device can replace the multiplicity of boxes and deliver security as a service to users and applications. The second step is to remove layers of switching from the physical infrastructure. Juniper Networks can reduce the number of managed devices by a factor of 10, so removing physical links and reducing the spanning tree issues. Th is is achieved through two methods: the fi rst is to consolidate the edge and to deploy virtual chassis technology, which makes multiple top of rack switches

“Unless you are building a new data centre, it is not always easy to start from scratch.

The easiest first step is to move to a more powerful integrated security platform” to the core network. All of this adds up to a data centre network that can be very complex and difficult to manage. The challenge is that because of the way it has been built people may not notice just how complex it is because it is what they are used to. By simplifying the infrastructure it is easy to achieve an improvement in performance, security and reliability.

What is the most cost efficient way for companies to overhaul their data centres and how will they achieve the best return on investment from such a move?

act like a single switch. The second is to use a very high capacity switch in the core of the network, which allows us to remove the aggregation layer completely.

What new IT trends are currently influencing the way companies manage their data centre resources?

TD. The big issues are virtualisation and consolidation. The fact that a single server can now do the work of many older devices delivers much more scalability and a reduction in floor space. New virtualisation techniques

mean that multiple applications can be run on a single system and this makes much better use of available resources. However, these things are not without risk and need some careful planning. Both of these technologies can have a significant effect on the network and so this should be considered in the design. Higher capacity servers will naturally require more bandwidth and virtualisation will change the security model.

Why are more companies now moving towards a centralised data centre as opposed to a decentralised system?

TD. Some years ago, decentralisation was viewed as the way forward. By using all of the computing and storage around the network it was believed that the cost would come down significantly. The challenge with this was that the ability to manage and secure distributed processing and storage was just too high and that centralisation made everything much more manageable. Th is is especially true in a world of WEB 2.0, SaaS (soft ware as a service) and SOA (service-orientated architecture) where an increasing amount of traffic actually stays in the data centre. Th is has a major impact outside of the data centre, as it makes the use of thin workstations more appropriate, delivering an easier to manage and more secure model. The balance to this is that if the network fails or delivers low performance then the operation of the organisation is directly affected. The reality of realising the benefits of a centralised model is that the network needs to be faster, more secure and more reliable than it has ever been before.

Trevor Dearing is the Head of Enterprise Marketing for Juniper in EMEA. He has worked in the telecoms industry for 23 years in a variety of roles. He began in R&D developing networking solutions for digital CO voice switches, and newly-invented Ethernet technology. His career then moved to a predominantly data networking focus.

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ITSECURITY

Meet the gatekeeper With the potential for data leaks to inflict serious financial and reputational damage on organisations, CXO seeks the advice of information security aficionado and Aviva’s CISO Paul Wood.

Information security is vital to almost every department within organisations today. What would you say are your biggest issues and challenges when it comes to protecting the business from security breaches?

Paul Wood. The issue today is around data loss more than anything else.

It is the thing that is in consumers’ minds as much as it is in the minds of organisations. The other issue aligned with this is the potential for fi nancial crime and the exploiting of personal data. The main challenge, however, is around making sure that once something happens we are able to react to it appropriately, realistically and pragmatically. Often the issue becomes much worse if the incident response plan is not done in the proper and robust manner. It is about how we assess what that particular incident or breach was and how we risk assess what the impact became to the business. If it involved customer data then you have to assess the potential of that exposure for the customer. You need to see how you will limit that exposure, learn lessons from a particular mistake or error and how you will manage everyone’s expectation.

In the UK we have seen some pretty serious security breaches and confidential data going ‘missing’, even within government departments. From your experience what would you say are the common mistakes that organisations make when handling, storing and moving data?

PW. Understanding where data is at any one point in time is probably one of the biggest challenges organisations have. Also, getting the individuals inside businesses to understand the true value of information is a challenge in itself. So, a company may not adopt the appropriate security measures to reduce the potential for the risk of exposure of the data if it does become lost. This could mean not adopting sensible encryption measures, looking at how to stop or control data leaving systems or the area of mobile computing and how people use these devices. They may think it’s just a toy they have been given and don’t understand the powerful nature of what that particular device might contain.

In most organisations people are the biggest risk. In presentations I have given on security I talk about there being no patch for stupidity,

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which is about the ‘people risk.’ Often it is not deliberate but human error and mistakes or people trying to do the right thing but it goes wrong.

However, there is the potential of the disgruntled employee or there is the chance for someone who wants to steal corporate data because they want to take it with them to a new organisation. The risks are split about 80-20 percent. By this, I mean there is an 80 percent risk of theft internally and 20 percent externally. Lots of people talk about hackers and threats from the outside world but the risks are much greater internally for any organisation. Staff already have access to your systems, they understand your management processes and controls that you have in place and know how to work their way around them. The only thing you can do is to have good security education awareness, ensure people know that sensitive data theft and corruption of data – be it through planting malware or Trojans – is unacceptable. If you go back and look at the disgruntled ‘mal-intended’ events of the past you can nearly always predict that the event was a possible. The individual will have either exaggerated signs of bad behaviour or will have been disgruntled by the way they have been treated or will have been not happy with their pay review. But people then continue to let them have access to systems instead of realising this could be a problem child and there is a need to limit this individual’s access.

Paul Wood

“There is an 80 percent risk of theft internally and 20 percent externally. Lots of people talk about hackers and threats from the outside world but the risks are much greater internally for any organisation.”

If you choose to outsource, again you struggle to define and protect the perimeter. What’s your advice in this area?

PW. I think the issue is about protecting the data and not the perimeter.

It doesn’t matter how the data is being processed and what mechanism is being used to access the data because it’s about ensuring that the measures you put in place to protect the data are correct. It doesn’t matter if it is a laptop or desktop or a portable device – it’s about making sure you have the appropriate level of encryption, controls around access and that you are regularly reviewing that the people using these devices have the right level of access. You also need to educate people about not sharing passwords and log in details but if you do discover this to be the case you need to deal with it effectively and promptly in line with your policies.

At Aviva we outsource a fair amount of our call centre and backoffice processes and a bit of IT development. We do very thorough due diligence over selecting the partner we are going to do business with because we have to make sure that the negotiations and discussions over security parameters are very clear. It’s important that they understand that this is a two-way undertaking and that we want them to operate as if they were part of our organisation and apply the same rules and processes. It’s a partnership approach to make sure we get to where we want to be so in reality it’s no different than the outsource company actually working inside Aviva.

How do you weigh up the risks versus the reward of introducing new technology for Aviva employees? For instance, a technology may allow for greater productivity from staff but is a risky proposition from a security standpoint.

PW. We look at a new technology, conduct a risk assessment to see where the weak points are and the counter-measures we can introduce, and arrive, at a position where we are all comfortable.

That may mean that for a period of time we don’t get the full benefits of that productivity if we feel the risk is too high. Equally, it may mean that we live with it [the security concern] but we look to try and mitigate it as the new technology develops.

Mobile devices were a good example of this because in the early stages everybody wanted them but the levels of controls that you could position on those devices have only developed and grown over time. But we shouldn’t shy away from these things because technology enables business. What we have got to do is fi nd cost-effective and pragmatic ways of reducing the risk from using these new tools.

When it comes to investing in new security technologies, bosses can find it hard to quantify how IT security benefits the business. You spend money but you see nothing much in return because it is there to purely protect the business. How do you ‘persuade’ management

to invest in security?

PW. The days when people thought this was a ‘nice to have’ and we did it because it was the right thing to do have done. People understand that customers, clients and partners all expect there to be a level of security that they are going to have to work through and expend to make sure the data that people entrust to us is protected in a pragmatic and sensible way. What we have turned around is to make sure that security is built in at the beginning of a project and not retrospectively. Management also need to accept that security is part of a project’s lifecycle and it happens as a matter of course.

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ASK THE EXPERT

Background checks online The authentication processes underpinning the issuance of online credentials are becoming increasingly important for websites as cyber crime grows in sophistication and the internet becomes a less trusted place. By Deborah Clark.

I

n the 21st century, people are comfortable with processes validating aspects of their backgrounds. No one expects to apply for a job, rent a flat, or procure an identity card without a background check. A parallel development occurred on the web, where analogous processes for online businesses have been developed.

Th is evolution was required to secure the increasingly sensitive information exchanged over the web against threats that arose to exploit the various vulnerabilities, technical and human, inherent to transacting online. Businesses benefit greatly by understanding these authentication processes and the credentials granted to websites as a result of them, namely SSL certificates.

or has the right to use that domain name.

Some leading CAs, such as VeriSign, do not offer these certificates.

Organisation Authentication: Organisation authentication is employed for ordinary certificates. CAs verify the organisation’s existence through a government-issued business credential, normally by searching government and private databases. Before issuing the certificate, CAs confi rm the company’s right to use the domain name and that the individual who requested it was so authorised. Authentication practices for this type of certificate vary between CAs. Businesses should research this process when choosing a CA. Extended Validation (EV) Authentication: EV is the highest authentication level, adding

“One wouldn’t dream of hiring an employee without a basic check of his background; the authentication processes behind the issuance of SSL certificates are similarly critical. ” An SSL certificate is an electronic fi le identifying a site and enabling encrypted communications, issued by a Certification Authority (CA). Certificates assure consumers that they are doing business with a legitimate website.

To authenticate a site, CAs perform investigations similar to background checks. There are three commonly recognised categories of authentication: domain, organisation, and Extended Validation (EV). Differences in the levels are vitally important. Even within a category, authentication processes vary amongst CAs – a key reason for choosing a trusted one.

structure and controls to the organisation authentication process. The process starts with a signed acknowledgement of agreement from the requestor. CAs then validate registration documents or legal opinion letters to confirm details about the company or requestor. The

process represents little burden for legitimate organisations, but is a substantial obstacle for a fraudster.

SSL indicators such as ‘https’ in the address or the gold padlock icon were once sufficient to quell consumer fears; they provided assurance that data transmission was encrypted.

However, the strongest encryption is no longer enough because of a different problem. Phishers pose as genuine e-businesses. They purchase certificates from CAs that perform weak authentications, using them to trick customers.

Encryption does no good if the recipient of the transmission is a phisher. If a site appears to belong to a trusted business, users frequently fail to realise it is a malicious clone. In surveys, 90 percent of users are unable to distinguish phishing sites from legitimate ones.

To earn trust, a business’ site needs to show customers that its transactions are secure and the site is legitimate. To meet this need, security vendors and internet browsers combined forces to establish the EV standard, the first fundamental change in the secure e-commerce backbone in over a decade. When customers visit a site secured with EV, the address bar turns green, provided they use a high-security browser. This feature cannot be mimicked by a phisher.

One wouldn’t dream of hiring an employee without a basic check of his background; the authentication processes behind the issuance of SSL certificates are similarly critical.

Online users are savvier, more sceptical, and more scared. They expect businesses to protect them, and currently 84 percent of them believe that businesses are not doing enough.

The new authentication processes go a long way in allaying their concerns and protecting online businesses.

Deborah Clark is Product Marketing Manager at thawte, Inc

Domain Authentication: These certificates use the lowest form of authentication. CAs verify that an entity requesting a domain authenticated certificate either owns the domain

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Islamic Finance

Islamic finance comes of age With global financial markets in flux, Shariah-compliant banking is an increasingly attractive option for Western investors and financial institutions.

A

report by management consultancy Arthur D. Little entitled Islamic Finance Comes of Age has identified a surge in activity around Islamic fi nance as a promising opportunity for the global fi nancial services industry as it emerges from the current recession. With Islamic fi nance assets currently standing at around US$800 billion, Arthur D. Little expects this figure to surge to as much as US$4 trillion in the next six years – representing a major opportunity for Western fi nancial institutions looking to develop new partnerships and global markets.

The fi rm’s latest report investigates 10 capital markets in selected Islamic countries, each of which offers the Western investor different opportunities due to their varied levels of market maturity and sophistication. The study groups the 10 markets into three clusters, helping fi nancial players to identify the best strategies for entering each Islamic fi nance market.

The so-called ‘big four’ – the Kingdom of Saudi Arabia (KSA), Kuwait, the UAE and Malaysia – have highly developed capital markets that are supported by both government and private sector initiatives to promote fi nancial education and diversify the range of available fi nancial products. For instance, KSA and Kuwait hold the largest concentrations of Islamic fi nancial assets of 40 percent and 21 percent respectively.

The ‘challengers’ – Qatar, Bahrain and Oman – are rapidly growing Middle Eastern economies, and market growth as well as a range of government incentives has meant that these emerging players are quickly climbing the global Islamic finance ranks.

Meanwhile, the ‘newcomers’ (Morocco, Tunisia and Egypt) are also making progress. Morocco and Tunisia authorised Islamic fi nance markets in 2007, while in Egypt Shariah-compliant products were only recognised last year. Despite this, the new players have government

MALAYSIA

Map showing the global hubs for Islamic finance

backing, and in the cases of Tunisia and Egypt, policy-makers are doing what they can to encourage the inflow of investment. Th is is not the case in Morocco, however, where regulation remains tight.

“The collapse of conventional fi nancial markets has left many traumatised investors seeking a return to conservative and ethical fi nancial practices, and we believe Islamic fi nance is now one of the most attractive alternatives to conventional fi nance in this regard,” says Dr Gerrit Seidel, Managing Director and Global Head of Arthur D. Little’s Financial Services Practice. “With such huge growth over the last two decades, MENA’s capital markets are now ready to shine on the world stage, and smart investors from the West will act quickly to make the most of these alternative markets.”

A wide variety of products and services exist across the spectrum of Islamic fi nance, which are likely to expand further as the industry develops. Along with the popular sukuk or Islamic bonds, syndicated lending, project fi nance and refi nancing, and equity markets all represent real opportunities for growth.

“The collapse of conventional financial markets has left many traumatised investors seeking a return to conservative and ethical financial practices” However, despite the tremendous progress it has made in recent years, the MENA capital markets still face many challenges. For one, they remain vulnerable to sector-specific shocks. Fluctuations in the property or oil industries, for example, will affect MENA fi nance disproportionately. In addition, many of the major players in Islamic finance do not have robust inflation-fighting policies in place, while the legal, institutional and regulatory environment also requires work. Despite progress, many Islamic fi nance markets still operate with relatively new or incomplete regulatory and compliance regimes in place that risk the transparency and smooth operation of capital markets.

“Western private banks and wealth managKUWAIT ers can gain credibility in Islamic finance by ofBAHRAIN fering strong market-specific research reports QATAR U.A.E on Arabic local markets, or even volunteering to host exchange programmes to help financial market specialists from Islamic banks gain knowledge of the traditional financial market,” adds Dr Seidel. “Collaboration between established Western banks and the rapidly growing Islamic finance industry can be mutually beneficial. We have already seen leading players such as Deutsche Bank, Barclays Capital and HSBC initiate such partnerships.”

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EXECUTIVE INTERVIEW

The rise of Islamic banking With Shariah compliant banking surging in popularity around the world, CXO hears about its potential in Europe from NG Subramaniam, President of TCS Financial Solutions.

Could you shed some light onto how Islamic banking has exploded into a US$300 million industry in recent years? How much of a footing does it have in Europe?

NG Subramaniam. Islamic banking has been growing at a rate of 15-20 percent every year, spanning most of Asia and the Middle East, and is now beginning to make inroads into the western fi nancial markets. The growth in Islamic banking can be attributed to high revenues from the petro-dollar and the trickle effect on affluence in the Middle East and Asia, as well as socio-demographic trends such as the population growth and rising affluence of Muslims worldwide.

Many countries in Europe have begun showing interest in Islamic banking. France recently announced that it has eliminated tax obstacles and improved the legal framework for the setting up of Islamic fi nancial institutions in the country. Many German banks have been active in the global scene issuing Sukuks, and are in the early planning stages for retail banking offerings in the domestic market, while the UK is home to the only five Islamic banks in the EU so far, with €6.4 billion in Sukuks on its stock exchange.

What are the challenges international banks face when wishing to offer Shariah compliant products for their customers, whilst ensuring that they meet international standards and regulations?

NGS. International banks face many challenges in setting up Islamic banking operations. The regulatory environment, local taxation and contract laws need to accommodate Islamic banking products. There is a need for different countries to put in place the appropriate local regulatory framework to address Islamic banking, especially in areas such as tax treatments. The biggest challenge yet lies in the shortage of skilled resources in

The TCS BaNCS platform encompasses an array of pre-configured, customisable banking product lines, including deposits, investments, retirement accounts, consumer and commercial loans, mortgage loans, equity fi nancing, cards, payments, treasury management and trade fi nance. In addition, transaction banking services, clearing and settlement functions across the banking value chain can be enabled through the solution’s business process con-

Islamic banking as well as Shariah scholars qualified to advise banks operating internationally under Islamic law.

What impact does it have on their core banking systems?

NGS. Islamic banking may differ from westernstyle conventional banking in many respects but the same business, regulatory and technology requirements prevail. Most banks today deploy core banking systems to support their business processes and increase operational efficiencies. Th is requires enterprise-wide planning, commitment and resources. There are also considerable complexities and risks associated when a bank attempts to set up an Islamic banking window using the existing conventional core banking system to support Islamic banking. The major areas of concern that banks need to address are product compliance, profit sharing/distribution and the requirement to maintain separate entity books for customers and for reporting purposes.

Could you explain how your Islamic banking services and products are benefiting financial institutions today?

NGS. TCS BaNCS enables business transformation in Islamic banking in the form of increased market share for our customers, superior service quality, consistent and well-designed product integration, alongside a lower cost infrastructure for transaction processing.

Endowed with a customer-centric bent, it helps banks manage their customer relationships effectively. Th is comprehensive solution maintains distinct identities of Islamic and conventional fi nancial products and banking solutions on a common platform. It can be implemented as an Islamic and conventional banking solution in a single instance or as two separate instances, or as an Islamic fi nancial solution alone.

N. Ganapathy Subramaniam is the President of TCS Financial Solutions, a strategic business unit of Tata Consultancy Services Limited. A part of TCS and the Indian IT industry for the past 25 years, NGS has had numerous opportunities to perform a variety of roles in delivering solutions to customers globally, especially in the banking and financial services sector. For more information log onto www.tcs.com/bancs

figurability and service integrator component.

We also offer Sharia compliant insurance solutions based on Takaful to meet the varied needs of insurance enterprises across multiple lines of business, distribution channels and customer segments. TCS BaNCS, with solutions in core banking, universal banking, payments, regulatory compliance, and wealth management, meets the needs of a diverse range of organisations, including microfi nance, eurozone powerhouses, and the operators of one of the largest branch networks in the world.

Built using advanced SOA technologies, the solutions are robust, STP-enabled, flexible and highly scalable.

We enjoy a track record of having successfully designed and implemented banking solutions to deliver fi nancial institutions with ‘embedded transformation intelligence’, thereby, creating a culture of growth and profitability for our customers.

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ISLAMIC FINANCE

MONEY AND MORALITY

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hen examining the social and economic factors driving the popularity of Islamic banking, we need to look at it in the following manner: there are approximately 1.3 billion Muslims around the world. If I were a Muslim and wanted to take out a loan or go into business, I would go for an Islamic option. I would be supporting an institution that adheres to my faith. Moreover, I would see doing business with an Islamic institution as something that is more morally responsible. Around the world today, there is greater religiosity, especially in Islam. So it is understandable why Islamic fi nance and banking has taken off the way it has. Muslims are looking to spend or save their money with institutions that align with their faith.

In places like Central Asia where Islam is on the rise, a majority of the countries in the region view the presence of an international Islamic fi nancial institution like the Islamic Development Bank (IDB) positively because of its ability to help respective governments promote both Islam and socio-economic development. Islamic banking and fi nance, where no usury or riba is permitted, has only just begun to take root across regions like Central Asia and could be used in the future as an instrument to channel the energy of Muslims who desire greater inclusion of Islam in government.

But it’s also easy to see the influence of Islamic banking and fi nance spreading to non-Islamic entities. In addition to upholding certain business practices that are in line with Islam, those involved in Islamic banking and fi nance also view it as a business where they seek to make a profit using the concept of profit and loss sharing. Islamic fi nancial institutions are now operating in approximately 80 countries and their assets have increased more than 40-fold since the 1980s. Major western fi nancial firms and banks like HSBC and Citibank have all opened up Islamic windows within their institutions where they abide by all Islamic banking and fi nance principles. Further, there is now a Dow Jones Islamic Market Index that tracks more than 600 companies whose operations and services adhere to Islamic Law.

Historical basis

Now managing funds in excess of US$800 billion, Islamic financial institutions are predicted to become even more popular. Geoffrey Gresh takes a look at the realities of religious finance and considers the possibility of other faiths getting in on the act.

The history of Islamic fi nance dates back to the days of the Prophet Mohammed in the seventh century. Every business transaction that took place between the capital provider and merchant was set up through a profit and loss sharing system, or mudaraba. The capital provider was similar to that of a venture capitalist today. He wouldn’t know the outcome of the deal but when the merchant returned after six months or so, the two would settle the deal between them. If there was a loss, they would split losses. If there was a gain, they would split the profits. Morally, it was a system that made sense. And if nothing went wrong, you could make a lot of money.

Religiously speaking, there are four references to riba in the Koran.

More specifically, the Koran states that earning money from interest or riba is unacceptable, but earning money from trade is acceptable. The hadith and sunna also provide interpretations for riba and other Islamiccompliant business transactions.

To complicate matters, there is no one central authority when it comes to Islamic banking and fi nance. Each country or Islamic fi nancial institution has a Shariah Board consisting of Imams or prominent reli-

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gious figureheads that establishes the specific A growing trend? operating practices and principles. In recent Islam is not alone among religions in years, there has been an attempt to stanoffering precedents for morally motivated dardise practices and Islamic fi nancing. In fi nance. Historical debates and references Malaysia, for example, the country has forced regarding interest go all the way back to the uniformity with a national Shariah board.

Hamurabi code of 1800 BC. The code placed Islam is a very diverse religion with many limits on interest rates and banned compound different sects and interpretations. Islamic interest. It was the fi rst legal code in history, banking and fi nance is exactly the same. written in Mesopotamia. Centuries later, ArEach country or fi nancial institution’s Shaistotle also provided the most influential arriah Board might have a very different idea gument about the “barrenness” of money. He of what is or isn’t permitted. Some countries stated that money should be solely a means of like Malaysia have a more ‘liberal’ interpreexchange and not allowed to multiply. tation in Islamic banking, while a country The Bible alone makes many references like Pakistan or Saudi Arabia would have far to this idea of morally motivated fi nancial more strict rules. All of this is slowly changtransactions. For example, Deuteronomy, ing and there is an impetus now to further Geoffrey Gresh is editor-in-chief of Al-Nakhlah, the Fletcher 19:19-20: “Do not charge your brother interstandardise some of the Islamic banking School of Law and Diplomacy’s Journal on Southwest Asia and est, whether on money or food or anything Islamic Civilisation. He is a former Rotary Ambassadorial Scholar and fi nance practices applied in a respective to Turkey and Presidential Fellow at the American University in else that may earn interest. You may charge a Cairo. He publishes frequently on contemporary issues facing country. Uniformity around the world will the Middle East and Central Asia. foreigner interest, but not a brother Israelite, probably never take place but there is at least so that the Lord your God may bless you in an attempt to bring more of the interpretaeverything you put your hand to in the land tions and practices closer in line with one another so that what one does you are entering to possess.” in Malaysia will be similar with a practice in Egypt for example. You Or look at Leviticus 25:36: “You shall not charge your brother intermust keep in mind as well that Islamic fi nancial institutions are also est on a loan, either by deducting it in advance from the capital sum, or businesses and they must adapt to the global economy if they want to by adding it on repayment.” In other words, you shouldn’t charge your succeed and make a profit. Maintaining a strict interpretation of Islamic brothers. Lastly, we have Luke 6:34-35: “And if you lend only where you Law and applying that to Islamic banking and fi nance might not always expect to be repaid, what credit is that to you? Even sinners lend to each be the most sound business decision. other to be repaid in full. But you must love your enemies and do good; Again, Islamic fi nancial institutions abide by Islamic Law and and lend without expecting any return; and you will have a rich reward.” uphold the principles of profit and loss sharing in their daily practices.

In essence, you should lend without expecting any return.

There is nothing against earning a profit. Rather, it is the way you go about making a profit that is contested. Islamic institutions have come up with innovative products and services that uphold these Islamic principles and bypass traditional conventional banking practices that charge interest. For example, there are Islamic bonds, Islamic hedge funds, and even Islamic mortgages and insurance. In sum, there is a genuine difference between ‘conventional’ banks and Islamic banks. It is not just semantics.

As far as standardisation goes, there are certain aspects of Islamic So there are a number of historical precedents for morally motivated finance that are similar throughout the market. Terms like murabaha or financial services. In theory at least, this would mean that there is plenty of mudaraba will be familiar to all, as will recognised products like sukuk scope for others to follow in Islamic finance’s footsteps. But as to the future (Islamic bonds). However, the school of Islamic jurisprudence that an insuccess of such an institutional model, I really don’t know how successful stitution follows will affect the products it offers or creates. For example, it would be. Islamic banking and finance has been so successful because a Shariah Board that follows the Shafii school of Islamic jurisprudence of the 1.3 billion Muslims that are enticed by responsible financial institumight have a much more liberal interpretation of what Islamic products tions that uphold their faith. Additionally, the petrodollar windfall of the are permitted compared to a Shariah Board that upholds the Hanafi school 1970s and 1980s permitted many Arab countries of the Gulf to invest in of law. A Shariah Board in Iran that follows Shi’a Islam might also have a establishing Islamic financial institutions that have spanned the globe over different interpretation on what Islamic products are permitted. Yes, all Isthe past few decades. I don’t know if other religious organisations would lamic financial institutions uphold core principles like profit and loss sharachieve this same success unless they had similar resources. If another ing and the prohibition of usury. But there are so many different Islamic religious institution wants to invest in establishing a successful religiously financial products, as well as different Islamic jurisprudence schools, that based financial institution, it might be difficult to break into the market. it makes it hard to devise any universal procedures and products.

But as with everything, you don’t know how it will work until you try.

“Islamic financial institutions are now operating in approximately 80 countries”

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EXECUTIVE INTERVIEW

Banking, the ethical way

term, really that is starting to be used for Islamic banking. This way it can cross the borders of the Western community.”

Islamic banking has been widely established as an ethical alternative to the conventional banking system. Software firm ITS hopes to help drive its adoption worldwide.

Unique Sharia compliance The nature of Islamic banking means that every bank interprets what rules there ought to be. The problem that causes is that it makes building a rigid IT platform to administer all the different versions very difficult. However, ITS welcomes diversity: “We don’t believe there will ever be a standard, and I believe that if there was one it would defy the whole point of an Islamic

“We’ve seen some of the Tier One banks establishing Islamic windows”

W

ith the western banking model looking pretty rough after a year of collapses and crises, even Pope Benedict XVI recently urged financiers to look at the Islamic system, where bankers are automatically more risk averse because they share the risks with the customer. This shows that Islamic banking is now ready to be re-branded as ethical banking, a system that could find new customers in the western world and elsewhere, as well as its traditional home in the Islamic world.

The new focus on Islamic banking in the west comes just as ITS prepares for a global rollout of its latest suite of banking solutions, called Ethix.

Going global Today ITS supplies more than 85 banks in the Middle East. In the past couple of years it has grown into Africa, and into the Far East from Malaysia to the Philippines. Its core expertise is in Islamic banking, but it also supplies into the conventional banking industry. ITS has a lot of the Tier One banks as customers; it supplies conventional banks in Africa, Nigeria and South Africa.

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bank. I don’t think you could come up with a standard, for example, of how Murabaha [a type of sale compliant with Sharia, involving a declaration of the seller’s fixed costs, to be added to the price] is defined,” says Abdou.

“Conventional western banks are looking to What ITS has done, is create an Islamic platopen up Islamic ‘windows’, especially with the form which represents the underlying principles global banking crisis,” says Haitham Abdou, of Sharia. This then allows the client bank to deGroup Director of Marketing at ITS. “Islamic fine its own products from the ground up, from banking saw a boom starting a couple of years ago an accounting point of view, a product point of and we feel it’s been growing at view, a line of business point of about 15 to 20 percent here and view, how the particular bank’s globally. We don’t see that Sharia board wants to see it slowing down. We’ve seen done and define the workflow some of the Tier One banks completely from scratch. such as HSBC, Citibank and ITS is preparing to market ABN Amro, all establishing the product globally, and has Islamic windows in their opernow had its name registered ations. The ITS development around the world as a tradecentre is in Cairo. We have mark. “Even conventional banks about 1400 software engineers need to be more ethical,” says there. We’re the only CMM Abdou. “There are many comlevel five software organisation ponents that fall under the Ethix Haitham Abdou is Group Director in this part of the world. What brand, such as Ethix – finance, of Marketing at ITS. He has over 15 years of IT experience in the we’ve done is put several prodEthix – branch, Ethix – invest, banking and finance industry ucts together whether they’re Ethix – ledger: overall there and expertise in IT strategies for financial institutions based on ours or third-party, and remight be 25 different products the latest service orientated architectures. His areas of packaged them as one solution, under that banner. The good expertise include: bank which we call Ethix Financial thing is, you don’t have to purautomation projects; branch delivery; core replacements; Solutions. The focus is on ethichase all of that, they’re all comIslamic financing; AML; electronic banking; payment systems. cal banking, which is the new ponents in the suite.” n

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LAW ENFORCEMENT

HANDCUFFS AND HARD DRIVES When she’s not controlling the Metropolitan Police Service’s €406 million IT budget CIO Ailsa Beaton dons her uniform and goes out on patrol. And as she tells Diana Milne, there’s no better way for her to understand the demands of the job.

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here aren’t many CIOs who spend their spare time pounding the beat on the streets of London. But for Ailsa Beaton there’s no better way to understand the IT requirements of her organisation than to volunteer as a special constable. As CIO of London’s Metropolitan Police Service (MPS), Beaton’s remit is vast, and includes supporting 50,000 employees with 30,000 desktops, controlling a €406 million IT budget and ensuring officers are equipped with the technology they need to fight crime. She describes IT as the “lifeblood of the organisation”, underpinning modern policing methods from the control room to the street patrols. Its growing importance comes at a time, however, when the organisation is facing tight economic constraints and Beaton admits one of the most challenging aspects of her role is balancing increasing demands with depleting resources. “The biggest challenge is for us to make the police service the best it can be with shrinking resources. In absolute terms

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the money may not have been cut, but we’re being asked to do more with it than we’ve ever done before.”

Project pipeline The “more” Beaton refers to includes being tasked to deliver service improvements and savings in the region of €58 million and spearheading a major overhaul of the Met’s IT and communications infrastructure. This was the aim of the C3i programme, which was completed in 2006 and involved integrating the force’s communications and monitoring systems, including its 32 borough control rooms. Describing the project, Beaton says: “We’ve taken five call receipt centres, 32 borough control rooms and integrated them into three operational centres that handle the 12 million inbound calls each year, whether they are 999 or non emergency calls. The centres also co-ordinate the dispatch of officers, whether it’s an immediate blue light situation or less urgent scenario.

We despatch not just by voice, but through mobile data terminals in police ve-

hicles and we monitor alarms across London. It was very complex and as such, took a great deal of time from the inception of the idea through to delivery. But as a project it ran to time and budget and we’re very pleased with the outcome.”

As well as C3i, another huge focus for the MPS is mobility and ensuring police officers on the beat have easy access to all the information they need when they attend an incident. With this in mind the Metropolitan Police is rolling out PDAs to officers so that they can get information on the move rather than having to radio a colleague or return to their patrol car to the mobile data terminal. “Through mobile data terminals the information we’re able to give police officers has changed beyond all recognition,” says Beaton. “But although the information is available over the radio, and they may have mobile data terminals in the cars, we were left with a bit of a gap for officers on foot. So we’re rolling out PDAs to officers which will allow them to conduct various business processes such as checking people’s details on the PNC (Police National Computer) while they are on the street.”

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The bigger picture Although her main focus is on the Metropolitan Police area, Beaton is also involved in implementing nation-wide improvements to policing and is a member of the Association of Chief Police Officers and Head of the Information Management Business Area. One of the biggest projects she is involved in within that capacity is the migration from the PNC to the Police National Database (PND). The PNC has been used since 1974 and consists of several databases containing millions of police records that are accessible 24 hours a day. The Police National Database is a new and improved version which, says Beaton, will provide access to more data about individuals, detailing not just criminal records but police intelligence about a person, including ongoing investigations and suspicious activities. She explains: “The PNC will tell you if somebody has a criminal record. It will know if they are wanted or missing or if a vehicle is stolen or missing. But what it can’t tell you is about intelligence that has been gathered through investigative work we’ve done. For instance, if we think a person may have been linked with the sale of illegal weapons, the PND will give broader picture of what we know, for example that someone is suspected of conducting illegal activity with underage children, or is involved in a paedophile ring. When you know that additional information you might take some different actions or ask some different questions to help in the investigation.”

While Beaton is satisfied with the improvements that are being made to the information that can be accessed by police officers, she admits there are gaps that must be bridged in terms of accessibility to information by the public. This particularly applies to witnesses and the victims of crime: “I think the information available to victims and witnesses has improved tremendously, but more can be done. The gap we’ve got is that face-to-face interaction is not always the way people would prefer to receive that information. Currently we are unable to provide information to the public electronically so people can see how their case is going. That’s largely because we haven’t separated what the police need from what the public need in the case process and we are unable to give members of the public access to absolutely everything there is about a case, because we would jeopardise the case.”

THE BOYS AND GIRLS IN BLUE The Metropolitan Police Service is by far the largest of the police services that operate in greater London (the others include the City of London Police and the British Transport Police). Founded by Sir Robert Peel in 1829,the original establishment of 1000 officers policed a seven-mile radius from Charing Cross and a population of less than two million.

Today, the Metropolitan Police Service employs 31,000 officers, 14,000 police staff, 414 traffic wardens and 4,000 Police Community Support Officers (PCSOs) as well as being supported by over 2500 volunteer police officers in the Metropolitan Special Constabulary (MSC) and its Employer Supported Policing (ESP) programme. The Metropolitan Police Service covers an area of 620 square miles and a population of 7.2 million.

Ailsa Beaton

“Being a special constable makes me feel much more connected to the frontline business than I would if I was just a board member” Policing efficiency In her role as ACPO member, Beaton is also involved in efforts to better co-ordinate working practices across the UK’s 43 independent police forces as part of the nationwide Information Systems Improvement strategy (ISIS) programme. “This is about all 43 independent forces working together to get the most out of information and communication technology (ICT) in policing, and in the most cost effective way. We’re working very closely with the ISIS lead, the National Policing Improvement Agency (NPIA). We’ve got to the stage where we’re starting to find solutions to help support local policing, without having the cost implication of all 43 local forces doing their own thing” Achieving this sort of efficiency and cost effectiveness within the police service is an integral part of Beaton’s role. However, to free up the group to focus more on information management and using technology to meet the Met’s objectives on the frontline, back-office IT procedures were outsourced to Capgemini in 2005 as part of a seven-year €60 million deal. “What we outsourced to Capgemini was what I called the standard IT, such as phones, desktop computers and applications.” Beaton goes on to say that the contract has resulted in both cost savings and service level improvements. She reveals that a previous outsourcing deal didn’t take account of the round the clock requirements of the Metropolitan Police: “Our first generation outsourcing didn’t take as much account of us being a 24-hour, seven-days-a-week, 365-days-a-year business and was far too geared to what I would call a standard office way of working.”

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THE ORGANISATIONAL STRUCTURE OF THE MET Territorial Policing: London's local police Following a recent restructuring, most of the day-to-day policing of London is the responsibility of 33 borough operational command units (BOCUs).

Specialist Crime Directorate In addition to policing London’s streets, the Met has various specialist units dedicated to reducing all aspects of serious and specialist crime.

The intention of Specialist Crime Directorate is to place a renewed emphasis on working collaboratively with communities, boroughs and partners to identify effective solutions to serious crime problems.

Specialist Operations The Met has various specialist units that work across the capital or which fulfill a national role.

A number of these are grouped into a section of the organisation known as Specialist Operations. They deal with tasks such as intelligence, security, protection of politicians, embassies and royalty, and the investigation of certain categories of serious crimes, including racial and violent crime and terrorism.

On the frontline Understanding the unique needs of the police service is key to successfully aligning information management with crime fighting. Beaton’s secret weapon is her voluntary work as a Special Constable which she says gives her the best possible insight into the IT needs of the police and whether the systems her team have put in place are really working: “Being a special constable makes me feel much more connected to the frontline business than I would if I was just a board member. When I’ve done an upgrade to mobile data terminals or I’m putting out PDAs or talking about how good the radio service is, I’ve experienced it all first hand so have a greater appreciation of how technology is meeting the needs of the service.” As well as keeping in touch with the technology used by officers on the front line, an important part of Beaton’s role is understanding the technology that is being used by criminals to commit offences: “We must keep aware of all the things that are being made available through the internet whether, it’s deceiving people into parting with money or setting up various scams around it. It’s also a way of criminals communicating with each other maybe without ever meeting, which changes the way that we investigate crime.”

Below: Met police adverts to raise awareness of terrorism

Central Operations Central Operations consists of a number of specialist units that provide a broad range of policing functions.

These units effectively provide an integrated, collaborative and community focussed service to London.

With Capital City Policing at the forefront of its responsibilties, it also has the remit for delivering the security arrangements for the 2012 Olympic and Paralympic Games in London.

Administration and support An organisation the size of the Metropolitan Police Service could not function without various management, administration and support functions. For this reason The Met has thousands of staff, including police officers as well as civilians, who work behind the scenes to ensure that the front line units can do their job. Their functions include recruitment, training, personnel management, provision of information technology, publicity and communications. Some functions, such as vehicle maintenance and aspects of information technology and telecommunications, have been contracted out to the private sector.

Beaton’s passion for her role should, she hopes, serve as an inspiration to other aspiring female CIOs in an industry which remains heavily male dominated. She is keen to encourage women to follow her example and is involved in initiatives in the UK such as Computer Clubs for Girls, “I don’t think it’s been particularly more difficult for me than for anybody else,” she says. “But we’re in a challenging position, and I think only about 15 percent of the British Computer Society is female. So the numbers of women going into computing is frighteningly low. I sit on the Sector Skills Council for Information Technology (e-skills) which supports activities like Computer Clubs for Girls to try to get girls when they are at school to realise that this isn’t just a boy’s thing.

They need to know that it’s actually very interesting and it’s not just about computer games. There are lots of ways of using technology that are useful and worthwhile,” a point she has proven very successfully herself. n

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EXECUTIVE INTERVIEW

Bringing videoconferencing to life With tough economic conditions, volatile fuel prices and organisations looking to slash their carbon footprint, we hear from Matthew Light about the real difference videoconferencing is delivering today.

What impact is the recession having on organisations installing videoconferencing facilities? In these lean times is now the ideal opportunity to make cost savings?

Matthew Light. There has been a trend of companies trying to get videoconferencing facilities installed as soon as they can, as they recognise the benefits of reducing travel costs and saving time. Whole offices have been closed as staff are encouraged to work from home. There has never been a better time for companies to enhance their communications and move to videoconferencing. With the increase in bandwidth and lower cost connectivity, now is the time for videoconferencing.

“It is now possible to share just about any type of information during a videoconference” If an organisation is considering a videoconferencing facility what would you highlight as the key benefits?

ML. The main benefits include: Increases in productivity. As well as the benefits of being able to meet face-to-face without having to travel to physically be in the same location, it is now possible to share just about any type of information during a videoconference. This enables decisions to be made much quicker.

Videoconferencing enables you to be in several different places at the same time, enabling you to keep in closer contact with customers and staff.

Saving money. Videoconferencing provides a substantial saving due to reduced travel costs, both in terms of fuel expense and the time taken

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to travel, which could be more usefully used catching up on emails and contacting customers.

was on a Friday, the MD did not have to use any of his weekend time travelling home.

What predictions do you have for the videoconferencing and communications sector in the years to come and how will businesses be able to work quicker and smarter?

ML. The increase in the bandwidth of broadband connections and leased lines, together with the Safety. Videoconferencing ensures the safety of falling cost of these communication services, conference members by removing any concerns means that videoconferencing is now an easy surrounding travel. business decision. Over the internet, videoconference calls are free. It will be just like picking up International business. It althe phone and speaking to lows for multi-point meetings someone as you do now, across time zones and internawith the added advantage of tional boundaries. being able to share information from any application Environment. With the green that you are using on your issue, videoconferencing is playPC, and thus will increase the ing an increasingly important scope for further developpart in reducing carbon emisments in home working. sions and allowing businesses to However, people may choose strive to be carbon neutral. to congregate in a physically shared working environment Matthew Light, MD of Tempura Can you give an example of to benefit from the interCommunications based in Basingstoke, has over 11 years’ how your products and serchange and flow of ideas and networking and videoconferencing experience and works to advise UK, vices benefited a customer general camaraderie. It is reEuropean and American businesses recently? ally the combination of the through their base of channel partners, customers of SMEs, ML. Recently a managing diPC/laptop and videoconfercorporate and government departments and organisations. The rector was due to attend a encing which is the key to focus and expertise spans network meeting in Montpellier in working quicker and technologies and VOIP as well as videoconferencing.

France, which would have ensmarter. With so much work tailed all the hassle of booking now conducted using comflights, arranging hotels and all puters, the ability to stay in the time involved in travelling to the meeting. touch with customers and colleagues visually via Instead, we were able to arrange for the installation videoconference means that you can be physicalof our Tempura Video system, which involves a ly located wherever you want, yet use your skills simple software download together with an inexto achieve your business goals at the same time. pensive camera and speaker/microphone device The latest systems provide higher quality and and the customer was able to hold the meeting via lower bandwidth. The evolution in videoconfervideoconference. The cost saving in terms of travel encing technology will continue to make the enand time was phenomenal, and as the meeting vironment even more life-like and natural.

Better communication. Videoconferencing allows you to see the facial expressions and body language of conference members, important aspects of conversation that are lost using a standard telephone call.

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EXECUTIVE INTERVIEW

VIRTUAL R E A L I T Y VMware’s Fredrik Sjostedt offers his insight into the tangible benefits of virtualisation.

Cost is obviously a key area for consideration. What is your advice for companies finding it hard to calculate the cost benefits of virtualisation?

Fredrik Sjostedt. There are two ways to calculate cost savings from virtualisation. The first is to examine the CAPEX (capital expenditure) savings that can be realised from consolidating servers in the data centre. We see customers that have achieved consolidation ratios of 80:1, where 80 physical servers are converted into 80 ‘virtual machines’ running on just one physical server. Even with normal ratios of 20:1, there is still always a very clear and tangible cost benefit.

The second way to calculate cost savings is much more of a challenge and that is to look at how you drive operational savings by using virtualisation.

Many organisations fail to understand that if you continue to use the same procedures you did when running a physical infrastructure, most of your CAPEX savings will be lost to OPEX (operating expenditure) increases.

My advice is to start off using the VMware TCO calculators to help give a view of your current cost base and to see how much CAPEX can be saved almost immediately. Then you need to engage with your normal systems integrator or VMware’s PSO team to review the current processes you have in place and develop new plans and processes to control operational expenditure and accelerate savings in the longer term.

Business agility is a key concern for C-level executives right now. Does virtualisation offer the potential for enhanced enterprise agility and what benefits does it offer in this regard?

FS. Virtualisation is often thought of as simply server consolidation and a CAPEX saving technology. This is far from the truth. C-Level executives need to understand the wider benefits that virtualisation can deliver, when the technology is used well. Firstly, look at how long it takes to roll out a new IT capability, such as a database server. After making the decision that the capability is needed, you need to procure the hardware, take delivery of it, install and test it, and then put it into pre-production, before it’s finally rolled out into the production environment. I’ve seen customers take as long as 27 weeks to get through this process. If your competitor can deploy faster than this, then you have lost the competitive edge, as they would be able to go to market with their solution faster. Virtualisation can help you to slash the time

that the entire process takes, from decision-making to rolling out a production capability, down to just a few hours. Clearly, this is something that appeals to any C-level executive looking for agility. Secondly, virtualisation can also help to maximise the availability of your IT resources. This is important, as there are very few organisations today that are not heavily dependant on IT for day-to-day operations.

Virtualisation allows organisations to transform an IT infrastructure that is built on minimising downtime to one that is uninterrupted and 100 percent available at all times. Again, this is a very attractive benefit for business leaders.

In your opinion, what is the future of virtualisation?

FS. Virtualisation is one of those really disruptive technologies that come around every-so-often. As organisations continue to look closely at how they manage their cash flow in order to remain competitive in challenging market conditions, they also now need to start examining how they strate-

“Virtualisation allows organisations to transform an IT infrastructure that is built on minimising downtime to one that is uninterrupted and 100 percent available at all times” gically prepare for the mid-to-long term as well. The recession will end and organisations that have used the recession to successfully re-structure and streamline their processes will be far stronger and more competitive as the recovery picks up pace.

IT is such an important component in most organisations today, and therefore transforming IT from a ‘cost centre’ to a ‘business enabler’ can have an absolutely massive impact on performance.

We have already seen some tremendous success stories where virtualisation has delivered huge benefits to organisations in terms of cost savings, better processes and increased agility. However, as mentioned above, these have mainly been little more than server consolidation programmes. Over the next 12-24 months, we will begin to see the other, wider, and potentially greater advantages that virtualisation can bring about, both in terms of data centre processes and desktop management. Virtualisation really will allow organisations to transform their IT and energise their entire business operations. n Fredrik Sjostedt is Director for EMEA Product Marketing at VMware. Sjostedt has almost 20 years of experience in the IT industry, gathered in both technical and marketing roles with hardware/software vendors like Apple, 3Com and Symantec. He studied systems analysis and mathematics at Lund University in Sweden and holds a postgraduate diploma in Management from Henley Business School in the UK.

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RETAIL

King

of the

jungle

By Ben Thompson

Amazon’s CTO Werner Vogels is focused on transforming the internet behemoth into the world’s most customer-centric organisation – and is using innovation to help him get there.

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he Amazon rainforest contains the largest collection of living plant and animal species on the planet – and like its jungle namesake, the world’s largest e-commerce platform holds a similar wealth of weird and wonderful specimens just waiting to be discovered. As well as everyday items such as clothing, music and consumer electronics, the internet explorer can also unearth a huge range of rarer treasures. Want to reduce your carbon footprint? How about a 400W self-assembly wind turbine to help get you started. Looking for that unusual gift? Check out the original Andy Warhol screenprints in the ‘Everything Else’ department. Fancy getting married?

Try the 10x18 wooden wedding chapel, complete with front porch and steeple (sorry, bride not included). Shopping has never been this easy.

Yet while some may still think of Amazon as simply an online retailer, the reality is very different.

From its bookseller origins, the company has grown to become one of the world’s biggest technology organisations, a platform that attracted over 615 million visitors last year and on which more than one million active retail partners do business worldwide. An increasing number of diverse businesses are built on the Amazon.com platform – including the online operations for Target, Lacoste, Marks & Spencer and Timex Corporation – and the company’s relentless focus on innovation helps Amazon maintain its status as a high-tech pioneer. From new hardware development to the definition of new business models, from building ultra-reliable storage services to a massively scalable computing cloud, from pervasive monitoring and performance control to revolutionary efficient software architectures, Amazon is recognised as being on the bleeding edge of technology development.

“We have three different businesses,” explains the company’s CTO Werner Vogels. “One is the retail business, and that’s the one that people are most familiar with. Then there’s the seller business, which consists of three major streams – the seller-only Amazon website, the enterprise services business where companies launch e-commerce operations on top of our platform, and services such as Fulfillment by Amazon that enable businesses to take advantage of one of the most advanced fulfillment networks in the world. And then there’s the developer business. For all of those, we take the same approach: we want to be the world’s most customer-centric company.”

For Vogels, this means focusing on continuous interaction with the customer-base – generating what he calls a ‘feedback loop’ – to ensure that the services Amazon provides are the right fit for its customers. “We have a process that we call ‘working from the customer backwards’ to develop new technologies, where we start with what the customer needs and then work backwards from that point to make sure that the technology we implement really does what we want it to from a customer standpoint,” he explains.

Plotting a path Take Amazon’s popular and much-copied product review system, for example. The site had reviews from the outset, and the idea of letting the market decide what’s hot and what’s not has played a key role in helping to make the company such a trusted seller – even non-customers admit to checking out the user reviews before eventually buying elsewhere. But as other retailers jumped on the user review bandwagon, Vogels and his team decided to take the concept a stage further. By adding a simple button asking ‘Was this review helpful to you?’, Amazon prioritised the most relevant reviews – those that had helped customers make a decision over whether or not to buy a particular product, both positive and negative – and provided a simple way for customers themselves to regulate the quality of the reviews. A recent article in Business Insider suggests the move has had significant business benefits. In 2008, Amazon brought in €13 billion, of which 70 percent came from media products such as books, movies and music – products that also make the best use of the reviews feature. The study suggests that promoting the most helpful reviews has increased sales in these categories by 20 percent (one out of every five customers decides to complete the purchase because of the strength of the reviews) – adding a projected €19 billion to Amazon’s top line.

It is often said that the best innovations are the ones that seem so obvious. And while Vogels is at pains to stress that such developments don’t just happen without a considerable degree of effort, he does concede that all Amazon’s technology improvements start from a very uncomplicated concept.

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“I think you can have brilliant ideas, but taking them from the idea phase to the stage where they really mean something for your customers is much more challenging

than I anticipated”

“You have to find ways in which your customers can be more efficient at what they want to do,” he explains. “We have a number of high-level goals around how quickly customers can find items, how easily they can browse, how they can check out and how they can purchase things, and making that as efficient as possible for our customers is key for us.”

If you focus on the customer, continues Vogel, you take the long-term view. “You’re not looking at the next quarterly success; you’re looking at how you can make sure that Amazon is the world’s most customer-centric company over the long-term, and how you can innovate on behalf of the customer to make sure that the things you do really matter. In this sense, everything from reviews to web services can be thought of as supporting tools for doing the right thing for the customer. In terms of technology, it means seeing whether we can take a more cost-effective approach or have better scalability and better reliability, or whether can we help our customers make sure they make the right purchasing decisions.”

Of course, efficiency is one measurement of success, but there is also a more intangible quality that must be achieved for such a platform to be loved by its user-base: ultimately, it must also provide an enjoyable experience.

“Customers are very vocal with what they appreciate and what they don’t,” he continues. “So while our customer service is known for being excellent, customers also have the power and the tools to actually give feedback directly to the technology teams. In terms of innovation, we make sure that all these small experiments that are going on all the time with new technologies, with new customer-facing functionality, can be continuously measured.”

Measuring value Amazon has taken a number of steps to ensure any improvements to the platform add real, measurable customer value, and has built a large infrastructure to ensure it can monitor and assess the impact of changes to the site.

For instance, all Vogel’s teams have been given the instruction to innovate continuously on behalf of the customer, constantly looking at where improvements can be made. What makes a particular service a best seller? Is it better information, better presentation or different sources? “Our goal for customers is that they can find what they are looking for as fast as possible, in the most efficient way, in the minimum number of steps,” he explains.

Werner Vogels

Vogels maintains that this is only possible via constant monitoring of the customer experience. Consider the following example. A customer wishes to download a movie to watch on the long Paris to New York flight, and sends Amazon an email with a question about its video-on-demand service. Not only does the service team answer within the hour, they also include a link to indicate whether the answer solves the question or not. Choosing ‘yes’ takes the customer to a ‘Thanks for your feedback’ message, which not coincidently puts them back onto the Amazon site and contains a further link to provide additional feedback.

If you respond ‘no’ to the original question, you are taken to a similar page to rephrase the question. This simple feedback mechanism provides a number of important benefits. First, it demonstrates Amazon actually cares whether the user’s problem is resolved satisfactorily; it allows the customer to easily submit another question if not satisfactorily resolved; it allows you to quantify the performance of the service department; it identifies areas where better answers are needed; and finally it helps identify tricky problems that can be corrected.

Such attention to the minutiae of customer service interactions helps the company refine its offerings and continuously improve. And while conceding that the management team makes most of the long-term big technology bets, Vogels insists that many of the ideas actually come up through the organisation. “Amazon is very flat in terms of its organisational structure and we have a tremendous focus on innovation, so we’ve got all sorts of paths in which key information and ideas can travel to those who actually make the decisions,” he says. “I think most of the technologies as you see them in Amazon – whether it is reviews, whether it is Listmania, whether it is Gold Box – have come out of the grassroots.”

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Such a meritocratic hierarchy, where the best ideas rise to the top, is essential to the company’s reputation as an innovator. Encouraging ideas that add value is a philosophy that is nurtured right through the company culture, from the C-suite down to the recruitment of new hires, as Vogel elaborates. “In terms of our personnel, we look for a very particular individual: they need to be able to think in the way that the customer thinks,” he says. “It’s very important to have a culture where everybody understands what the core values of the company are. New starters are often surprised at how important focusing on the customer is to us and how good Amazon is at doing that. So having a core value throughout the company that everybody signs up to is essential.”

The importance of teamwork

“10 years from now, you’ll see that many Amazon innovations implemented have had a tremendous impact”

The other essential trait that Amazon tries to instill in all staff is the ability to collaborate effectively – something that is particularly important in the technology function, which by its nature involves small teams focused on specific projects. “Our development teams talk to each other all the time,” says Vogels. “Even though we work in very small teams, Amazon itself is a very large technology operation and it is essential that everyone co-operates and collaborates all the time.”

According to Vogels, teamwork is key to delivering fully rounded ideas that really work for the customer – whether that customer is internal or external. Coming from a background in academia (prior to joining Amazon in 2004, he spent a decade as a research scientist in the Computer Science Department at Cornell University looking at scalable reliable enterprise systems), Vogels admits to being energised by the way business organisations approach the issue of R&D. “In academia there’s a real focus on individual achievement,” he says. “Although there is some collaboration among faculty and there are student teams working together, the work is still rather individual, as is the reward structure. In industry, however, building real technology is a multi-disciplinary activity. First of all, you need good engi-

Amazon.com FAST FACTS FOUNDED: 1994 HEADQUARTERS: Seattle, Washington AREA SERVED: Worldwide CEO/CHAIRMAN: Jeffrey Bezos REVENUE: $19.16 billion OPERATING INCOME: $842 million NET INCOME: $645 MILLION EMPLOYEES: 20,500 WEBSITE: Amazon.com

neers and programme managers to build something that really works. But there are also legal implications, there’s an impact on tax, there’s impact on PR, on marketing – all of those functions make up a team, and you can only build and deliver a product to your customers as a team.”

It is a challenge Vogels relishes. “I think you can have brilliant ideas, but taking them from the idea phase to the stage where they really mean something for your customers is much more challenging than I anticipated when I was still in academia,” he continues. “I did some startup work alongside my academic work, but even so the path going from idea to actual implementation is a long journey, and when you have to operate at the scale of Amazon that’s a whole different story again. Suddenly, issues like reliability, performance, availability and cost-effectiveness play a major role in all of the decisions you make along the way.”

And in contrast to Google, which famously encourages developers to spend 20 percent of their time on individual projects outside their day-to-day responsibilities, the team ethos rules at Amazon. The motivation comes out of the idea that the things that you do have a direct impact on the customer. “Doing things that matter to people is tremendously motivating, and so most of our engineers and programme managers – and indeed everyone else that is working on our products – find remarkable reward in making sure that our customers have a better experience.

We often have meetings where we start off with a ‘customer voice’ – a success story, even sometimes a negative story, of a customer’s experience of buying on Amazon – and use those stories to drive our services to become better.”

Once again, it all comes back to the customer. “We don’t just want to be the most customer-centric company on the web; we want to be the most customer-centric company on the planet, period,” concludes Vogels.

“I think that if you look 10 years from now, you’ll see that many of the innovations Amazon has implemented have had a tremendous impact on how customer-centricity is viewed.”

ROUNDTABLE

PUTTING YOUR PROCESSES TO WORK With organisations being forced to work smarter and more cost effectively in this economic slump, we ask a panel of industry experts how Business Process Management (BPM) is playing a vital role.

THE PANEL Hans Hantson is Business Development Manager at Ascentn EMEA. Hantson works in close collaboration with the Ascentn customers and partners and has more than 19 years of IT and business development experience. He worked previously for global companies like Toyota Motor Marketing Europe and EMEA-based companies.

As one of the founders of inubit AG, Dr Torsten Schmale is now CEO. In this role he is responsible for company strategy as well as for the sales and marketing, finance, and development departments.

Herbert Kindermann is a member of the executive board at jCOM1 AG, responsible for sales and services. Prior to joining jCOM1 he was a member of the executive board at IDS Scheer AG and has more than 30 years of experience in IT business, with 10 years focused on BPM and SOA.

Peter Gérard has been CEO and President of IDS Scheer AG since September 2008. Gérard started his career at IBM in 1966. This was followed by appointments to the executive boards of Deutsche Bank (1996), Mannesmann AG (1999) and Karstadt Quelle AG (2000).

How can BPM help companies to respond to and survive the economic downturn?

Hans Hantson. Working in this economic situation means you need an agile or flexible organisation, and be able to adapt to new opportunities and deliver end-to-end services to your clients or prospects. The only certainty you have is that everything is changing continuously. This creates new opportunities and can make your company even stronger than before, at least if you’re able to organise yourselves to react to this situation. A lot of companies are using very rigid and inflexible ERP systems or custom developed applications to support their business. But, as processes are not longer static, they will need solutions to handle dynamic processes and even unpredictable situations. Dynamic BPM solutions will allow you to adapt easier to certain situations or make exceptions on running processes without the need for technical IT people to handle a business case.

“BPM for an enterprise has an effect similar to adrenaline for the human body. It helps to sharpen the senses for important information and to react in the most efficient way when under stress” Dr Torsten Schmale Peter Gérard. Almost every company is facing challenging market conditions. Partners turn into competitors and vice versa. Customer demands are changing dramatically while mergers totally change the competitive landscape. Processes that have been proven in the past must be reassembled to adjust to the dynamic environment. How do you cope with this situation? Of course, you need to save costs. But how do you ensure that your cost savings do not affect your customers? Successful companies know their core processes and how they distinguish them from their competitors. They invest in these processes to stay ahead of the competition in difficult market conditions.

They also know their context processes that can be outsourced to save costs. These companies document, analyse and control their processes, manage their business processes and with this, their business success.

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Dr Torsten Schmale. BPM for an enterprise has an effect similar to adrenaline for the human body. It helps to sharpen the senses for important information and to react in the most efficient way when under stress. While adrenaline is dangerous for the body outside short-term critical situations, BPM is not for the enterprise, even if it is applied for a longer period. Nowadays, more and more companies have recognised the role BPM can play for them to survive the economic downturn. They use it to generate fast improvements regarding cost and efficiency in their core processes. Once realised in small projects, companies quickly understand the value of BPM also on a wider scale and start strategic BPM initiatives.

TS. We recommend introducing BPM step-by-step. Every step should demonstrate a clear improvement and a fast, predictable ROI of three to 12 months, depending on the current situation. Th is approach has to be strongly supported by the BPMS vendor.

Four issues are critical success factors: • The BPMS must support all BPM phases from modelling to supervision in a homogenous and holistic manner and must provide the opportunity to quickly integrate legacy systems. If the BPMS appears large, complex, like a bundle or not intuitive, then it is the wrong one for this quick-win approach • You should look out for the availability of best practice solutions on top of the BPMS. Such composite applications can be introduced within a few weeks while delivering very fast results • The licence model has to be modular and flexible to address exactly what you need in your incremental approach • The implementation and consulting experience of the BPMS vendor is decisive for a successful BPM initiative. The best product could result in a failed project when it is introduced without suitable skills or sufficient experience

“The current motto is: save money strategically, not recklessly. BPM provides the best, indispensable and expeditious support possible, but only if the methodology involves all employees in creating the process description from the start” Herbert Kindermann

Herbert Kindermann. The current motto is: save money strategically, not recklessly. BPM provides the best, indispensable and expeditious support possible, but only if the methodology involves all employees in creating the process description from the start. At jCOM1, we achieve this objective through our subject-oriented approach. Subject orientation means the focus is on the ‘subjects’, such as the people who are actively engaged in the process. In other words, the employees manage their own processes and are responsible for making sure those processes run in the proper sequence according to defi ned business objectives. Based on the process models, the soft ware needed to handle the processes is then created automatically. An intelligent BPM solution of this type helps to eliminate the communication gap between business and IT departments.

Th is solution guarantees that corporate strategies can be put into practice realistically and in compliance with rules while generating savings into the millions. The result is an excellent chance to come through the economic downturn stronger than ever.

BPM software can be costly. How fast will companies realise a return on investment from this technology?

HK. Using the jCOM1 BPM SUITE, very fast. Th is soft ware allows you to introduce a new process in three steps: • Employees in affected departments perform the modelling themselves • Participants use automatically generated dialogue soft ware to interactively test and validate the process • Employees implement processes which have been adapted to their requirements (exactly as modelled) • Our approach avoids useless interviews, countless individual and overall adjustments, and corrections during implementation and initial operation. The time and monetary investments needed to make changes decrease significantly, helping companies to obtain a very high level of agility.

HH. We strongly encourage companies to work in a baby-step approach when adapting BPM technology. Firstly, don’t look at BPM as a pure software package to solve all your problems. Handle this project as a business project, for which you will need IT support on some levels. A baby-step approach means not trying to go for a ‘big bang’ or too quickly. Start by automating one or two processes you clearly know and are well understood by everybody. Th is will help you to learn in-depth how the BPM Solution is working and how it can help you even more than you expected at first stage. You need to see the big picture and adapt step by step so you can easily correct when needed and move on forwards. A modern BPM solution will help you to establish the first processes in a couple of days, giving you the advantage to learn and fi ne-tune the solution. Solutions that take weeks or months before you see any result will probably give you a very low ROI. What pitfalls must companies avoid when introducing BPM to their organisations?

PG. BPM is not just a project. It must be a continuous approach to improve the processes of a company. When considering the current market conditions it is important to continuously measure the performance of your processes. If you fi nd out that the processes are not successful anymore you need to adapt to the new conditions. BPM is not a technology.

It must be a management discipline. If you just stick to the technology layer you will only optimise your IT. But the purpose of technology is to serve the business. Because of this, you should start to optimise the business and then design your IT to support your business. Often, BPM starts in separated guerrilla projects. At a certain maturity level they must be integrated and professionalised. If you miss this part you will not be able to leverage the full power of BPM. For this, you need to establish BPM governance. The process of process management must be designed and implemented in the organisation.

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ROI IN ACTION According to IDS Scheer’s Peter Gérard, his customers achieve ROI though improvments in several business areas, as their responses demonstrate: “Reduced wait time for customers by half, increased the number of contracts that can be concluded without further inquiries by 28 percent, and reduced the number of complaints by 60 percent.” – CosmosDirect “More than 30 percent cost reduction in order-to-cash process and order confirmation twice as fast as before project start” – Aleris “Total BPM project investment (including all external and internal costs) represents less than 20 percent of the identified and validated savings potential” – Cargolux Gérard says a business process is not just something your business is doing – a business process is your business. By optimising your processes you optimise your overall business performance.

HH. The main pitfall in almost all companies today is the discovery of the business processes themselves. Companies in business for maybe 20 or 30 years are still having no exact idea what their business processes are today. Go inside a department and ask 10 people to describe their core businesses process and probably you will have 11 different answers.

The second pitfall is the adoption by people of new processes or new systems. Human beings are by nature not very open to dealing easily with changes. They are used to working in a certain way, which is working for them, so don’t want to change this. Make sure that people are involved in the process from an early stage, explain and show the benefits of the BPM. Adoption will come automatically if they see the benefit and how it can help them in doing their daily job better and faster.

We need decision makers who are responsible for the active processes to determine how these processes should evolve in the future. Using our subject-oriented methodology, we are able, to a certain extent, to make everyone accountable. Th is approach works because each of the employees has the knowledge of where potential exists for improvement of processes. These days, a common issue, which has become increasingly critical, is the absence of governance in business processes. Particularly in this context, it is important that all employees receive support through a personalised process portal as they perform their daily work and adhere to applicable governance and compliance specifications.

TS. BPM is not just another IT system to be introduced. BPM affects the IT architecture, the way business and IT people work together and changes the organisation up to the management level in the long run.

Hence, there are many pitfalls that can only be avoided if the BPM initiative has the right backing from the management, the due awareness by all involved stakeholders and necessary experience of the people in charge of this initiative. Fortunately, BPM can be introduced step-by-step in small projects, thus reducing the risk to fail on a large scale. Nevertheless, companies must realise that BPM divides the staff and often also the management into friends and foes. While friends approve of the changes BPM brings, foes don’t. They try to keep everything as it is for fear of reduced responsibility, more transparency about their work and a machine taking control of their daily work. Therefore, introducing BPM successfully always requires some kind of active change management and buy-in activities in parallel.

There is a wide variety of BPM vendors in the market. How should companies go about choosing the right one?

TS. Yes, but in the meantime BPM can be found on a lot of marketing brochures. Most of the vendors have some BPM functionality in some form or another. However, companies should have a close look at these offerings. Some vendors talk of BPM but offer only BPA – process modelling but no automation, integration and supervision. Other vendors have complex heterogeneous BPM suites acquired out of several stand-alone components. These BPMS puzzles are far from helping to optimise and automate business processes quickly, and in an agile and cost effective way.

With that in mind, you should write down your requirements and go for a short list of BPMS vendors. Additionally, you should think about your priorities regarding the processes that should be the first to benefit. Pick out one small process with significant visibility in your company. Before making your decision on a BPMS vendor, you should go for a first pilot project that proves that the system of choice is really working as expected.

“BPM is not just a project. It must be a continuous approach to improve the processes of a company. When considering the current market conditions it is important to continuously measure the performance of your processes.”

Peter Gérard HK. BPM is supposed to help process participants to work more effectively and generate added value. The objective is to significantly boost productivity and agility while drastically reducing costs. During the introduction of BPM, we proceed according to a fi xed pattern. First, the basic conditions need to be defi ned. In essence, we work together with the customer to specify the objectives, the starting situation and the risks.

Furthermore, we divide the structure of the overall process roughly into sub-processes, define which of these processes can be standardised and determine process owners. Th is strategic approach reduces the complexity and is necessary in order to avoid various ‘BPM stumbling blocks’.

HK. First, it is important to figure things out and develop a structured plan. The following questions need to be dealt with: • Which processes should be automated?

• How many changes are required annually?

• Is a service-oriented architecture (SOA) already in place or should one be established?

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• How extensive is human interaction?

• How many companies must be involved in a data exchange to carry out these tasks?

• How prevalent is shadow IT? Our solution is oriented toward giving employees a significant amount of creative freedom. Nevertheless, it is imperative to comply with all company specifications and legal regulations. To this end, the BPM tool must be easy to use, other existing applications should be easy to integrate, and process participants should be able to execute their processes in the manner they themselves defi ned initially. Governance and compliance requirements must provide the foundation. Ideally, the BPM solution should enable employees to make improvements to their processes in a fast, effective and cost-efficient way without having to go through the IT department. The result: motivated employees, coordination between IT and non-IT departments, and a fast ROI. HH. Companies should fi rst defi ne what they want to achieve and what effort they want to take for this. Mainly they can take two different directions for this: looking from a purely technical angle or from a business point of view. Do they want more business control and flexibility, to adapt process changes on the fly or adapt them quickly to exceptional needs? Or are you looking for one-shot automation for very static pro-

cesses? We recommend to use always the 80/20 rule, as you will not fi nd the ‘golden key’ solution on the market. If a solution is delivering you 80 percent of your requirements out of the box, make sure you can achieve the 20 percent by extending the solution. So it’s important to look for a flexible and open solution within your main angle, being business or mainly technical.

“The main pitfall in almost all companies today is the discovery of the business processes themselves.

Companies in business for maybe 20 or 30 years are still having no exact idea what their business processes are today” Hans Hantson PG. Under the current market conditions companies are following different strategies to ensure business success. If you don’t know your processes you can’t control your business. Based on a company’s market situation and its BPM maturity level, different BPM approaches can be leveraged. ARIS provides integrated soft ware tools for each BPM maturity level. Th is means ARIS can be used from the very start for process documentation, process cost and weak point analysis, quality assurance, soft ware implementation and many other use cases. ARIS Platform provides integrated soft ware products that help enterprises to continuously improve their business processes. These products cover every phase of a continuous BPM lifecycle – from strategy defi nition, process analysis and design to transferring the models into your IT systems and monitoring process execution. Based on this, companies can easily and quickly respond to new market demands with its products and services. Key for both strategies is business flexibility. With ARIS, companies can be sure to get the right BPM product for all requirements from the BPM market leading soft ware vendor. With ARIS Platform you can prove the success of your BPM initiative based on process key performance indicators.

Th is enables you to turn your organisation into a process and successdriven company.

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LOGISTICS

A LOGISTICAL CHALLENGE

Acquisitions, cost cutting targets and a major outsourcing project are just some of the challenges facing Alex Pilar, CIO of DHL Supply Chain. But, he tells Diana Milne, nothing will dent his passion for the job.

W

hen you’re in charge of technology for a logistics company that claims to be Europe’s most punctual, inefficiencies simply aren’t an option. And for Alex Pilar, CIO of DHL Supply Chain, the pursuit for procedural perfection is a full time job. A DHL veteran, having started his career there in the 1990s, Pilar is constantly involved in projects to further streamline the business and cut costs. He says this is no easy task at a company that is constantly adding new businesses to its existing portfolio. Most recently it completed the integration of the UK-based logistics giant Exel following DHL’s acquisition of the firm in 2005. During such projects, Pilar says the biggest challenge he faces is integrating the companies’ legacy systems and applications into DHL’s own IT infrastructure without adding unnecessary applications or

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layers of complexity. “Our group has been built to some extent on acquisitions,” he says. “This means always bringing in legacy systems such as platforms and technologies. So despite all our efforts, we are always facing new complexity as we consolidate. It’s an ongoing process and there are major projects going on currently in Europe.”

Trimming the fat Pilar describes how DHL successfully integrated Exel’s legacy systems with its own – a process which involved a massive 900 separate projects. “It was a very successful integration programme and involved 110,000 people from Exel and 30,000 from DHL. There were 900 projects in different functions executed, which is a really signification programme.” He says the com-

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pany is currently in the process of “aggressively” streamlining its applications portfolio to cut costs: “We have, through the acquisitions we’ve made, far too many applications and too much complexity and this is a significant challenge because of the costs.”

The drive to cut costs is greater than ever with the economic downturn having hit the European logistics market hard. DHL has suffered badly, having reported a slump in net profits of 71.4 percent for the second quarter of this year with sales nosediving by 17.7 percent, generating €11.1 billion compared to €13.3 billion the previous year. Its aim is to cut its costs by €700 million by the second quarter of next year with IT a major part of the programme.

“Like everybody else we have been challenged a lot on adjusting our costs,” says Pilar. “We are formulating a Alex Pilar strategy for all business areas to make sure that we minimise the complexity and maximise the potential of the strategy applications and avoid further investments in these. We must also continue the

brutal streamlining of our applications and leveraging all the opportunities we have.”

One major cost cutting exercise, that preceded the credit crunch but continues today, is the centralising of DHL’s support services to three hubs in the Czech Republic, Malaysia and the US which started in 2004. The programme was aimed at slashing 60 percent off its €700 million IT budget and involved establishing three global IS centres and one IT infrastructure in Kuala Lumpur, Prague and Scottsdale. It was also done as part of a plan to have IT support available to its 120,000 users 24-hours a day. At the time Pilar was in charge of the European part of project, which he says has now reached all DHL’s targets: “We have reached all the parameters we hoped for in terms of the cost efficiency and time and business case but we continue to build that operation and consolidate and optimise infrastructure in Europe.” He goes on to describe the benefits to DHL of having centralised its IT services, in terms of cost and

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efficiency. “We have had three benefits. One is labour arbitrage.

We had workers based in locations like the UK, Switzerland and Brussels. Consolidating meant there was the opportunity to optimise or virtualise many services. The move also created a critical mass of IT experts all sitting together in one place, which helped to improve productivity too.

So we were quite successful in executing this programme.”

Pilar now hopes to build on the success of DHL’s own successful internal shifting of IT services to a central hub by embarking on the outsourcing of its telecoms infrastructure. To date it has signed deals with Telefónica O2 in

“The automotive industry is 20 years ahead of IT in the way it manages to hide the complexity of a sophisticated car behind an interface, which is simple and doesn’t irritate you”

L About DH

ader of the le t e k r a m l a b lo DHL is the g l express and logistics internationa was founded in the US 40 industry and day its parent company, years ago. To st, employs 300,000 staff Deutsche Po orld. Its network spans around the wntries. There are four over 220 cou isions: Access DHL Express specialist div al, Forwarding and Freight; services Glob Freight services, Access DHL ns Supply Chain and incorporatio Information Solutions; Corporation Supply Chain for mail and Access DHL ervices.

Access Mail S

Europe and AT&T in the US and it is currently working on finding outsourcing partners in Asia Pacific, Latin America and the emerging markets.

The project is, he says, a team effort between the CIOs of all DHL’s various divisions. “These programmes will bring significant savings into our telecoms cost. We are working together across all divisions and we have a core programme called Telecoms Optimisation where CIOS from each diFAST FACTS vision are steering the different programmes for each region.

EMPLOYEES: Over 500,000 – one of the biggest private employers worldwide LOCATIONS: 18,500 worldwide OFFICES: 220 worldwide

He says the challenges of the project are the same as for any large scale outsourcing programme. However, he says he is confident that DHL’s outsourcing partners are now strong enough to take on the weight of the firm’s complex telecoms infrastructure; a situation that he says didn’t exist two years ago: “I think the industry has matured. A couple of years ago we were considering doing this, but the complexity we have would have been hard for any of the partners to accommodate. We feel much more confident these days.”

Staying simple Cost cutting is by no means the sole driver behind the various IT consolidation projects Pilar and his team are embarking on. He says a major aim of the organisation is to achieve simplicity, both in its own internal operations and in the services it offers to its customers as part of its 2015 strategy. Pilar acknowledges, however, that when it comes to IT simplicity can be a difficult goal to reach compared to other industries. “Simplicity is something that is very close to my heart as the CIO of a big

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company. If you compared IT to other industries, such as the automotive industry it is very behind. Indeed I would say the automotive industry is 20 years ahead of IT in the way it manages to hide the complexity of a sophisticated car behind an interface, which is simple and doesn’t irritate you. IT still has a long way to get to go to that level of simplicity and sleekness of operation.”

Achieving simplicity is a key goal behind the logistics and supply chain projects, which DHL takes on for its customers. These include the likes of the NHS in the UK for which DHL has provided supply chain services for two years, and British Airways with which it has recently won a deal to provide logistics to parts of its business. Selling these solutions to companies wanting to improve the efficiency of their operations means the pressure is on for Pilar to prove DHL can also manage its own IT as smoothly as possible. He says too that as DHL is both a provider of IT services and heavily reliant on IT for the running of its own business, technology is very closely aligned with the company’s business objectives. Indeed, Pilar says he be-

lieves that if it didn’t play a key role in boardroom decisions, he would be failing in his role as CIO. ”The innovation of the business and IT’s ability to support that in the contracts logistics business is very important. We are working very closely with our business partners and interactions between CEOs and CIOs are very intensive and regular. We aim to bring IT as close to the business as possible. We are looking at the ways that the business is thinking so that we can work together to create the right solutions for our customers. Business and IT at this stage and in this century must be intimately close. You should not even be able to put a piece of paper between the two. It should be one entity. I keep saying that if IT doesn’t bring value in the boardroom it doesn’t belong there.”

Pilar is helped in his aim by the fact that he worked for five years as Managing Director of Country Operations in the Czech Republic. He says: “Because I’ve spent some time in the business as well as in IT, I know that IT is the business. It is part of it and if it’s not, it’s set to fail. I’m absolutely passionate about the fact that IT is absolutely part of the business.” It’s this missionary zeal for IT that has spurred Pilar on throughout countless efficiency drives and IT transformation projects. And with DHL about to embark on the complex outsourcing of its telecoms infrastructure, coupled with taking on the supply chain and logistics services of several major European organisation, he’ll need even more passion for the job in the months to come.

About Deutsch Post DHL Profile Deutsche Post DHL is the world’s leading postal and logistics group. Its integrated DHL and Deutsche Post brands offer services in international express, air and ocean freight, road and rail transportation and contract logistics.

Deutsche Post DHL is Germany’s only provider of postal services and delivers mail and parcels in Germany and the world. It is also a provider of dialogue marketing and press distribution services as well as corporate communications solutions. The group generated revenue of more than €54 billion in 2008.

History Deutsche Post DHL was transformed from a government-controlled, deficit-ridden national agency, Deutsche Bundespost in 1990, to a profitable European mail and parcel service provider. Deutsche Post AG went public in November 2000 and has been listed on the DAX 30 since March 2001. At the end of 2005 it acquired Exel. A minority stake in Deutsche Postbank AG (22.9 percent) was sold to to Deutsche Bank AG in February 2009

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EXECUTIVE INTERVIEW

Making the right connection We quiz Philip Edwards on why fibre optic cables have transformed the way we communicate and access data.

From which industries are you currently seeing the greatest demand for fibre optic cables?

Phil Edwards. Typically we see a lot of cable demand from the voice and data service providers such as France Telecom, Telefonica or Deutsche Telecom. In the US we’re working with the large incumbents and in China we’re heavily involved there in terms of rolling out the 3G network infrastructures. We see a great demand rising in fibre to the home projects. Looking to fibre to the home networks, in Europe frontrunners are Scandinavia, particularly Finland, Sweden, Denmark, the Netherlands, France and surprisingly Slovenia. We’re heavily involved in helping these fibre to the home deployments, either being the large incumbents or new entrances like utility companies in Scandinavia or the new operator Reggefiber in the Netherlands. Optical fibre technology is obviously the next generation from traditional telecom copper networks to provide high speed, low cost, reliable, integrated services to the consumers.

an efficient green sensitive solution which will give you huge access to data services directly to the home or the office or government buildings.

Why is fibre optic cabling a cost effective solution for companies?

PE. The future is all about improving the return on investment and being able to provide these high powered, huge tunnels of information at low cost. What we mean by total cost of ownership is that we aim to provide a very high quality level of service, with an effective original investment and more significantly to be able to overlay additional services without having to continually upgrade the network because of the fundamental capacity which this network has. The operational cost of registration and bringing new services and new connections into new environments is kept to the bare minimum. It’s all about enhancing bandwidth capability and making cabling the driver for bringing innovation into network solutions. This is also a low energy consumption solution, which makes it environmentally friendly and allows more people to work from home. This is where Draka can help.

“Optical fibre brings high bandwidth requirements into the home environment”

What are the main challenges associated with putting in fibre optic cables?

PE. The big advantage of optical fibre now is that it brings the high bandwidth requirements into the home environment.

There’s a genuine green theme about this because it’s enabling people to have access to masses of data, which is enabling them to work from home or access diagnostic services online. The challenge is making a reliable, non-limited point-to-point connection between the home and the central office, where most of the information is captured and then, via a digital frame, is actually connected to the individual user. Using a fibre optic cable for this last mile is sensible, but it comes down to costs. So the issue is about having very smart network designs and very cost effective designs so the cost of ownership for the network provider is low both in terms of original capital injection and in the running cost of that network. We can design you a network that will be at the lowest cost of installation, which will be

What is the latest technology that is being developed to benefit companies?

PE. We now provide the latest generation of bend-insensitive fibres which means that you can handle fibre like copper, mechanically abuse it or if you like tie it in a knot without actually compromising the transmission characteristics of the fibre. This means that failure rate during the installation of the network becomes very low which is making it a lot cheaper. In addition, you can miniaturise the components in which you manage the fibre, so it’s a smaller footprint. It requires less energy to support it and the connectivity is more reliable. Nobody wants to have the internet suddenly unplugged from their home or their office because we’re so dependent on it. So building resilience in and miniaturising the solution addresses this challenge in a cost effective way. n Philip Edwards is the Group President of Draka Communications. He is an engineering graduate born and educated in Wales. He started his career with ITT and has since worked for Northern Telecom,Pirelli, Marconi and for the last seven years, Draka. During this time he has looked after the global optical fibre activities.

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PHARMACEUTICALS

In with the new When Chris Viehbacher arrived to take up the reins as CEO of sanofi-aventis, he found a company with an image problem that had forgotten how to communicate. Now he plans to change all that, as Marie Shields finds out.

Y

ou could say Chris Viehbacher has been around. He started his working life at PricewaterhouseCoopers, then in 1988 he moved into the pharmaceutical industry with GlaxoWellcome, which later became GSK. He holds both Canadian and German passports, and has lived and worked in the US and Canada, as well as Germany, France and the UK. But it’s his latest move that is big news. Last December he left his position as President of GSK’s Pharmaceutical Operations North America – after being passed over for the top job in favor of Andrew Witty – to become CEO of its French rival, sanofi-aventis. The move caused shock waves throughout the industry – the previous CEO, Gerard le Fur, had been in the position for only 18 months.

The company’s share prices dropped in 2008, following the rejection in the US of Acomplia, a treatment for obesity, which had once been seen as sanofi’s most-promising drug. And last July, sanofi and partner Oxford BioMedica said their TroVax medicine had failed to meet the target of a kidney cancer study. Investors became understandably disgruntled and the company obviously felt that a change was called for.

When Viehbacher’s appointment was announced, there was a widespread view that he was being brought in as a kind of savior, to turn around a troubled company. Immediately after the announcement, sanofi’s shares rose 6.8 percent, their biggest gain in more than two years.

While he admits that sanofi-aventis has recently suffered from a bit of an image problem, Viehbacher insists he has a strong foundation to build on.

“I had two months between leaving GSK and starting at sanofi, and as part of the analysis I carried out during that period I found a number of strengths coming into the company I would not have known about. When we presented our fourth quarter results, where we talked a bit about the strategy, even people in France who’ve known the company for a long, long time discovered new things.

“The first was that we have a leadership position globally. We’re often perceived as being a company which is very franco francais, very French, but actually this is the company that’s got the number one position outside the US and Europe. It was the first company into China, it has a major position in India, big positions in Latin America, and a major position in Africa.

“When you think that in the future more than 50 percent of global pharmaceutical market growth is going to come from outside of traditional markets, sanofi is positioned with not just the market share, but also with the

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people, resources, local market knowledge and government contacts to benefit from this period of growth.

“We’re also a lot more diversified than people realise. We’ve obviously got a leadership position in vaccines, and a position in OTC that I don’t think anybody realised we had, either inside or outside the company. It provides a basis on which one can build. We have fledgling operations in generics, which we have since reinforced, and we have quite a significant older product range that continues to grow, and which really supports the business globally.”

Let’s talk What then, was the problem? Viehbacher feels that one of sanofi’s mistakes in the past has been a lack of effort to communicate with investors and the general public. “Sanofi is a company that experienced significant success for many years, and didn’t pay attention to the need to communicate.

It’s when you run into difficulty that you suddenly realise that you’ve got to explain where your strategy is and where the strengths of the company are,” he says.

“Management didn’t focus enough attention on it, and we never expressed a vision about where we wanted to go. We had the building blocks lying on the ground, but there was no plan to make the house and no real explanation of what house we were going to build. There’s been some work needed on architecture and construction. But at least the fundamentals were

there; it’s just a question of now building upon those and turning them into something.”

There also needs to be more emphasis on external growth, Viehbacher explains. He says he wants to see the company open up more to the outside world. “We were a company that was more focused internally; a company that lived within its own walls. We didn’t embrace enough of a customer perspective, we didn’t embrace enough of a partnership perspective on looking for new products. We were looking principally inside at our own research for new product opportunities, and we weren’t spending a lot of time communicating with the outside world.

“One aspect of my plan is to bring the outside world into the company and open it up to what’s out there. We have just carried out a pipeline review within our research and development organisation, and we examined it not just from the traditional point of view of safety and efficacy, but we also looked at the value to customers. Cutting 14 of our 65 projects was clearly a strong signal that we’re only going to progress those medicines that are not only safe and efficacious, but also add value to patients. So there is a need to change the culture.”

Viehbacher has also been looking at R&D structure. He says it’s important to keep in mind that there is a lot of fantastic science going on outside the company. “The model – if there is such a thing – is to say you’re going to be doing some research inside, but you’re also going to be doing a lot of research through collaboration. To a degree, outside research is still seen as adding to internal efforts, and to that I say, ‘There are plenty of companies outside and they’re doing plenty of things. Why replicate that?’”

Companies still need to do enough of their own research to be able to understand the research being carried out externally, and big pharma companies will always have some depth of expertise that smaller outside companies don’t. Viehbacher stresses, however, that for him, the discovery research model is very much one of osmosis, and not so much about creating smaller units and organising the structure. He believes in moving money and resources across a range of projects and teams, some of which may be internal and some of which may be external.

Time to collaborate It’s for this reason that Viehbacher is willing to allocate up to 50 percent of his research resources to outside collaborations. He gives the following example: “When we put forward a proposal to build a biotechnology factory in France, I said, ‘I’d like to make sure that this factory is also available to other biotech companies who might want to use the facility.’ That’s an interest for us because we might be able to partner with some of those companies.

“Right now a lot of those companies are forced to subcontract the manufacturing to people who specialise in manufacturing, but who aren’t necessarily interested in partnering. They’re just doing it to make as much profit as they can. Traditionally business development has centred on the idea of adding something to the company, where we don’t think the pipeline is enough. But when we think our own internal pipeline is enough, then it becomes harder to bring in new products to the company.

“After 20 years, I can say with certainty that you can never have enough pipeline. There isn’t a company in this industry that has enough pipeline, and enhancing that and working collaboratively outside has got to be a way of life – and a constant way of life, not just something you do on an ad hoc basis

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to supplement your own. The model we must move away from is this notion of ‘We’re going to just keep throwing money at a black box’ – which is the way I often perceived research and development in my past years – and hope that we can do everything from A to Z, from discovery through to commercialisation.”

With external collaboration, there’s obviously a process of competition that doesn’t occur with internal projects. It’s through this competitive process that some of the best ideas come out, and weaker projects often get weeded out. Companies don’t always put the same level of due diligence and rigour behind the choice of internal projects, because they’re committed to sites and committed to teams.

“This might mean we need to bring a lot more rigour to deciding which are the best ideas to invest in,” Viehbacher says. “Then we need to get behind them, make sure the teams have passion and conviction, and give them the latitude to decide. The construct of a team may differ from one therapeutic area to another, but at the end of the day we are betting on teams and their ideas. It’s a question of how do you identify those, encourage them and put some stress on the testing of those ideas? You have to let them run and try to keep as little process and bureaucracy as you can from impeding those efforts.

Then after three or four years, you see what results they have come up with.

That’s also something that in our industry we haven’t been good enough at – looking for the results early on. As an industry, we do development pretty well; it’s the discovery research piece that we’ve got to go back and look at from a people point of view.

“You’ve got to be able to voice a problem before you can solve it. To a degree, we’ve been dancing around a number of issues in this industry and haven’t wanted to face up to them. We do need to acknowledge, for example, that we don’t have enough new products to replace the ones we’re going to lose. And we probably have not been realising an appropriate return on the money we have been spending on this area, and we probably do need to spend a lot more on research and development in terms of how we restore the creativity and productivity there.

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“Nobody has really gone far enough, in my view, of saying, ‘We’re going to address this.’ We’ve been taking baby steps, when we need to be a little bit more radical.”

Diagnosis merger The industry has recently seen a spate of mega mergers – Pfizer/Wyeth, Roche/Genentech, Merck/Schering-Plough. What does Viehbacher think of this trend, and is it one he’s considering buying into himself?

“One way or another, we all have to think about where we’re going to get sustainable growth from, and everybody starts off with a different set of cards.” he explains. “You have some companies that have become almost purely small molecule-based in Europe and the US, and when you’re facing a

“One of the reasons the industry is having difficulty in discovery is that we’re still pursuing the same targets.

At some point you have to branch out and go after some new frontiers” patent cliff and you don’t have an awful lot of other things in your hand, you pretty much have to do something to continue to survive. Pfizer has said, ‘We need to be more diversified. We need more biologicals and vaccines, for example, and OTCs,’ which they didn’t have, and so it was a way of getting that.

“Merck’s Peter Kim recently said in an interview that they want more pipeline. Everybody starts with a different position. For us, we’ve got a lot of elements upon which we can grow. I don’t necessarily need to do a big deal to seek that out; and in fact if you are trying to get away from dependence on

Gérard Uféras/Rapho/Cianfaglione & Gravereaux Architectes

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The sanofi-aventis group head office.

blockbusters you want to focus on those businesses that have different competitive profiles and different barriers to entry. And they’re not necessarily going to be easy businesses either, but they’re going to have a different longevity and a different perspective in terms of growth.

“My first objective is to continue to build on this notion of a global healthcare company as opposed to a pharmaceutical company based in the US and Europe, and therefore have an acquisition strategy that builds upon those things where we already have a strong presence. Like vaccines, like emerging markets, like OTCs and generics, where we’ve been weak but where we can strengthen ourselves. I don’t think the size of the acquisition necessarily matters. It’s a question of us all looking to strengthen our companies as we face patent expiries, and some of us, like sanofi, have things upon which we can build internally; some of us have to seek more externally.”

Viehbacher says that the big question, whether you’re buying big, medium or small, is still going to be around innovation. He believes most companies are struggling with the question of how to come up with an innovation model that is sustainable. He doesn’t think anyone has found the solution, but he stresses that innovation is something that needs to be worked hard at, and that you can’t let merger and acquisition activity completely dominate that.

Diversify and multiply Since becoming CEO, one of Viehbacher’s constant refrains has been that he aims to turn sanofi-aventis into a diversified health-care company with a more global reach. What exactly does this mean?

“If you think about strategy you essentially start off with a certain number of things,” he says. “The first is: where is there an attractive market, and you come down to that by looking at what are some of the mega trends amongst consumers? What are some of the disease areas of unmet need?

What’s the evolution in the marketplace in terms of payers and insurance companies and regulations? And you try to then marry that with where you’ve got some sort of capability, presence or experience, and try to focus in on those market areas that are the most attractive.

“On the pharma side, we’ve gone too long where we start with a medicine and go look for a customer. If you look at the fundamentals of the healthcare market, it’s huge. There is going to be economic growth at some point; we do have the economic crisis, but even in the economic crisis you’re still seeing quite a number of markets growing, although not as much; for example, in countries like China who suddenly decided that they need to significantly increase the level of investment they have behind healthcare.

“If you look at the aging population as a mega trend, if you’re looking at obesity, you’re looking at a trend for wellbeing, you’re looking at time compression, you’re looking at urbanisation of populations. You’re suddenly seeing that there is going to be a focus on healthcare, but on a certain type of healthcare, and that our style of living is creating new healthcare issues. To me, healthcare – especially if you don’t define it too narrowly – is fundamentally a strong area. And you’ve also got major diseases that still are not well treated – such as diabetes, oncology, Alzheimer’s disease.

“Therapeutically you’ve got some very interesting areas, but then of course not everybody can afford the same level of healthcare. We’re seeing an increased presence of government regulation trying to go after some of the private sector in terms of over-the-counter, or in countries where there’s no real social security or health insurance today – which is true of most countries in Asia – and you have to ask, can you get into more services, OTCs, generics, some devices? There are all kinds of growth opportunities out there, and the strategy is around going after those versus just saying well, we’re a pharmaceutical company.”

Another constant lament within the industry is the lack of new blockbusters. Viehbacher points out that blockbusters are unlikely to disappear completely. “The model that didn’t work was betting on the blockbusters; relying upon them for your success. There will still be blockbusters, you just can’t count on them in terms of timing. You’ve got to also then organise yourself, because there’s no question that there’s no better business in terms of profitability, with low levels of resources needed, than when you’ve got a blockbuster. If you’ve got one you’re in a great place, but you can’t always count on those.”

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Increasing productivity Another area that Viehbacher feels the industry should be looking at is the strength of its R&D. With this in mind, sanofi recently carried out a portfolio review. “Our intention was to do what a lot of other companies had already recognised, and that is that you can’t develop a new medicine unless it adds value to patients,” he explains. “In so doing we’ve established new processes where the market is represented at the decision table as to when we advance a product – nothing revolutionary there. The next step is to ask five questions of R&D. The first two we’ve already answered: do our products add value, and who needs to be at the table when we make decisions?

“The third, fourth and fifth questions are: how do we restore creativity and productivity back into our organisations? How do we make sure our organisation is as interested in seeking science outside the company as inside?

And, what are the new technologies and areas for investment that we want to be in? Science is moving on – where do we want to place our bets?

“I’m not going to define all those; we do know we have some issues. I’m meeting with some of our scientists right at the bottom of the company. We have anywhere from nine to 10 hierarchical levels between the head of R&D and the scientist. That means a lot of our best people have become managers, and you get a promotion in the company by becoming a manager, not by being a great scientist. We’re not doing enough to recognise innovation. We’ve got some great people, but it’s very hard sometimes to get a project advanced if you really believe in something, because you’ve got to go through so many steps.

“We’re trying to go back and have a very basic look from a human point of view at who are the people who can succeed, how do we test whether they’re going to succeed, and how do we give them a chance in our organisation and give them enough latitude? We’ve become quite risk-averse as companies, and you’ll very often hear that we’re trying to manage the risk of the companies. And to a degree that makes sense – certainly when you get to development you want to manage risk.

“One of the reasons we’re having difficulty in discovery is that we’re still pursuing a lot of the same targets, and at some point you have to branch out and go after some non-validated targets, some new frontiers of science. We haven’t allowed enough of a risk profile at that level of the organisation to branch out into new areas. If you look at the targets in oncology, in metabolic disease, and in CNS, and you compare how many companies are going after the same target, it’s incredible.”

When asked about the possibility of further job reductions as part of costcutting measures under his leadership, Viehbacher refuses to be drawn. “We will certainly go through a process of looking at how we can reallocate and reorient our resources, and that may end up in fewer resources. But nobody’s going to invest in this company because we cut costs. One of the lessons I’ve learned in the last 20 years is that if you want to provide shareholder return you have to present a company that’s got a sustainable growth prospect. If you just go through endless rounds of cost cutting you end up with an organisation that becomes very distracted and very demotivated.

“We’re becoming more of a global company. We’re going to focus a lot more of our growth into emerging markets and places like vaccines and OTC. Those all have ripple effects within a company; if you’re suddenly in generics, the manufacturing organisation has got to be able to support 100 launches a year versus 15; a launch being the launch of an SKU, not a new molecule.

And so you’re going to have a different organisational model – you don’t necessarily want to smother your generics businesses.

“You want to provide some different perspective. You’re going to be doing a lot more outside collaboration. What is the type of person, what is the type of competency you need for that? I think we’ll probably end up saving some cost, and this company has done that very effectively over the years.

“We’ve got the lowest SG&A ratio in the pharmaceutical industry. Sanofi has never stood up and beat its chest and said, ‘We’re going to eliminate all these jobs.’ It has just quietly and effectively managed its costs, and we did that again in the first quarter. To me cost management is just part of good management. We’ll continue to do that, and there are certainly opportunities to take some costs out of the business.

“An endless round of cost cutting is not necessarily helpful, and it doesn’t create value longer-term. It has to be to get the company growing on its feet again.”

“An endless round of cost cutting is not helpful, and it doesn’t create value longer-term”

Recession-proof?

It is unlikely that any industry will emerge completely unscathed from the current recession, and recent rounds of job cuts among pharmaceutical companies are an indication that they too are feeling its effects. The Pfizer/Wyeth merger resulted in the loss of nearly 20,000 jobs. GSK eliminated 800 research positions late last year, and recently announced it could shed up to 6000 more jobs across its global operations. AstraZeneca also said in February that it would cut its workforce by about 6000 positions. Sanofi-aventis, while it hasn’t yet made major reductions to its R&D staff, has cut nearly 1000 sales jobs in France, and several hundred more in the US.

Optimistic outlook Despite the challenges his company and the entire industry are facing, Viehbacher is optimistic about the future. In his opinion, there is too much focus on the patent cliff, when the future is in healthcare. “In our company we’ve got a lot of talented people and we’ve got a lot of financial resources.

There are a lot of patients out there, and we’ve got the medicines and vaccines to help them.

“We’re going to be a company that grows well on into the next decade.

We need to get past the blockbuster phase, but the base business that we have and our ability to partner and do acquisitions gives me an awful lot of excitement for the future.

“Healthcare is still something that matters more than anything else – there is huge unmet need out there. It’s a massive marketplace, and if we’re a little bit creative and a little bit flexible in how we go after it there are big opportunities.”

Despite the initial controversy surrounding his appointment, Viehbacher seems to be settling nicely into his new role. As he looks forward to the rest of his family joining him in Paris this summer, perhaps this ‘man on the move’ will decide to stay put for a while. n

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EXECUTIVE INTERVIEW

How are your products and services aiding companies to boost their ‘green’ credentials?

NS. We are proud to offer the most electrically efficient power and cooling equipment available; nevertheless, customers typically obtain the largest energy efficiency gains from the help we can provide in planning the infrastructure of new data centres and assessing and improving existing data centres. Simple choices in deployment geometry, sizing, power distribution, or configuration can result in dramatic changes in energy consumption. One of our goals is to ‘build in’ efficiency to our data centre reference designs to ensure that organisations operating smaller data centres on a small budget can be just as efficient and ‘green’ as enterprises like Google that have expert staff and operate very large data centres.

GREEN CREDENTIALS

What are your predictions for this sector in the next few years and which industries will emerge ahead of the curve with their ‘green’ efforts?

NS. Green efforts in the IT space will focus on electrical energy consumption in the short-term, because this is where the most substantial and cost effective environmental impact benefits can be obtained. Many existing data centres should, for now, focus on measured electrical enwill undergo significant efficiency improveergy savings. Success requires that an effective ments that will extend their baseline energy consumption practical life. For new data study be performed or it becentres, the fundamentally incomes difficult to assess acefficient traditional raisedcomplishments. Clarifying the floor cooled data centre boundaries between IT and design will disappear, as hotnon-IT energy consumption aisle containment and free-air remains a point of confusion cooling become standard pracfor most customers, and any tice. Over the next few years, as assessment needs to be explicthe efficiency of data centres it on this. Server virtualisation improves dramatically, we can projects should always address anticipate a focus on the next power and cooling infrastruckey green IT objectives, which ture in parallel with the IT are water consumption and changes; we find many virtuNeil Rasmussen is the SVP of Innovation for APC by Schneider equipment end-of-life disposalisation projects achieve Electric. His current research is al. Improvements in all of these much less energy savings than focused on next generation high efficiency data centres. He holds 17 areas will be driven by vendors, anticipated when the power patents related to data centre architecture and has published over and the most effective IT users and cooling infrastructure has 50 papers on that subject. Rasmussen will be those who adopt emergnot been adapted to the virtureceived his BS and MS degrees in electrical engineering from MIT. ing green management stanalised environment, and imdards such as ISO-50001 provements that could have Energy Management Standard been easily made at low cost rather than attempting to develop their own intercan be difficult or expensive after a virtualisation nal standards. project is completed.

With organisations looking to improve their efficiencies and slash their carbon footprint, Neil Rasmussen offers his expert advice on going ‘green’.

Will the global recession impact on organisation’s ‘green IT’ efforts or do you take the reverse view that this is the ideal opportunity as CFOs look to slash expenditure?

Neil Rasmussen. With many customers deferring major IT deployments and focused on controlling costs, this is an ideal time to undertake efforts to reduce energy expenses. Adjusting power and cooling infrastructure, retiring older servers, and driving server standards often have a short payback time and can recover data centre power, cooling, and physical space capacities, creating a solid foundation for future IT projects. For many customers, server virtualisation provides a large additional opportunity to free-up capacities and reduce power consumption. For most customers, reductions of 20 percent in IT related electrical consumption are easily obtained, and savings of 50 percent or more are commonly achieved.

What are the common mistakes people make with their attempts to reduce their technology carbon footprint?

NS. Due to the immaturity and lack of standards for assessing carbon footprint, IT professionals

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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.

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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, 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 fi nancial 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 eco-technologies.

“According to the UN, 20 million new jobs could be created worldwide in the renewable energy sector by 2030” 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 energy-efficiency in buildings has the potential to create up to 3.5 million green jobs in Europe and the United States.

Stavros Dimas

The road ahead We are building the future, today. And it is clear that those who take the lead will have a fi rst 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-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 lifecycle is essential. Th is is at the heart of our Sustainable Consumption and Production Action Plan.

Th is brings me to the role of the Executive Agency for Cometitiveness and Innovation (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. Th is 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.

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MARKETING FOCUS

A change of focus

The world’s undisputed king of photography, Eastman Kodak, recently made a successful transition into the digital age. A huge part of that transformation was down to the way the company’s CMO, Jeff Hayzlett, changed how the company communicates with its customers. By Rebecca Goozee

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s one of the most visible and active social-media fans in the CMO business, Jeff Hayzlett believes that social media has the power to grow a brand, strengthen relationships with audiences and keep a fi nger on the pulse of what’s happening with the business. And nowhere has this been more evident than at Kodak.

When Kodak was going through it’s transformation from a fi lm and print company to a digital one, many functions in the company played a role in making that transition a successful one, including decisions to downsize, cut jobs and increase focus on B2B customers; marketing came into its own, particularly the use of social media.

“Overall marketing itself has changed,” explains Hayzlett. “At the same time that Kodak was going through its transformation, marketing was going through a big shift – mostly driven by the internet ghaving more and more of an impact on the way in which we reach out to people online. We’ve seen a real shift away from traditional television ads to more viral types of campaigns, which has been a fundamental transfer. And at the same time, Kodak was getting its mojo back, making for an exciting time quite frankly.”

There were undoubtedly challenges in moving from a fi lm and print company into a digital one, but by putting a program in place it was possible to change the mood of the company and align goals to ensure everyone was working together and in the same direction. By leveraging a number of themes it was possible to generate a great deal of energy and enthusiasm in Kodak. “One of the themes we focused on was around spend,” explains Hayzlett. “When you’re a company the size of Kodak you have hundreds of millions of dollars that you spend in the marketing area.

What we’ve done is got much smarter in the way in which we spend it, so we reduced our supplier spend, but we’ve increased our external investment in making Kodak much more visible to our marketplace.”

Hayzlett put forward the idea of FAST, standing for focus, accountability, simplicity and trust, which also denotes speed. “When you go through a lot of change inside a company sometimes people become afraid to act because they want to be sure they are doing the right thing. The FAST mantra was that even if we mess up, let’s do it and let’s do it faster. It got employees focused on what their jobs were and what they needed to do.”

By changing the mood of the company it was possible to achieve one of the biggest turnarounds in business history. Sixty percent of business today is B2B compared to four years ago when it was around 30 percent.

Eleven digital product lines now provide around two thirds of the revenue and more than half of those products didn’t exist four years ago.

By comparison, less than half of the revenue came from digital products four years ago.

Why did marketing play such a huge part in the turnaround? According to Hayzlett it is because the Fortune 500 giant is an extremely market-centric company-meaning that marketing is the only function that can bridge an idea all the way through from production and delivery to the customer. “Marketing is very much like the chief customer officer in the respect that marketing strategy is involved in the evolution of Kodak. It’s really leading the effort to move beyond the US into critical markets like the UK, Russia, China, Australia, Germany and France – marketing is the Cavalry officer that’s out front leading the horse charge,” smiles Hayzlett.

An unconventional approach Marketing is clearly key at Kodak, and Hayzlett is renowned for his love of alternative and innovative marketing techniques. So why has he chosen to embrace so many social media tools?

“Because they work!” he laughs. “Social media has been around forever but its recent transition to the internet has made it a great way to communicate with customers.” By shift ing the discussion from a one-sided sell it has been possible to engage, educate and excite potential customers with new and improved products.

Rather than calling an 800 number, customers can directly interact with Kodak and share their ideas or problems.

“We’ve been opening up dialogs in different ways and they’ve helped us spread the word.

It’s amazing to watch conversations on Twitter for instance. Someone will say they are looking at an HD video camera and then immediately people will reach out to this person and give them advice about the best product. It’s exciting and it’s helping to fan the flame of the fi re that’s Jeff Hayzlett already taking hold.”

Aside from Twitter, Hayzlett is involved with Facebook and Flickr, as well as a number of tools to monitor and participate in different ways, such as TwitterBerry and TweetDeck. “I use a number of tools and it’s really amazing, because I wrote something yesterday in one of my tweets regarding TwitterBerry, and then someone said, have you heard of UberBerry, so now I’m checking that tool out too. All of them are great for getting the message out there.”

Hayzlett originally started using social media to keep in contact with his family and let them know where he was. And he soon figured out that Facebook was a great way to keep in contact with employees. “Social media was just such a great way to be connected and share our lives,” he explains. “And then I found out, wow, I’ve got this great big Kodak community at my fi ngertips, with 20 percent of our employees on Facebook alone, which

“Kodak has a better bond with customers than ever before and that’s because of the way in which we are able to communicate with them”

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A HUMAN FACE was phenomenal. It gave me direct access to them, without any fi lters, and I started getting all these followers and it’s just taken off from there, it’s just I’m doing a little bit more of it.”

That said, Hayzlett is unsure to how much time he devotes to social media. “I just don’t keep track of it,” he admits. “I just know I do all of it myself, nobody else does it for me, and that I spend enough time to get what you need to get done done. That’s the best way to describe it, and you know, I used to spend a lot more time on the telephone and I don’t do that anymore and I see myself doing more along these lines than I do now by email.”

Hayzlett is a firm believer in the power of narrowcast marketing and admits that it has had an impact on the types of media that he continues to use today. “Narrowcast marketing is very much in line with one of the best marketing techniques that we can use. So while direct mail is an older media type it provides a 13 to one ratio on your return on investment,” he says. By applying the same kind of rules to newer media types, Hayzlett is able to help customers focus in on customising and individualising products. “It’s all about recognising the individual customer and narrowing your message down to meet the individual needs of that individual person. What we try do is make the experience as personalised as possible.”

The use of social media has certainly played a part in making Kodak’s communications more personalised. Indeed, Hayzlett believes that having conversations with individual customers is vital to forging a relationship and providing a personalised service. And that conversation doesn’t always have to be a good one for that relationship to flourish. “We fi nd that social media has helped us fi nd customer complaints,

WHAT THE ANALYSTS SAY

S

heryl Kingstone, Director of Yankee Group’s Enterprise Research group with an expertise in customer centric strategies, believes that 2009 is the year that social media will solidify its place within the realm of traditional business applications. In her report, Enterprises Need to Say ‘I Do’ to the Marriage of CRM and Social Media, Kingstone says that although social media is a disruptive technology, its real benefit will come when businesses incorporate it within day-to-day customer lifecycle processes to engage in real-time customer conversations.

She reports that social media is forcing enterprises to make substantial changes to sales, marketing and service.

Now companies are using social networking sites such as LinkedIn and Plaxo – which started as professional networking communities – to create their own enterprise social graph to improve sales opportunities. Kingstone cites reduced sales and support costs and increased richness of the customer relationship resulting in CRM software independent software vendors as having to embrace the changes social media is bringing or else face becoming less strategic to corporate goals.

Source: www.yankeegroup.com

Biz Tech Daily named Hayzlett a top 20 Twitter All-Star for business and he is one of the few executives followed on ExecTweets, but what does this mean to him?

“It’s both scary and exciting,” he explains. “It’s exciting to be included in such great company as Sir Richard Branson, but it’s also a great honour and it’s reflective of the new spirit of Kodak. Social media has helped put a human face on Kodak, and usually with such a big company you don’t always have a face to reach out to, so we have people, as well as myself, that are using social media tools to connect and engage with customers.

“It’s a great honor to be seen as somebody who’s really on the cutting edge, and I think that’s a great thing for Kodak.”

which is great because it enables us to go about fi xing them, as opposed to before when we wouldn’t have known about those things,” says Hayzlett.

“Kodak has a better bond with customers than ever before and that’s because of the way in which we are able to communicate with them.

Nobody wants to be treated like a number and we don’t want to treat our customers like that because they’re people and they’ve got special information or memories, and we want to help them whether they’re a B2C or B2B customer.”

Looking ahead In terms of moving forward, Hayzlett is looking to continue building customer relationships in a much more intensive way, by “turning up the volume”. He hopes to focus on a few key messages and get the entire marketing organisation and all the external partners executing those key ideas. “We’re re-energising our marketing communication and evolving into a truly social organisation. You’ll see it through the appearances on [TV show] Celebrity Apprentice and you’ll see it more on our blogs and through other social media.”

Internally, Hayzlett is working on mykodakworld.com, an internal website for the company’s 27,000 employees, to engage and activate the workforce to become brand ambassadors for Kodak. He is also looking to improve training around cross-promotion. “We’re starting to do a lot more cross-promotion than we’ve ever done before, because you know that if a customer buys a camera then they will want a printer. They’ve made a decision that Kodak’s the best brand, so therefore we can sell them other products under the same umbrella.”

The Kodak transformation has been one of the biggest turnarounds in business history, successfully combining elements from HR to R&D to marketing, to make a stronger and more relevant company to today’s market. “We’ve been doing the best to get the word out and integrated our products to make Kodak a part of the story, and we’ve done that effectively in a number of markets, in Celebrity Apprentice for example, where we’ve used branded content to get the word out to those viewers.” When you look at the success that the company has seen, it seems obvious that social media is a truly effective way to spread the word.

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EXECUTIVE INTERVIEW

Taking Web 2.0 to the next level With the next few years expected to see a surge in the use of Web 2.0 technologies, we sit down with André Bonvanie to discuss their benefits to organisations and the role social sites can play.

What is driving this growth in Web 2.0 technologies?

André Bonvanie. In a study conducted by McKinsey, Clay Shirky, an adjunct professor at New York University, calls the underused human potential at companies an immense ‘cognitive surplus’ and one that could be tapped by participatory tools. Corporate leaders are, of course, eager to find new ways to add value to their organisations. Because traditional tools were traditionally too hierarchy oriented and didn’t do anything to stimulate people sharing their knowledge profile, this IQ surplus never surfaced. Web 2.0 allows for people to be in control of their knowledge profile beyond organisational boundaries and facilitate in creating pockets of knowledge that can be (re)used by everyone. They allow for participation of the entire organisation in harvesting new ideas to improve the overall organisation’s performance.

What advice would you offer organisations looking to deploy Facebook and/or Twitter as a business tool and what challenges does this throw up?

AB. The seismic success of Facebook, Wikipedia, Twitter and other social computing tools often creates soaring expectations for viral adoption of social computing in business settings. While the ‘just build it and they will come’ strategy works in the consumer world, it’s a dangerous approach for business: users may never come, or they may come and waste their time. That’s why implementing a business social network like social sites offers a much better fit in terms of getting new employees on board, making sure confidential content stays confidential and that you allow for identifying your corporate champions. We’ve seen Facebook change its application a few times already, and you may not like these changes at all, and these could actually break some of the processes you have set up on these consumer-oriented platforms.

Do you have an example of where you recently helped an organisation by supplying your products and services?

AB. Universal McCann (UM) is a global media communications agency delivering the ‘Next Thing Now’ to the world’s leading marketers and strategic thinkers. UM selected NewsGator Social Sites and UM employees can now quickly browse through the company’s intranet and find the latest content headlines, view the most relevant/popular portal content and easily learn about other employees at any office in the world. The social computing platform also enables employees to discover colleagues and subject matter experts, form social networks, and build communities based on areas of interest, rather than geography or project teams. The social computing platform enables UM to enhance each person’s effectiveness within the collective wisdom of the worldwide organisation – driving significant business value and customer satisfaction.

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“The seismic success of Facebook, Wikipedia, Twitter and other social computing tools often creates soaring expectations for viral adoption of social computing in business settings” Looking into your crystal ball, what are your predictions for how Web 2.0 technologies will evolve in the future and what will it mean for business?

AB. I’m quoting Gartner’s Nicos Drakos in saying that the goal of an integrated portal with a social networking system is to simplify the process of personalising, finding and exploring information via social filtering — that is based on how information relates to people (who wrote it, who subscribes to it, what my colleagues read, what they rate highly and so on).” So by using these Web 2.0 tools, and even tools that will be surfacing in the next year or so, our view is that people will have a social fingerprint that describes them and makes it easy for other people to find them for collaboration on shared projects and tasks. n André Bonvanie leads NewsGator Technologies’ European office. NewsGator provides social computing solutions including NewsGator Enterprise Server and Social Sites. For more information contact him at andreb@newsgator.com or +31 (20) 561 7038.

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CRM FOCUS

A social approach Michael Thomas offers his opinion on using the recession to add social CRM practices to your business strategy.

O

ne of the most common questions that I am asked is how can companies leverage and improve their CRM practices during the recession? How can they weather the storm and keep their most valuable asset, the customer, during this time and continue to add new business to their customer base? I start off answering the question by using the analogy of the yellow caution flag in a Formula 1 race, where the flag signifies a hazard and all cars must slow down and hold their position until it is safe to resume.

Holding the position is one thing but there is a lot to be gained during that time, especially during a pit stop. My point is what you do during this slow down will affect how you will proceed when the green flag signifies the end of the slowdown. Companies need to take a look at their CRM strategies during the pit stops of this slowdown and make adjustments that will allow prospects and customers to engage with you more efficiently and effectively.

I have heard that 80 percent of your business revenue is from the top 20 percent of your customer base. If this is true then reaching out to the top 20 percent is where you should focus your time. Take the time to pull them in and get their input and feedback. They too are struggling during this time

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and acknowledging this by discussing ways of how your company and solution can assist them in weathering the storm will earn their loyalty and advocacy. This open collaboration and conversation will set the stage for future trusted communications. I feel that there are two major areas to address that will position your company in a positive light during this recession: focusing on the social customer and understanding that the social customer is a mobile customer.

The social customer Companies that have been speeding along at a steady pace will slow down to find that a lot has changed. The need for foundational CRM strategies will always be there but customers and prospects are now in the driver’s seat in their interactions with you. Companies now will have to engage with them on their terms. The customers are now in control and are known as social customers and a new strategy called social CRM will need to be in place to meet them on their terms.

Paul Greenberg, bestselling author of CRM at the Speed of Light defines the social CRM customer this way: “CRM is a philosophy and a business strategy, supported by a technology platform, business rules, workflow, processes and social characteristics, designed to engage the customer in a

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collaborative conversation in order to provide mutually beneficial value in a trusted and transparent business environment. It’s the company’s response to the customer’s ownership of the conversation.”

The “ownership of the conversation” gives the power to the customers because the fact that they have the tools to express themselves can hurt, as well as help, your company’s image.

Another component focuses on the way prospects find out about you. It usually begins with a search and the ability to show up in a favourable way in the search results which will set the pace of how and if they will engage with you. Social tools such as blogs, social networking sites and Twitter are some of the tools of choice for customers to spread the good, bad or indifferent about your company. These same tools can be used by companies to open up new lines of communication with their audience.

I will use the three components of CRM to address some social CRM practices companies should implement to engage their audience: Marketing: SEO (Search Engine Optimisation) plays a major role here. Adding a social channel to your marketing efforts may be as easy as setting up a Twitter account or Facebook group to start out with but the key is to have activity around your company and brand so that people can find you. In addition to adding this channel is the ability to monitor what is being said about your brand, utilising something as simple as Google Alerts as well as other listening platforms such as Radian6 to monitor those conversations in order to engage or diffuse effectively. Do you have a ‘follow me’ tab for social media avenues you have in place?

Sales: Once your company and products are found, how are you engaging with the prospect to make sure lead scoring strategies are in place to route to the proper sales person or to make sure they go to the shopping cart? Do you know the right behaviour, web clicks and actions to keep their interests and to entice them to buy? This could be as simple as tracking what they are looking at and if there is an area on your site where people can comment and rate your product. Taking the time to monitor this behaviour will assist in integrating the action into your lead generation processes. Is your sales team on board with interacting with their prospects with social media tools?

Service: This is one of the key areas to address with social media because customers are known for expressing their opinions and frustrations over the web. Having a method to address their concerns early will prevent bad information from spreading quickly. Monitoring Twitter and engaging with customers on updates, solutions, new features and other pertinent information will keep them in the loop and give them the confidence that you are aware of what is being discussed.

Self help areas on your site with FAQs, solutions and promotions will also lend a hand in service as well as marketing and sales. Customers look-

“Companies need to take a look at their CRM strategies during the pit stops of this slowdown and make adjustments”

ing to do business with you will seek out this area and information to see how issues are addressed and resolved.

The mobile customer While addressing the social media component of CRM, it is equally important to understand that the social customer is also a mobile customer.

Your company’s communications will need to be flexible in order to reach their desktop or mobile device. Giving them practical options of engagement will make it easy to communicate and do business with you. Now is the time to embrace this new media and put social CRM practices into play.

You will have to adapt to your customer or face losing them. n

Michael Thomas is National President and National Board Member of the CRM Association.

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Successful delegation in times of transformation Greg Kinsey, Managing Director for Europe at Breakthrough Management Group International (BMGI), outlines how managers can talk their way out of a crisis in times of economic strife.

A

s the global recession continues to wreak havoc on sales and profits, corporate executives are facing the challenge of leading rapid change. Only those organisations which quickly transform will likely survive much beyond the end of the decade. This means mobilising and empowering teams on a wide range of projects, for example: re-inventing the sales process, transforming to a leaner supply chain, innovating new products or processes, driving cost out of operations, or collaborating with suppliers in new ways. In this environment, increased delegation is mission-critical. Delegation provides a way to “scale” the management team to get more done in a shorter timeframe. And delegation is the key to empowering individuals and teams to improve the parts of the business they know best. In some cases, this means breaking down cherished work systems that represent the core of their job identity. In other instances, it means finally having permission to destroy procedures that everyone knew were inefficient in order to implement a better or easier way of doing things. In either case, change and innovation cannot occur in a command-and-control culture. This is why old-fashioned micro-managers fail in times of rapid change. Effective delegation is required.

Delegation explained What is delegation? What are the secrets of effective delegation? These are questions that I hear from seasoned executives as well as new managers. For starters, a quick look at a dictionary tells us that, as a verb, to delegate means to transfer power or authority to someone. Well, this seems a little different from the way I hear it used in the workplace, where people often say things like “we should delegate the presentation to Paul” or “I delegated the cost calculations to Julia”.

There are a lot of managers who consider delegation to be the transfer of tasks rather than the transfer of power or authority. True delegation is not telling people what tasks to do (or how to do them), but rather it

LEADERSHIP

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LEADERSHIP

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regard established rules, are impatient with details and tend to generate a is entrusting them with a broader responsibility for outcomes. It means givsteady stream of ideas without too much concern over practical implemening someone the authority to make decisions, solve problems, lead teams and tation. Successful transformation projects require both types of cognitive style. take actions to get results. In this light, there are two important pre-condiTherefore, teams with both adaptors and innovators are usually the most suctions of delegation: clarity of mission/purpose/direction and unconditional cessful. Leading such mixed teams requires a person who is in the middle of trust. Don’t delegate if your strategic direction is unclear. And don’t delegate the range, with an ability to connect with people on both extremes of the conif you can’t deliver the trust. tinuum. This approach has proven so sucBut the act of delegation is usually the easiest part. The cessful, that some organisations have trickier aspect of delegation is found on the side of the receiver; About BMGI BMGI works with leading companies around started using a powerful tool to measure not everyone can accept delegation and run with it. More often the globe to help to transform their businesses.

Founded in 1999, BMGI has developed a client cognitive style, called the Kirton Adaptionthan not, I have seen that delegation is easy for the giver to give, base that today exceeds 200 organisations in Innovation (KAI) Inventory. Developed but hard for the receiver to accept. In general, those who do not industries as diverse as biotechnology, healthcare, finance, retail, manufacturing, by psychologist Dr. Michael Kirton, the readily accept delegation are more likely to fail with the reenergy and communications. BMGI has offices in 12 countries and has more than 150 KAI provides a rapid and reliable method sponsibility. Not everyone is a good candidate to receive deleemployees worldwide. For more information of measuring an individual’s cognitive gation. So how do you know to whom it is best to delegate? on services, visit www.bmgi.eu or email Europe@Bmgi.com style. For further information on this Good leaders tend to know this instinctively. There has also methodology, see: www.kaicentre.com. been significant behavioural research pointing to two key facIn summary, delegation is a powerful leadership tool, which is indistors which determine a person’s likeliness to perform successfully under delpensable in times of rapid change. The art of delegation requires clear strateegation: (1) task competency, and (2) emotional commitment. Task gic direction (expressed in mission and objectives) and the practice of competency (also referred to as “level” by behavioural scientists) is the aptiunconditional trust. Both of these elements stem from the style of the inditude to perform the kind of work being delegated. In other words, does he or vidual leader, as well as the culture of the organisation. The other important she have the ability (intelligence, skills, etc.) to do the job? The second factor, aspect, often overlooked, is to carefully choose the people to whom you delemotional commitment, refers to the person’s willingness to do the job. More egate. Only those individuals with a high degree of task competency and emotional commitment will be successful recipients of delegation. Beyond that, it is important to understand the cognitive style of individuals and assign roles according to cognitive style. Some activities are more adaptive in nature and some activities are more innovative in nature. Most projects are a mix, requiring different styles of problem-solving at different phases of implementation. This is why the highest performing teams are usually a mix of adaptors and innovators, led by a strong “bridger” who relates well to both ends of the spectrum. n

“Those who do not readily accept delegation are more likely to fail with the responsibility”

than just motivation, it is about raw determination. A person with a high degree of task competency and a strong emotional commitment is a good candidate for delegation. Otherwise there is a risk of failure, because the person is either unable or unwilling to perform the delegated mission. And to make matters more challenging, the competencies and commitment level of an individual are not fixed. Both attributes can vary over time (month-to-month or year-to-year) or change according to situation.

Problem solving All people can be effective problem-solvers, given the right level of commitment and competency for the task at hand. However, not all people have the same style of problem-solving. What is not typically known or well understood is how a person’s cognitive style can determine their success.

Research suggests that there is a range of problem-solving styles, running along the continuum from adaptive to innovative. Adaptors are good at solving problems within the established paradigm, while innovators excel at outof-the-box thinking. Those at the adaptive end of the spectrum are usually comfortable with rules, have patience for details and have a practical, conservative approach to risk. Those at the innovative end of the spectrum often dis-

Five keys to effective delegation • Delegate to a person with a high degree of task competency and a strong emotional commitment to the organisation • Understand that true delegation is not telling people what tasks to do but rather entrusting them with a broader responsibility for outcomes • Recognise your team members’ different problem solving skills. Are they good at solving problems within the established paradigm or do they excel at out-of-the-box thinking?

• Delegate in times of rapid change. Do not micro-manage as change cannot occur in a command-and-control culture • To delegate successfully requires clear strategic direction and the practice of unconditional trust

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n and was o i s , s r e o c t e c r o e D ss during th g n li g Dear Busine g u r t ing for s k n r e o e w b n s o a h y r y sh to car i My compan w o h w e mute or s m o o h c T o l. t a v i e r v a a h by they will t a h bought out t tuati s ld e o r t a n h e c i e h b s have arters w u q d a e h ’s the busines m t fir er of 26 n g a e r n a a p m e e h h t t ay. I am w a relocate to e v i r d ake the ’s r t u o o h t g e n i n k o o n a eam are lo t ed more th e h t f o want the lf ’t a n h o d d n y u e o h r a because t r staff and e f demorf l o e e n o f y I c n t a u d dun mmute b o c e h t voluntary re h t individi w g n i e r k e r v o e w s r d e will p ch of har n u b t a upheaval. I e r uade his g s a r e e s p lo o t ld g u n o i Ic do anyth n o i t a alised that u t i s fighting s e i b h t I l n l i i r w e r g ana oo pushy. O t g n i uals. Can a m e b t u on witho y a t s o t f staf uation? t i s s i h t n i le a losing batt ills Pete W m, Holland

Amsterda

Dear Pete, Wouldn’t it be great if you could have the best of both worlds – be bailed out, as times have been tough, by another company AND keep your old staff with whom you feel comfortable and whose work you clearly valued greatly in the past.

However, it is clear that for many, their loyalty to you and their commitment to their old job is not high enough to balance out the inconvenience of an hour’s drive each day – plus it sounds from your choice of the word “upheaval” that change is not a comfortable concept for them. If you wish your staff to stay with you, you would need to understand from each individual exactly what are the benefits that the redundancy will give them and what exactly is the “pain” of changing locations. Then you need to figure out, for each indi-

vidual, what it would take to make it actually seem much better to stay with you and commute, rather than the lesser gain of redundancy. It is really all about understanding their motivation patterns as the equation may be different for each one. Often people take redundancy because they were feeling a little stale anyway and it seems like a nice payout. Often they later regret it when they cannot find other work which suits them as well as what they were doing. Your staff will all need to consider this for themselves. You will gain little by being “pushy” – unless this is a style you have used with them before and they respond positively to being pushed. You may benefit from really understanding their motivation to choose one thing or the other, so that you can influence their thinking appropriately.

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Dear Barbara,

Dear Busine ss Doctor, I am CEO o f a mail orde r company a have the un nd in two m enviable tas onths I k o f telling my annual revie staff, duri ws, that th ng their i s y ear they wo bonus. It w n’t be rece ill be the fir iving a s t time in five won’t be ha years that nded out an bonuses d I know this w to my staf ill come as a f, many of w big blow h o m are longsta stuck with nding and ha the compan ve y through t I’m sure, giv h i c k and thin. en economic c onditions, t come as a su hat this wo rprise to t n’t h e m .

W will breed re hat I fear sentment. though is t H hat it o w c an I preven reaction an t a negative d possible w alkouts?

Barba Reading, UK ra Hillstein

Bonuses used to be the exception, based on exceptional performance and exceptional results – recently however they has come to mean an expected top-up to salary and people mentally spend the money before it has even been agreed.

Resentment is born of anger, usually when people perceive – or choose to perceive – that they have been unfairly treated. If you are transparent, if the same applies to all and not just to some, if everyone can clearly see that you are being fair to them, then resentment would be unusual. They may, however, be disappointed – which would be a fair and reasonable response and all you can do when people are disappointed is to explain the circumstances so that they understand how the decision was reached and ask for their understanding. If some staff choose to be resentful, they will be doing this, despite anything you may have done to show that you are being fair and reasonable.

There is little you can do to prevent this – except not respond with anger or resentment yourself, but to be understanding and accept that they are simply being human. They may walk out (although to what end?) but if, as a leader, you know you are sticking to your values and principles, if you are sure that you are being fair and reasonable, then you should let them. Staff who are unfair and unreasonable are no great loss.

Meanwhile, be planning for the year ahead.

Make sure you show your staff that you value them and their efforts, reward them in small ways all year round so that the bonus is not the only reward they feel they ever receive. Offer coaching and development so that they increase their skills and have a stronger CV, so they feel they are getting value from you in other ways. Create and sustain the kind of work environment that they want to choose to belong to, so that they feel they have a better future with you than they would without you.

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On the shelf From hunting down the perfect job, to the unconventional wisdom of economics and an insight into the credit crunch, CXO reviews the best of this quarter’s business book releases.

Job Hunting for Rookies From Rookie to Expert in a Week, by Dr Rob Yeung

With layoffs continuing to soar as the recession bites deeper, this handbook by Dr Rob Young, psychologist and TV presenter, offers advice on hunting down and landing the right job. Young claims this 176-page book will lead you towards a job that matches your ambition and interests, to ensure you end up with the right job for you. It also includes useful ‘Rookie Buster’ tips and examples of job adverts and how to tailor your CV when applying to different posts.

CXO says: An interesting read, albeit a little on the short side due to an abundance of cartoons littered throughout. Though short on words the book is informative and full of handy advice. A must-have weapon in any jobseeker’s armory.

More Sex is Safer Sex The Unconventional Wisdom of Economics, by Steven E. Landsburg

In More Sex is Safer Sex, Professor Landsburg offers readers a series of stimulating discussions that all flow from one unsettling fact: combining the rational decisions of each of us often produces an irrational result for all of us. Claims include; avoiding causal sex can actually encourage the spread of diseases and to solve population pressures we need more people. In his entertaining narrative, Landsburg guides us through these shocking notions by the lights of compelling logic and evidence.

CXO says: An entertaining read, with surprises on virtually every page. Th is book will make you think about your decisions in unforgettable ways and spark debate over much that we all take for granted.

How I Caused the Credit Crunch An Insider’s Story of the Financial Meltdown, by Tetsuya Ishikawa

How I Caused the Credit Crunch is inspired from Tetsuya Ishikawa’s seven years at the forefront of the credit markets. A vivid, personal and realistic account of the banking world, this book tells the story of how a novice to the mysteries of hedge funds, subprime mortgages and CDOs, fi xed complex deals worth millions in the exclusive bars, clubs and trading floors of London, New York, Frankfurt and Tokyo. Then the bubble burst.

CXO says: A true expose of the human failings behind the credit crisis, this book deft ly explains the intricacies of the arcane financial instruments which are now grimly associated with the credit crunch. An interesting read.

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Bangkok Time: +7hrs GMT | Currency: Baht | Dialling code: +66 | Airport code: BKK Bangkok is a buzzing metropolis and an assault on the senses for a first-time visitor.

CXO checks out what the Thai capital has to offer during the day and night.

Grand Palace

Chao Phraya RIver

About With a population of more than eight million, Bangkok is Thailand’s largest city and one of the most popular destinations in Southeast Asia for overseas visitors.

Thailand has been dubbed the ‘land of smiles’ and Bangkok is no different so expect a warm and friendly welcome on your visit. Famed for its stunning temples and traditional architecture blended with modern skyscrapers, Thailand is a unique location with plenty to see and do. However, the city’s hot and humid conditions can be too much for some so be prepared.

DO’S AND DON’TS • Thais do not normally shake hands when they greet each other, but instead press their palms together in a prayer-like gesture called ‘wai’.

• Make sure you barter hard when buying souvenirs, especially in the touristy parts of town.

• Don’t insult the monarchy. Thais love their king and any disrespect shown to the Royal Family is seriously frowned upon.

• It is considered rude to show the soles of your feet or use your foot for pointing.

From the airport Opened in 2006, Bangkok’s Suvarnabhumi International Airport became the main hub, replacing Don Mueang. Located in the Bang Phli district about 25 km east of downtown Bangkok, Suvarnabhumi is an ultra-modern airport and one of the busiest in the region. For transfers to your hotel, the Suvarnabhumi Airport Express – a high-speed rail link due to be completed later this year – will offer a fast and convenient journey into the centre of the capital. Until then you will have to make do with the airport buses or numer-

ous taxis hawking for your custom outside the main terminal. When taking a taxi, insist that the meter is switched on and expect to pay around B500 (about US$14) to the centre.

Getting around

Bangkok’s gridlocked roads are legendary so the clean and modern Skytrain, which whizzes around the city and provides a welcome respite from the searing heat outside, is a great alternative.

It is inexpensive and covers a good part of the city, although the network is earmarked for expansion.

Another option is to do what the locals do and travel by water taxi. For a few baht you can take a boat along the main Chao Phraya River and stop off at a number of key tourist attractions. If you have to go by road, flag down a taxi – the city is full of them and they are cheap. If you are feeling adventurous, hop into the back of a three-wheeled tuk tuk for a noisy and dusty, but exhilarating ride through the streets.

Relax Getting out and about on the streets is the best way to really absorb the sights, sounds and smells that make Bangkok a unique destination. It’s famed

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for its street food, which is both cheap and tasty, while the night markets sell everything from fake designer handbags to charred-locusts. The national sport of Thailand is Muay Thai, kickboxing to the rest of us. Regular bouts take place at an atmosphere-charged Lumpini Stadium. If you are not into raw pugilism, take a daytrip to the traditional floating market where you can find Thais paddling flat boats filled with fresh produce. Don’t forget to haggle hard. At the end of a packed day of sightseeing venture up to the Sirocco Sky Bar for a breathtaking view of the teeming city below.

Mandarin Oriental Hotel

Sleep

Thai New Year (Songkran) is celebrated every year from April 13 to April 15.

Expect to see the locals dousing each other in water and flour.

Mandarin Oriental Hotel This colonial-style hotel has been a favourite of the elite since 1876. Indeed, all 393 rooms are assigned with personal butlers. In 2006, the Mandarin Oriental underwent a face-lift with its new spa touted as one of the best in the world. Facilities have been updated to include a large gym, tennis and squash courts and two outdoor swimming pools.

Rooms: 393 Rates: Around B15,000 (US$427) a night

See

A must see for any visitor is a trip to the Grand Palace – a huge complex of buildings that served as the official residence of the Kings of Thailand from the 18th century onwards. Its stunning architecture houses the Temple of the Emerald Buddha – Thailand’s most sacred site. A strict dress code applies: Men must wear long trousers and shirts with sleeves; women should be moderately dressed and both sexes should wear closed shoes. Other impressive sights across town include Wat Pho, home of the 46 metre-long, gold-plated Reclining Buddha, Wat Intharawihan (Standing Buddha) and the Temple of Dawn. In fact, Bangkok boasts more than 400 temples dotted around the city.

Peninsula Bangkok Located on the banks of the Chao Phraya River, this 39storey, five-star hotel includes six dining outlets, a 60metre pool, a tennis court and access to the Thai Club golf course. A helipad on the roof awaits airport transfers for those wishing to experience a birds-eye-view tour of the capital.

Rooms: 370 Rates: Around B10,500 (US$300) a night Tuk-tuk

Eat Bed Supperclub One of Bangkok’s hippest restaurants and bars with its minimalist interior and ultra-futuristic décor, including beds suspended from the walls.

Set dinners: B1850 (US$52) Friday and Saturday.

B1450 (US$41) other nights Vertigo Grill & Moon Bar Perched 61 floors above the Bangkok streets, this open-air restaurant is the place for that special meal.

But make sure you have a head for heights.

Four courses: B2700 (US$76) per person Muay Thai

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Dive in This issue we dip into Europe’s top swimming pools.

ITALY Hotel Caruso, Ravello Located on a cliff 1200 feet above sea level, Hotel Caruso’s open-air heated pool overlooks the magnificent Amalfi Coast. With views of medieval ruins facing one side of the pool and endless stretches of blue sky on the other, Hotel Caruso’s pool has attracted a host of celebrities to its crystal waters including Greta Garbo, Humphrey Bogart and Jackie Kennedy.

FRANCE Hotel du Cap Eden-Roc, Antibes This saltwater swimming pool located in the south of France has long been a favourite with the celebrities who frequent this private resort. Built in 1870, it has entertained the likes of Clark Gable, Brigitte Bardot and even Egypt’s King Farouk. The pool’s spectacular view is second to none; its overflow cascades down the rocky seaside cliffs against the panoramic backdrop of the French Mediterranean.

ICELAND Blue Lagoon, Grindavik Only a short bus ride from some of the region’s most luxurious hotels, such as Hotel Nordica, Iceland’s magnificent geothermal resort is a breathtaking sight. This man-made pool is situated amidst lava fields, as well as winter snow, and offers a complete natural spa experience.

The seawater ingredients within the pool – minerals, silica and algae – provide deep relaxation, and offer a swimming pool experience with a difference.

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GREECE Perivolas Hotel, Santorini Often gracing the cover of luxury travel magazines, the pool situated within Perivolas Hotel gives the appearance of infinite stretching waters. The pool-edge is designed to meet with the Aegean sea level and Greek skyline to produce a calming and serene effect. It is interconnected to the hotel’s spa, which boasts a steam bath and hydrotherapy massage pool, via a series of arched doorways.

UK The Berkley, London The only London hotel with a rooftop swimming pool, The Berkley is situated in Knightsbridge and offers panoramic views of the city and Hyde Park below. The pool area is brightly lit and cased in turquoise, whilst the loungers and flowers add splashes of colour. The pool is only open to hotel guests and club members, although day memberships are also available for purchase.

FRANCE The Ritz, Paris

GREECE Athens Life Gallery Part of the Leading Small Hotels of the World group, the Athens Life Gallery hotel is a boutique, serene setting, situated in the uber-chic suburb of Ekali. The modern décor of the hotel extends to the swimming pool where a twin-set of pools is separated by a very arty glass walk to create a minimalist feel.

The indoor-pool located within The Ritz in Paris has received endless reviews for its opulent interior. Inspired by the ancient Roman baths, the unique poolside ambience is created through rising columns, frescoes and mosaics, resulting in a serene setting.

The pool also encompasses a mezzanine bar so guests can reward themselves with a cocktail after their swim.

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Technology for today’s executive A trawl through the latest gadgets on the market. <<< 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 however, some critics argue that it takes the romance out of physically reading a good book.

Desirability rating

>>> Apple iPhone 3GS Apple is at it again with yet another upgraded version of its ubiquitous iPhone.

Aesthetically, the 3GS looks pretty much identical to previous incarnations with its huge screen, sleek lines and minimalist features. Inside, however, there have been some significant tweaks, the most notable being a beefed up CPU. The RAM has also been doubled from 128MB to 256MB. Indeed, the S in 3GS stands for speed and its zippier innards allow for quicker web browsing and slicker running of software and applications. There is also the ability to cut, copy and paste while the camera is now three megapixels, which is OK but not great. The 3GS comes with either 16GB or 32GB of storage. Overall, this is a welcome upgrade but it’s still not quite perfect.

Desirability rating

<<< Panasonic HDC-TM10 With most mobile phones now boasting the ability to shoot video everyone, it seems, is filming even the most mundane of incidents and uploading their amateur footage to the internet. However, if you are after vastly superior pictures and sound then you need a full HD camera. Once the preserve of professional film makers, HD-quality home movies are now available to the masses. Japanese electronics firm Panasonic has upped the ante with the HDC-TM10 – the world’s lightest AVCHD camcorder at a feather-light 227 grams. It sports 8GB of built-in flash memory but if you slot in a 32GB SDHC card it can boost capacity to eight hours of HD footage. This diminutive device houses a flip-out 2.7-inch LCD screen and offers an impressive 16x optical zoom. The HDC-TM10 is compact, light and produces superb images for budding Steven Spielbergs.

Desirability rating

>>> Samsung 8000 LED While LCD (liquid crystal display) televisions have become de rigueur in living rooms, Samsung is pushing LED (light emitting diode) as the future for creating that in-house cinema experience.

Samsung’s 8000 series has LEDs mounted around the bezel which means this TV is wafer-thin at just 2.1 inches thick – ideal for sticking it on a wall. This set, which comes in 40 and 46-inch versions, has a 240Hz mode for smoother, judder-free images. Another trick up this set’s sleeve is its ability to connect to the internet and display on-screen widgets, although you will need to purchase a separate dongle to go online. Four HDMI sockets means this LED TV just keeps on giving.

Desirability rating

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