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HEAD IN THE CLOUDS Busting myths about cloud computing Page 72
www.cxo.eu.com
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Q4 2009
SWITCHING CHANNELS Behind the scenes at the BBC with CTO John Linwood Page 20
THE COMEBACK KID Computer king Michael Dell reveals a radical shake-up in his company’s strategy Page 34
WELCOME TO THE CHEAP SEATS Why budget airline Ryanair never skimps on technology investments Page 86
LEADING THE WAY How Germany is beating its way out of recession Page 40
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FROM THE EDITOR 5
Great expectations Why companies are racing to keep up with consumers’ high tech demands.
T
oday’s consumer is a far more demanding one than any that has previously existed in history. The emergence of digital media, which make it possible to purchase just about any product or service instantly and to receive entertainment on demand, has transformed consumer expectations for good. Only companies that adapt quickly to fit their requirements will succeed. This is perfectly illustrated by two of this issue’s lead interviewees: John Linwood, Chief Technology Officer at the BBC, and Jane Kimberlin, IT Director of Domino’s Pizza. Both of course work in very different industries, but what they share is the fact that they work for organisations that have responded rapidly to changing consumer demands and have been the first in their respective fields to introduce groundbreaking new digital media technologies. In the case of the BBC, iPlayer has introduced the
“Part of our mission statement is:
world to the concept of on-demand television and radio and created a technology platform that competitors are clamouring to leverage. Meanwhile Domino’s Pizza has created an iPhone application that makes it possible for users to order from their phones with the touch of a button. Both technology leaders say, however, that these developments are just the tip of the iceberg and that they are working hard to find ways of further harnessing social media technology, such as Twitter and Facebook, to reach their respective audiences. It’s a sign of the times that companies must try harder than ever to find innovative ways of growing market share. Technology has put power back into the hands of consumers and companies that choose to ignore this phenomenon, particularly in an economic downturn, will do so at their peril. But companies that do choose to harness this new technology to attract customers must be sure they have a robust enough IT infrastructure
“When I look at the next six to nine
in place to support the vast quantities of data they will be receiving via new digital platforms. Linwood reveals that the biggest challenge the BBC faces today is ensuring it has the systems in place to handle the new demands placed on its corporate network and the associated petabytes of data. This poses a dilemma for companies; speed is of the essence because customers today are not prepared to wait for companies to catch up with the latest technologies. But without carefully laying the foundations that will support this technology, companies risk being lumbered with an expensive new toy that is draining their IT budgets.
Diana Milne Editor
“One of the biggest challenges we have
inform, educate and entertain. So
months, I see a few things to get really ex-
is regulatory requirements. There’s obvi-
that means social networking can
cited about – the processor from Intel going
ously a huge drive right now for passen-
be the right mechanism with which
from the desktop to the notebook, will
ger information. My biggest issue with
to reach the audience”
drive a huge improvement in performance
that is that there is no single European
and power. And Windows 7, which is a mas-
common approach to what information
sive improvement over prior generations”
has to be passed where and how”
Michael Dell, founder, Del Inc (Page 34)
Eric Neville, Head of IT, Ryanair (Page 86)
John Linwood, Chief Technology Officer, BBC (Page 20)
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CONTENTS 7
40 Leading the way How Germany fought its way out of recession
30 Staying one step ahead Keith Young, CIO of Standard Life, talks risk, recession and virtualisation
20
86 Welcome to the cheap seats A look at technology investments at Europe’s most controversial budget airline with Ryanair’s Head of IT, Eric Neville
Switching Channels The BBC’s CTO, John Linwood, takes CXO behind the scenes at the world’s largest broadcaster
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EXECUTIVE INTERVIEW 54 Gerhard Rumpff, Exasol 68 Martin Pladgeman, 10ZiG Technology 76 Joseph Crawford and Christopher Gesell, Verizon Business 84 Martin Rossbach, Nexans 100 Nigel Hawthorn, Blue Coat Systems 118 Stephan Van Herck, Adobe Systems
NEXT BIG THING 60 Kirby Wadsworth, F5 Networks 94 Edgar Aker, Draka Comteq
ASK THE EXPERT 78 Mike Jansen and Erik Westhovens, DinamiQs 82 Geert Jansen, Red Hat 90 Cathy Ham, BT Conferencing 114 Neil Rasmussen, Schneider Electric 120 Ben Zifkin, Axsium
34 24 Putting the fizz into Coca-Cola Find out from Coca-Cola Enterprises’ CIO Esat Sezer how technology is helping to drive the drinks giant’s global growth
52 Doing business the intelligent way Helena Schwenk of Ovum outlines the latest trends in Business Intelligence (BI) technology
34 The comeback king
62 The big question
In an exclusive interview, Michael Dell reveals a shift in strategy for the computer giant
IT managers reveal their top technology priorities in Ernst & Young’s 2009 Global Information Security Survey
46 Faster, stronger, higher We go behind the scenes at Adidas to discover how boss Herbert Hainer is beating arch rival Nike into submission and why innovation is key to this sportswear giant’s future
72 On cloud nine We investigate the myths surrounding cloud computing
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CONTENTS 9
80 Optimisation through virtualisation
cooking up a storm in the European fast food market
With Saumya Upadhyaya of Frost and Sullivan
ROUNDTABLE DISCUSSION 110 BPM
116 A new dawn 92 Tomorrow’s communications landscape Dissecting unified communications with Frost and Sullivan’s Lavanya Palani Batcha
96 The missing link Why a new member signs up to LinkedIn every second
Christian Egal, CEO of EDF Energy Renewables, reveals the company’s alternative energy investment plans
122 The game changing potential of HR HR professionals from some of the world’s biggest companies advise on how to steer staff through the economic downturn
102 Child’s play Inside the mind of Lego’s CEO Jorgen Vig Knudstorp
INDUSTRY INSIGHT 70 J. Tyler Rohrer, Liquidware Labs Inc. 126 Luc Bossaert NorthgateArinso
REGULARS
128 The money-maker An interview with the world’s most successful investor, Warren Buffett
106 Takeaway technology Domino’s Pizza’s IT Director Jane Kimberlin explain why the company’s online sales are
132 When leaders turn bad With Toni Lynn Chinoy
96
12 The brief 14 News 136 Books 138 City guide 140 The Knowledge 142 Hot wheels 144 Objects of desire
128
The Park Hotel, Bremen, Germany 23rd - 25th February 2010
CIOEU SUMMIT
Chairman/Publisher SPENCER GREEN Director of Projects ADAM BURNS Editorial Director HARLAN DAVIS Worldwide Sales Director OLIVER SMART
CIO Europe Summit 2010
Editor DIANA MILNE Managing Editor BEN THOMPSON
The CIO Summit is a three-day critical information gathering of the most influential and important CIOs from across Europe.
A Controlled, Professional and Focused Environment The CIO 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.
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BREAKING DOWN BARRIERS How the dismantling of an oppressive divide 20 years ago signalled the emergence of a new and united Europe. For 28 years, two months and 27 days the Berlin Wall stood as a stark symbol of the division of Western Europe and the old Eastern Bloc: freedom and capitalism to the West, dictatorship and communism to the East. Its collapse in 1989 after weeks of civil unrest in communist states across
Eastern Europe paved the way for Germany’s reunification and a uniting of Europe. On the 20th anniversary of the fall of the Berlin Wall on November 9, world leaders gathered in the German capital for a €7.5 million celebration. German Chancellor Angela Merkel, who was raised on
the communist side, described the night the wall toppled as the “greatest moment of my life”. She continued: “Together we brought down the Iron Curtain and I am convinced this can give us the strength for the 21st century.” Her Germany has certainly come a long way since 1989 and now sits as Europe’s leading and the world’s fourth largest economy as well as being the world’s second largest exporter – its car industry being the biggest contributor and the cornerstone of the manufacturing and engineering sector.
Despite the success stories, back in 1989 some political figures, including British Prime Minister Margaret Thatcher – an advocate for freedom and free speech, was concerned that a Germany unified overnight would become an “unstoppable force” in an unbalanced Europe. The problem for Western Europe was how Germany, with the largest population on the continent, was going to cope with unification. West and East Germany were known quantities but a sudden united Germany was an enigma.
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sary celebrations Ms Merkel said her country’s unity was still incomplete due to the East lagging behind in terms of economic growth. The recession has only compounded the problem but it has to be said that Germany was one of the first countries to emerge from the economic meltdown and start returning to positive growth. As well as Germany, the collapse of the old Iron Curtain set free the likes of once Soviet-controlled Poland, Czechoslovakia Hungary, Romania and Bulgaria, bringing these countries out of economic isolation and even eventually elevating them into the EU club. In fact, 10 countries from behind the old Iron Curtain are The current now EU members unemployment while Croatia and rate is Albania have joined NATO. In 2002 the in East Germany euro was adopted and so far 18 nations have ditched their old currency. Privatisation, free trade and free labour markets have transformed most of the once communist-controlled counties into prosperous and democratic nations. Russia too has close ties with Europe and the West – a relationship that looked nigh on impossible during the hostilities of the Cold War. And although the old Eastern Bloc and former Soviet countries have been hit especially However, those fears soon subsided hard by the recession after years of and a unified Germany became an rapid growth fuelled by a new era of even bigger player in Europe, some capitalism, few want to return to the might say its fulcrum. old communist days. A united But it hasn’t been all rosy, particEurope is good for the global econularly for the previously Soviet-conomy. In fact, the EU’s 27 member trolled East – a country that had seen states and their 500 million citizens millions of people flee the regime, are the world’s largest economy, leading to a significant brain drain. sharing around 30 percent of gross Today the national unemployment world product. With so much rate is 8.1 percent – seven percent in achieved, now is the time to raise the West and 12.7 percent in the East, your glasses and say “prost” to the latter of which still suffers from November 1989 and the fall of poverty and deprivation. Indeed, in a communism and the Berlin Wall. TV interview before the 20th anniver-
NEWS IN PICTURES
Britain’s Queen Elizabeth II returns to Buckingham Palace following her speech at the State Opening of Parliament. In it she included a pledge to halve the budget deficit within four years and stop “reckless” bankers from getting bonuses
12.7%
Domenico Raccuglia, the notorious number two of Italy’s Cosa Nostra gang of Sicily, arrives in Palermo’s central police station after being arrested. The Sicilian mafia boss had been a fugitive for more than 15 years. His arrest was a major blow to the crime syndicate
Storms batter the UK coast as torrential rain and gales of up to 110 km/h prompt a severe weather warning from the Met Office
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UPFRONT NEWS
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THE RAT RACE
THE GOLDEN YEARS?
According to a survey by Citrix the rat race to work frustrates European employees:
46%
OF WORKERS SAY BOSSES WON’T ALLOW THEM TO “COMMUTE SMART” TO REDUCE TRAVEL TIME
62%
OF COMMUTERS WANT TO REDUCE TIME SPENT TRAVELLING TO AND FROM WORK
4.6
MILLION HOURS WASTED A DAY COMMUTING IN THE UK
FAST FACT
UK£1.3 8 BILLION The amount of staff who use social networking sites, such as Twitter, cost UK businesses a year Source: Morse
UK businesses are bracing themselves for a surge in staff looking to delay retirement with around 1.8 million people expected to be working beyond traditional retirement ages in just 10 years. The findings from new research commissioned by Prudential among finance directors at UK businesses found nearly a quarter (24 percent) of companies expect staff to work beyond retirement age in the next 10 years, with the proportion of people in the workforce who are past traditional retirement ages expected to more than double to 1.8 million people. Larger companies expect to see an even greater proportion of their workforce working beyond retirement, with more than a third (39 percent) of finance directors at larger firms expecting to have to accommodate requests from staff to work longer. UK companies anticipate this will mean around 6.3 percent of their workforce (equivalent to 1.8 million people across the UK working population) will be made up of people working beyond statutory retirement ages in 10 years, more than double the current proportion of 2.6 percent of company workers (equivalent to around 752,700 people) who the respondents say currently work past retirement. The study also found that in the past 12 months alone, seven percent of finance directors have reported an increase in the number of employees asking to work past traditional retirement ages.
Martyn Bogira, Prudential’s Director of Defined Contribution Solutions, said: “As health and longevity continue to improve and people look to fund a longer life in retirement, it is inevitable that compromises have to be made. The statutory retirement age for men and women is due to rise to 68 by 2046, so working longer will be a fact of life for those entering the workforce today, but these findings suggest that increasing numbers of pensioners will be forced to work later far sooner than this.”
WINDOWS 7 A BOON FOR SMALL BUSINESSES Microsoft's launch of Windows 7 will enhance the ability of thousands of SMEs across the UK to increase efficiencies and reduce costs by becoming more cloud computing friendly. Outsourcery, a leading communications and hosted IT company with 25,000 SME customers in the UK, has welcomed the launch of Windows 7 on October 22, pointing to how the operating system can be used to seamlessly deliver software as a service (SaaS) solutions. Mark Seemann, Product Strategy and Development Director at Outsourcery, said: “Until now, existing company software systems that are based on Microsoft technology have had to rely on a local on-premises Active Directory for security, user maintenance, user control and intranet network connectivity – as this would not work if the Active Directory is located within a SaaS cloud infrastructure.” He added: “Some of the new features introduced in the Windows 7 operating system will allow businesses to obtain access to their server applications within a hosted environment, which will reduce operating and capital expenditure and maintenance in the future."
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A CONSUMER TURN-OFF UK businesses lose a total of €17.1 they abandoned a financial services billion each year when customers de- company or utility in the past year. fect and abandon their purchases as Even industries that were previously a direct result of poor customer ex- safe from competition, such as utiliperiences, according to a Genesys- ties, must now pay closer attention to Datamonitor/Ovum survey. A total the customer experience. “With the of 514 UK-based consumers were rise of social media and increased surveyed for the report titled ‘The consumer awareness the cost of cusCost of Poor Customer Service: The tomer frustration continues to Economic Impact of the Customer grow,” said Daniel Hong, Lead Experience.’ Consumers Analyst of Customer were asked about the Interaction at Ovum. frequency of their “We’re advising interactions with enterprise busibusinesses via the nesses in the UK Welcome more proactive engagement web, through to develop coheif it improves their contact centres sive strategies experiences and with their mothat straddle all bile devices. They were channels of customer also asked to identify the imcommunication. The difpact of those interactions on their ference between delivering exceppurchasing decisions. tional customer service and merely The industries in which enter- providing acceptable service is proprises are suffering the biggest losses nounced. Differentiating on service, are financial services, utilities and especially in service-centric industelecommunications, which lose tries such as finance and telecomsubstantially more customers than munications, is how enterprises can companies in other industries. retain customers in today’s challengNearly a quarter of consumers said ing business climate.”
83%
FROM THE VAULT In issue 10 of CXO, WOLFGANG DRIESE, CEO of Germany’s DVB Bank lifted the lid on his company’s remarkable turnaround from near bankruptcy just over 10 years ago. “Having experienced what happened through 9/11 and other cycles in aviation and shipping, we know how to weather the storm,” he explained. After all, “crisis breeds opportunity” according to Driese. To read more go to www.cxo.eu.com
THE SURVEY UNCOVERED: • 73% of consumers ended a relationship due to a poor customer experience • The average value of each lost relationship is €277 per year • 39% said it is critical for companies to provide more intelligent self-service so they are not trapped in unproductive automated systems
IT MANAGERS FEAR OUTSOURCING The increasing popularity of outsourcing has failed to debunk misconceived fears among IT managers on the security risks surrounding switching from inhouse systems. A YouGov survey, commissioned by IT assurance specialist NCC Group, found that 20 percent of IT managers working in large businesses believe that their outsourced systems and processes have less IT security than those based in-house. However, the report also revealed the inexorable rise of outsourcing with 89 percent of large compa-
nies in the UK outsourcing at least one IT system or business process. A separate PA International Outsourcing Survey 2009 found that 31 percent of companies plan to outsource more IT over the next year. As a global outsourcing company which works with businesses to plan, design, construct and operate a security rich environment for online applications and transactions, NIIT Technologies is on a mission to debunk some of the myths surrounding the security risks of outsourcing.
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A SOLUTION FOR A NEW ECONOMY Escrow Europe shows itself to be part of the ongoing e-business evolution. With recent product developments, the company demonstrates flexibility and a sense of innovation, and aims to conquer a role indispensable in the new economy. Escrow means ‘security in the hands of third parties’. As an independent third party, Escrow Europe guards business-critical assets such as source code of software, important databases, passwords or industrial designs. Merely as a spin-off of its own automatisation-process, Escrow Europe expands its productportfolio with a new state-ofthe-art product-line, hereby investigating its own possibilities as an independent third party. Essentially, Escrow Europe uses its on-line-deposit possibilities to establish a sure platform through which legally important assets can be deposited. Three products are put forward within this approach: Industrial Escrow, Investor’s Escrow and ‘Escrowsuredocs’. Industrial Escrow was surely known before, but is now presented in a completely new ‘online’
way. In today's technology-driven society, companies are increasingly dependent on third party knowledge. Dependence implies risks. If the risks are directly related to the core business processes it is crucial to minimise the company’s exposure and that can be done through Escrow. Investor Escrow ensures that the development in which investors’ finance is deposited is described in detail. The Escrow contract gives investors the rights to receive the deposits under certain circumstances. Absolutely innovating is ‘Escrowsuredocs’. The principle is very simple: deposit of documents, receiving a unique, independent ‘Escrow-stamp’. The possibilities are multiple: invoices, contracts, ideas, articles, even medical dossiers belong to the possible deposits. Right now, to begin with, Escrow Europe has deposited its own contracts in Escrowsuredocs, thus allowing its clients to consult them whenever wanted. With this development, the company takes a serious step ahead and confirms as an innovative and ambitious organisation.
YOU CAN QUOTE ME ON THAT “It's infuriating for people to see their friends losing their jobs, their friends having their homes foreclosed on and no one going to jail” WARREN BUFFET, the Sage of Omaha and world’s second richest man, criticises the reckless banking practices that led to the credit crisis and subsequent global recession.
“This move is all about the future, about creating a new and strong European airline. It’s great news for BA, our shareholders, our customers, our people and is a positive step forward for the airline” A bullish British Airways CEO, WILLIE WALSH, talks up the planned merger with Spanish carrier Iberia.
FAST FACT
UK£700 BILLION The value of contracts for goods and services organisers of the London 2012 Olympic Games are putting out to tender.
“I think we’ve come up with a first class candidate who has the skills necessary to take M&S forward for the next stage of its development” SIR STUART ROSE, the outgoing M&S CEO, on the appointment of Morrisons’ Marc Bolland.
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EUROPE’S BEST CITY TO WORK IN kets, the report states. The rapid spread of technology has also contributed to the way companies organise themselves and has allowed them to capitalise on lower costs and to be located closer to new markets. Overall, the top five cities remain the same, but Barcelona edges above Brussels into fourth place with an improved score over the year.
Where would you consider is the best city in the world to work in? Well, Cushman & Wakefield – a global real estate solutions firm has compiled a new report, 'European Cities Monitor 2009' to tell you that. In the 20 years that this report has been going, Europe's business landscape has changed considerably, particularly with the emergence of Central and Eastern European economies and new consumer mar-
Key Each colour represents the category on which the rankings are based Each circle represents the individual ranking of the city within the categories
Paris London
Frankfurt
Barcelona Brussels
Madrid Munich Amsterdam Milan Berlin
Top cities of each category
Image by Robin Richards
Overall
London
Cost of staff
London Qualified staff London Quality of telecommunications London External transport links London Easy access to markets
Bucharest
Birmingham Climate governments create Dublin Availability of office space Berlin Value for money of office space
Languages spoken
London London
Internal transport
Barcelona Geneva
Quality of life for employees Freedom from pollution
Source: Cushman & Wakefield
WORLD’S FIRST iPHONE WORM SPREADING IN THE WILD IT security and data protection company, Sophos, has warned iPhone users of the world’s first iPhone virus that is spreading wild in Australia. The virus, dubbed the ikee worm, breaks into iPhones, changing their lock screen wallpaper to an image of 1980s pop star Rick Astley with the message: “ikee is never going to give you up”. However, the virus can only infect users who have ‘jailbroken’ their iPhones in order to allow them to run ap-
plications that have not been approved by Apple. “The first indication that anything is wrong with your iPhone is if you see a picture of Rick Astley,” said Graham Cluley, Senior Technology Consultant for Sophos. “Fortunately the worm doesn't do anything more malicious than that – it doesn't steal information, access your emails or snoop on your calls. But the source code has been made available on the internet.”
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MCDONALD’S PULLS OUT OF ICELAND Following the financial crisis in Iceland, McDonald’s has decided to close its business and pull out of the country, as the island nation’s financial crisis has made it too expensive to operate its franchise. The first McDonald’s in Iceland opened in 1993, the BBC reports, now 16 years on, the company has three outlets which it plans to close. Besides the economy, McDonald’s blamed the "unique operational complexity" of doing business in an isolated nation with a population of just 300,000. Countries with McDonald’s Countries without McDonald’s Most expensive McDonald’s burger - selected countries (USD)*
Number of McDonald’s outlets of selected countries
US
Japan
Canada
Germany
UK
China
Norway
Demark
Iceland
Eurozone
US
13,381
3,598
1,400
1,276
1,250
660
7.18
5.93
5.21
4.96
3.57
World’s busiest McDonald’s
Image by Robin Richards
Located on famous Pushkin Square in Moscow is the largest McDonald’s in the world (more than 28,000 sq. ft.) and the busiest (more than 250 million customers to date). The restaurant seats 700 customers and has a 70 foot-long service counter with 27 cash registers.
* Price using the Big Mac Index published by The Economist, as an informal way of measuring the purchasing power parity (PPP) between two currencies and provides a test of the extent to which market exchange rates result in goods costing the same in different countries.
Source: www.oanda.com | www.aboutmcdonalds.com
PUT YOUR FINANCES IN ORDER
LOST HOURS
Research by HSBC, entitled ‘Future of Retirement: It’s Time to Prepare,’ on the effects of the recession found that:
Do you ever find yourself checking your social network sites during your working hours, even when you have a piece of pressing work to do? Well you’re not alone. Staff who use social networking sites, such as Twitter, while at work cost UK businesses €1.54 billion each year according to a new report by IT services group Morse, who commissioned the report. They said that such online behaviour clearly had a “productivity strain” on firms. Of the 1460 people surveyed, 57 percent of them admitted using social networking sites during the working day for personal use.
PEOPLE HAVE CHANGED SOME ELEMENT OF THEIR FINANCES WILL NOW RETIRE AS PLANNED
18%
ARE REDUCING RETIREMENT SAVINGS OR STOPPING SAVING
14%
HAVE USED SAVINGS TO PAY OFF DEBT EXPECT TO DELAY RETIREMENT
11%
19%
87%
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UPFRONT COMPANY INDEX
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VIRTUALISATION PLATFORM
DON’T MISS...
Red Hat has released a new virtualisation platform for nology, the hypervisor provides high performance servers called Red Hat Enterprise Virtualisation for and security coupled with memory sharing technolServers, which is designed to meet enterprise requireogy, which permits more efficient guest consolidaments for deploying and managing heterogeneous virtion, and enterprise features such as live migration. tualisation and cloud environments. This is the newest product set in the Red Hat Enterprise Virtualisation • Red Hat Enterprise Virtualization Manager for portfolio and is designed to enable pervasive adoption of Servers. A platform for configuring, provisioning, virtualisation, with a comprehensive end-to-end solution managing and organising virtualised Linux and combining a standalone hypervisor and powerful virtuMicrosoft Windows servers. It is designed for cusalisation management. tomers who seek to reduce the cost, complexity In February 2009, Red Hat announced plans to deand time required to manage large-scale virtualiliver the Red Hat Enterprise Virtualisation portfolio, sation deployments. With a rich set of managebuilding on its leading Red Hat Enterprise Linux operatment capabilities and powerful search and ing system platform, offering the proven security, pergrouping features, Virtualization Manager equips formance, scalability and cost advantages of open source customers with the ability to efficiently control a virtualisation technology. This release is part of that stratvirtualised infrastructure. egy and includes the following components:
26 PUTTING THE FIZZ INTO COCA-COLA CIO Esat Sezer discusses how technology is helping to drive the drinks giant’s global growth
• Red Hat Enterprise Virtualization Hypervisor. A standalone, lightweight, high-performance hypervisor designed to host Linux and Microsoft Windows virtual servers and desktops. It provides a solid virtualisation foundation for cloud deployments and other highly dynamic IT environments. Using KVM tech-
COMPANY INDEX Q4 2009 Companies in this issue are indexed to the first page of the article in which each is mentioned. 10Zig Technology 68, 69 ADEPTIC 11 Adidas 46 Adobe 118,119 Air France 140 Al Raha Beach Hotel 138 AMI-Partners 72 Apple 7,34,144 Ascentn 57,110,111 Axium Group 120,121 BBC 20 Berkshire Hathaway 130 Blue Coat 100,101 Boston Consulting Group 122 British Ariways 16,140 Brocade 34 BT Conferencing 90,91 bwin 56 Cable & Wireless 86 Canto Gmbh 37 Cisco 24 Cisco Systems 122 CNBC 130 Coca-Cola Company 24 Coca-Cola Enterprises 24 Dell 34 Dimaniqs 78,79 Domino's 106 Draqa Comteq 4,94,95 DVB Bank 15 Edward Jones 122 Emirates Airline 140
Ernst & Young 64 Escrow Europe 16, 59 Everett 63 EXASOL 54,55 F5 Networks 60,61 FedEx 122 Ferrari 144 Fortify 56 Frost & Sullivan 83 Genentech 122 GNSE Group 135 Goldman Sachs 122 Google 122 Harlan Evans 132 HP 34 HSBC 18 HTC 144 Hurwitz & Associates 72 Juniper Networks 137 Land Rover OBC Lego 102 LinkedIn 96 LiquidwareLabs 70,71 London Business School 27,133 Lotus 142 Lufthansa 140 M&S 16 Mafraq Hotel 138 McDonald’s 18 Meet The Boss 113 Mercedes IFC Methodist Hospital System 122
Microsoft 24 Microsoft 34 Motorola 34 NetApp 122 Nexans 84,85 Nike 34,46 NorthgateArinso 126,127 Novell 6 Nugget Market 122 Panasonic 144 PegaSystems 110 Puma 46 Red Hat 19,82 Reebok 46 Ryanair 86 SAP 24 Schneider Electric 114,115, OBC Schumacher Group 72 Siemens 20 SITA 86 Sony 144 Standard Life 30 StarForce Technologies 66 Twitter 14 Verizon 76,77, IBC Vmware 2 Wegmans Food Market 122 Xerox 122 Yahoo 20 Yankee Group 72
106 TAKEAWAY TECHNOLOGY IT Director Jane Kimberlin on why Domino’s Pizza’s online sales are cooking up a storm
128 CHILD’S PLAY Inside the mind of Lego’s CEO Jorgen Vig Knudstorp
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MEDIA
Switching channels As the world’s biggest broadcaster the BBC is spearheading the digital transformation of the television industry. Diana Milne meets the corporation’s Chief Technology Officer, former Yahoo exec John Linwood, to find out what the man behind the iPlayer really thinks about the future of broadcasting.
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hen John Linwood left the US search engine giant Yahoo to join the BBC earlier this year, he experienced something of a culture shock. Having spearheaded the development of some of Yahoo’s most successful social networking products, African-born Linwood found himself in a very British institution with a very British approach to making changes: “Clearly American companies have a slightly different culture in terms of their approach to delivering things. In the BBC clearly there’s a lot more governance because we’re spending public money so we have to be squeaky clean about how we use it. Sometimes in the BBC people are slightly more cautious. They don’t have that American jump in feet first attitude.” It soon became clear to Linwood however that the pace of change underway at the BBC would not leave him standing still for long. His arrival coincided with a period of massive transition for the broadcaster in the wake of a digital revolution, which has transformed the way viewers access television content.
entertain. So that means social networking can be the right mechanism with which to reach the audience. We’re looking at where our audiences actually are. Clearly if you want to reach Radio 1 listeners you’re looking at social networking sites like Facebook or Twitter. But if you want to reach Radio 3 listeners there are clearly not so many on Twitter.”
Outside intervention
Although the BBC, traditionally, has developed its own home-grown technology, the increased complexity it now faces, means it is also working closely with outside vendors to find solutions to the challenges posed by the digital media world. Linwood has recently instigated a new open technology strategy, which aims to make the tendering process simpler by providing potential vendors with more information about the details and technical specifications, which the corporation requires. He says he hopes this will encourage tendering by smaller technology companies, which could potentially provide more innovative and scalable solutions than the larger packaged solutions provided by major international vendors: “Historically we’ve worked with Entertainment on-demand large vendors, which is great, because they have all the capability The most significant development has been the launch we need,” says Linwood. “But one of the areas I’m focused on of BBC iPlayer, the broadcaster’s on-demand online teleis how we drive greater innovation for the BBC in terms of vision channel which has been a phenomenal success, atour products and services. And part of that strategy is how tracting over 100 million requests in its first year; around the BBC can engage with small companies. Of course, 700,000 a day on average. This, says Linwood, places large organisations can be creative as well, but when Number of requests heavy demands on the BBC’s IT infrastructure: “One of you’re looking at emerging and leading edge technolothe iPlayer recieved the challenges we share with many other suppliers on the gies, very often it’s the small companies that are the most internet is that user demand on the systems changes. For creative. If you’re looking for stability, strength and guarin its first year instance, if we have a very popular show on iPlayer we get a anteed delivery you want to go with a large organisation. For huge peak in demand.” instance for our desktop management I’m certainly going to go One such example that Linwood is particularly concerned about with a large, substantial organisation. But if, for example, we want to is the 2012 Olympics, which the BBC has exclusive rights to distribute in the break new ground in terms of how we handle digital files coming out of new UK and which Linwood says is likely to be viewed mainly online because of generation tapeless cameras, we would look at smaller organisations to pilot the timing of the games: “One example that is keeping me awake at night is and innovate a solution.” the 2012 Olympics. We know that people will be accessing it from their PCs Linwood says the biggest technical challenge the BBC will be looking to or their phones because it will be on in the daytime so the BBC is going to have external vendors to solve will be the new demands placed on its corporate netto build up a huge amount of infrastructure to support that.” BBC iPlayer has work, which now handles not just email and printing as it once did, but also also greatly increased the complexity of the BBC’s IT infrastructure as it plugs telephony, video conferencing and broadcast media files. This means the corinto so many of its different systems such as scheduling, live stream and metaporation is reviewing its entire corporate networking strategy: “We’re putting data systems, all of which feed data into the site. Costs too are an issue as the a whole raft of demands on the corporate network that it was never intended broadcaster must meet the increased demand for its online technology but withor designed for originally,” says Linwood. “It has changed radically in the past out the luxury of being able to increase its budget, as a private sector counterpart few years and it will continue to change radically in the coming three to five would, through revenue from increased use of the service: “Traditionally, if the years.” He is also involved in reviewing the BBC’s storage and data centre BBC broadcast to 10 million people for a particular show, it didn’t actually cost strategy following the corporation’s move to IP-based networking and the fact any more than if only one million people watched that show. In the on-demand that it is now moving digital files that have reached the terabyte level in terms interactive world that is no longer true. However, the BBC is a fixed earnings of size. Linwood reveals that over the next three years, the BBC will need seven company, we don’t get any additional revenue if we get more users so we have petabytes of additional storage, which creates massive technical challenges in to be really clever about how we deliver those services without incurring subterms of how it moves and stores that data. stantial extra costs.” The phenomenal success of iPlayer is just the beginning of the BBC’s foray A moveable feast into digital media, says Linwood, who reveals that it is currently looking at ways This complexity is increasing as the BBC becomes more divided across to deliver its content via social networking media. This is subject however, to a different locations – including the transfer of around 2500 staff from London detailed assessment of which programmes are best suited for social networking to Manchester’s state-of-the-art MediaCity complex in the Salford Quays dewebsites, says Linwood: “I think that clearly the BBC is looking at ways to reach velopment. Linwood describes some of the technical challenges this will creits audience all the time. Part of our mission statement is; inform, educate and ate: “There are massive challenges around how we store data and how we
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Question Time is among the most popular programmes on the iplayer
iPlayer was first launched in 2007 and is a service which allows viewers to catch up with radio and television programmes from the past week. It is currently available on Windows, Macs, Linux, Playstation 3, Nintendo Wii and iPhones. The next generation iPlayer was launched last June with a new single interface, which fully integrates both radio and television.
The UNMISSABLE
The top five episodes for Oct
The amount of traffic to the iPlayer (Oct 2009)
Most requested episode per series
TV
70million
53.2million
requests for the month of October
requests for TV programmes
(highest number to date)
26.1million requests for Radio programmes
410,000 664,000 Life - Ep1
928,000
Russell Howard’s Good News - Ep 1
371,000
Mock the Week Series 6 - Ep 1
362,000
Never Mind the Buzzcocks Series 23 - Ep 2
Question Time - 22/10/09
How the iPlayer is being used Radio
7%
requests from iPhone/iPod Touch
6%
requests from PS3 applications
94,000
151,000
2%
Ukraine vs England 10/10/09
requests from other sources
The Chris Moyles Show 13/10/09
79,000
Man Utd vs S’land 03/10/09
74,000
The News Quiz Series 69 - Ep 5
74,000 Cricket 02/10/09
85%
requests from computers
The make-up of the requests
The amount of data processed by iPlayer Radio
7
petabytes
equal to
of data transfered per month
3%
4%
for downloads
97%
for streams
Sources: BBC | Cnet
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96%
for on-demand service
for live simulcast
67%
for live programmes
33%
for on-demand catch-up
12.5gigabytes of data per second
or about 11million DVDs
400hours
of video encoded per week
across
60servers
dual Quad Core Intel Xeon machines
Image by Robin Richards
TV
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move that data about. For instance the sports team can at times have whether we use small companies versus big companies. So we have an around 100 live feeds coming in a day. We need to find ways that we can overall review underway of our outsourcing strategies and how we take carry those live feeds across our network to Manchester.” The those forward.” Corporation is also moving staff into a new high tech facility it is developing as part of its current Forward thinking Broadcasting House headquarters off London’s As part of Linwood’s drive to increase efficiency Regents Street. It hopes to complete the project within the organisation and to support an increasby 2012 and the move was one of the reasons beingly complex IT network, he is driving the stanhind the restructuring of the Broadcast and dardisation of IT processes across the corporation Enterprise Technology area within the BBC’s and the development of an infrastructure that alFuture Media & Technology Division spearlows for the sharing of technology across multiple headed by Linwood. He describes the changes divisions and platforms. “The goal is to standardhe has made and how these will fit in with reloise as much as possible. We’re also looking for opcating staff to the new facility: “We looked at the portunities to build platforms that are pan systems overall delivery of technology services within platforms and a service based architecture so that the BBC and decided there was a number of we can allow many different systems to use the things we could do. The first was rationalisation. same back-end services.” Cloud computing would, We’ve put the broadcast support operation says Linwood, answer many of the BBC’s technolteams from news, audio, music and World Serogy requirements in that sense, particularly when vice together to drive efficiency and reduce it comes to the BBC’s own internal business sysmanagement overhead. This gives us greater tems: “We’re looking at cloud for our internal sysflexibility because we can train those engineers tems because we believe that would enable a up to work across all divisions so when people number of things for us. First of all we’re looking are ill or there is a peak in demand we can move at more flexible working for our employees in About the BBC those resources around. Part of the restructurterms of how and where they do their jobs and The BBC is the world’s largest ing I did was ahead of the move (to the new how they access the systems. Cloud is a good way broadcaster. It was established by a Broadcasting House facility) because to deliver of doing that because it allows us to push the sysRoyal Charter and is funded by a new technology services into that facility I need tem beyond the bounds of the BBC so that somelicence fee paid for by UK to support news, World Service and audio music body who is working from home or in a café can households. It provides services to who will all be based there.” access all the systems they need to get the job eight national TV channels plus As well as 1100 IT staff based within the done.” regional programming, 10 national BBC, Linwood works closely with the many orAs a technology pioneer in so many areas, radio stations, 40 local radio stations ganisations to which the BBC outsources IT the BBC will stop at nothing to stay ahead of the and to the bbc.co.uk website. BBC functions. He says that a “huge amount” of the curve when it comes to digital media. And World Service broadcasts on radio, TV corporation’s IT is currently outsourced, for inLinwood says there’s no better time to be at the and online in 32 languages. It is stance its playout services, all the distribution of helm of an organisation that is going through funded by a government grant. content out to antenna and internal business syssuch dramatic changes behind the scenes: “I The BBC has a commercial arm, tems, which are managed by Siemens. Linwood think, for me, the time has come when technolBBC Worldwide, which operates says he is currently carrying out a review of the ogy and media are really coming closer togethbusinesses selling books, DVDs and corporation’s outsourcing strategy to ensure it er. The BBC and the media industry as a whole merchandise. The corporation is receives the best value and the highest quality seris going through a huge transition as technologoverned by the BBC Trust which sets vices from its outsource partners: “What I’m gy becomes more and more important in everyits overall strategy and represents the looking at there is how to be smarter about how thing we do, and for me the huge excitement of interests of licence fee payers. Its we outsource. It’s very important to understand the BBC is that it’s the world’s largest media orChairman is Sir Michael Lyons. the criteria that drives outsourcing. We’re refinganisation and where better to be when you’re ing that and trying to understand how the BBC going through a transition like that.” will benefit from outsourcing. If there is a techJohn Linwood took up the role of Chief Technology Officer at the BBC in April 2009. In the nical area that we don’t have the skills for internally then it’s better to outrole he is responsible for delivering the BBC’s technology strategy and delivering and managing the broadcast and enterprise technology infrastructure behind all of the BBC’s source that to a technology specialist that really understands the output. He joined the BBC from Yahoo where he was Senior Vice President of International Engineering where he oversaw a team of 1600 staff located across 22 technology. But one of the things we’ve learnt is that when you outsource countries with responsibility for the development, deployment and delivery of all the you need to retain knowledge within the organisation of the service company’s services outside the US. There he developed some of Yahoo’s most successful consumer products, including social networking, social media and user-generated you’ve outsourced. That’s about being a smart customer. You can’t outcontent. Prior to Yahoo he spent 11 years at Microsoft starting as an Architectural Consultant in 1993 then progressing to several senior roles. source something that you don’t understand yourself. It’s also about
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MANUFACTURING
Putting the fizz Esat Sezer, CIO of Coca-Cola Enterprises (CCE), the world’s largest bottler of non-alcoholic drinks, talks business, IT transformation and creating value through innovation with CXO’s Satoshi Kuko.
A
tlanta-based Coca-Cola Enterprises (CCE) is the biggest marketer, producer and distributor of Cola-Cola products in the world, serving 419 million consumers with 200 different products. CCE, which is 35 percent owned by the Coca-Cola company, recorded revenues of €14 billion in 2008 and boasts 72,000 staff across 430 facilities. More than half this workforce is mobile – truck drivers behind the wheels of 55,000 vehicles and people constantly replenishing 2.4 million coolers, vending machines and drinks dispensers. With such a dispersed global workforce, one of Esat Sezer’s most prominent projects has been to unify the workforce by implementing improved communication and collaboration between employees, particu-
into Coca-Cola larly those managing day-to-day operations, and boosting productivity. The business also needed a centralised platform on which to promote company initiatives and deliver video and audio messages. So CCE partnered with Microsoft to roll out a Soft ware-as-a-Service (SaaS) communications platform – a boon for employees in the manufacturing facilities who had limited access to the corporate network and those out in the field who lacked access to the company’s email and content. As well as the obvious connectivity benefits, the new software has meant a significant reduction in travel expenses with the use of online meeting tools and collaborative platforms that span time zones and geographies. Sezer, who has been CCE’s CIO since 2006, says the task ahead at the time was huge but in just nine months all 72,000 users were transitioned into the ‘cloud’ with email and IM. The tech chief has attempted several largescale corporate initiatives in the past but this SaaS solution produced a “wow factor”. “It exceeded my expectations, especially from an ease of use standpoint and speed of adoption of the user community, quite honestly. We have a big mobile workforce that is on the street every day but we had very limited connectivity with this mobile
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workforce as well as our white-collar workforce. The speed and pace with which we achieved this created a wow factor for me. From the business standpoint, how we came to the conclusion to drive this communication collaboration capability in the cloud was a result of a pretty comprehensive executive communication strategy that we developed.” He says CCE has gone from “crawling to walking to running” with Microsoft’s solutions. The project formed part of CCE’s threeyear plan, initiated in 2006 and spearheaded by Sezer, aimed at the consolidation, simplification and virtualisation of applications and infrastructures. Sezer, who has more than 20 years of global IT experience under his belt, says his unit has been deeply involved in the transformation process. “To get IT into driving our transformation agenda was top of the list for our CEO [John Brock]. As CIO, I drive the technology enablement component of it, together with all the process changes and related business activity changes that come with it. So that requires a lot of internal collaboration within the business functions and IT.” Sezer says credit is due to CCE’s leadership team for their willingness to embrace the importance of technology in creating improved efficiencies. However, initially it was a “mess” admits Sezer, with people pulling in different directions. That was until a clear strategic roadmap was unveiled, showing where CCE wanted to get to and what it wanted to achieve with the transformation process. For others embarking on a similar exercise, he even recommends appointing a “czar” zar” to oversee the smooth running of complex transformation n of the kind CCE has been through.
A shift in balance
“Our strategy is primarily explained in a sense that we need to be creating enough resources to fund the growth-related initiatives that differentiate us from our competitors. In other words, we need to create resources resou through the efficiencies and productivity initiatives initi and fund our growth-related activities that the t business requires.” As CIO, Sezer is constantly having to analyse an meaningful metrics in order to decide where w to direct resources. He says this is assessed s on an individual basis. “You have to look lo at it scenario by scenario because there is n one-size-fits-all answer to this,” he notes. no “A I have said, we have a very significant trans“As form formation agenda in Coca-Cola Enterprises so there w was not much debate here for us to decide to install mor more communication and better collaboration capabilities. biliti The question was how we were going to do it and how fast could we get there. Obviously the allocation of resources could come into competition with other things, but this did not happen here.” Of course, any change process or adoption of new technologies needs to create value for the business, but it is not always easy to quantify ‘value’. CCE’s improved communication and collaboration strategy creates obvious and transparent benefits for the business; other projects, however, are more opaque. Every initiative that Sezer is keen to roll out
72,000
Up until the turn of 2007, around 90 percent of the company’s internal resources were channelled into maintaining operations, or “keeping the lights on” as Sezer describes it. Th is figure has now fallen to around 60 percent, which means around 30 percent of the IT department’s focus is on implementing business transformation technologies. Sezer provides an example: le: “Our fi nancial activities and HR services used to be handled dled by local business units in the countries where we operate. Today, d however, h they are consolidated in a shared services model that we created for both fi nancial transactional activities and HR activities.” Sezer suggests that you can only achieve this consolidation by putting standard processes and systems on a global platform for staff to access. He adds: “Enabling technology capabilities was fundamental to drive that transformational activity in the fi nancials and the HR side of the house, which involves pretty big transformation components for us.” He goes on to say:
people are employed by CCE
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has to pass a rigorous “value management process”. “We have to make a solid business case and we apply toll gates to ensure there is a value proposition.” He adds: “We engage the business with us, defi ne the value and let the business allocate the resources if they see value.” CCE’s business units plough investment into the IT side of the company in order to drive new capabilities and efficiencies. “In other words, they put forward the necessary fi nancial resources to be able to drive those capabilities. They could put those fi nancial resources into something else as opposed to IT, but we work with them very closely to defi ne the value proposition up front and then we allocate the resources accordingly with our business partners.” It is envisaged that the SaaS roll out could be used as a launch pad for CCE to embrace Plaform as a Service (PaaS). Sezer explains: “We are looking into this very seriously right now, but it needs to deliver the wow factor, ease of use and accelerated beta deployment that the cloud provides.”
New ideas Like most top tech roles, innovation is an important aspect of Sezer’s job. After all, some IT chiefs suggest that the title of CIO should stand for Chief Innovation Officer rather than Chief Information Officer. CCE’s CIO points out that an innovative solution has to deliver tangible benefits for any organisation and not just be adopted because it is the latest socalled ‘big thing’ on the market. “Innovation has to be a differentiator,” he acknowledges. “We don’t want to innovate for the sake of innovation – we want to put innovative capabilities into place if it differentiates us from our competitors, be it in revenue growth management, selling and customer services, or the supply chain.” An example of innovation is in the warehouse where CCE has collaborated with Microsfoft , Cisco, SAP and Datria Systems to guide staff to where to pick up stock for delivery. The Voice Pick system, for instance, has improved accuracy from below 90 percent to almost 100 percent. It has also meant CCE has been able to do away with people to check that the right products are loaded on the right trucks. Sezer believes the ability to sniff out innovation requires different skill sets and competencies from IT staff. “You have to be really engaged with your business to understand exactly where the differentiation is going to come from. To do this you need to have very business savvy IT people who are talking with the business to understand where the differentiation points are.” You also need to keep a fi rm eye on technology developments too, says Sezer. “You need to be looking at emerging and current technologies to see how you are going to fi nd the shortest, fastest and best way to deliver that differentiated capability.” Naturally, this can be pretty complex, he says, because each company has its own technology ecosystem. He adds: “Th ings like cloud development and Soft ware as a Service require some really good architectural knowledge within your IT organisation. But if your IT organisation is preoccupied with the maintenance of the business, you cannot build it so your focus needs to shift into differentiated solution development with the right speed of deployment.” In order to be agile enough to be able to improve efficiencies whilst rolling out the right innovative technologies, you need the right staff : the business savvy techies he refers to. While CCE recruits fresh IT talent, Sezer is mindful of the need to strilke a balance between fi lling posi-
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It do says es what it on th e tin CC
E bu y s s y ru co nce p n tr a t e f ro m Coca - Cola Com and c pany o mbi ne s i t the o w i th ther ingre to cre dient ate b s evera that ges are s old to millio 419 n cus to m e rs wo rl d w id e
tions with both b internal and external candidates. can “We are very focused on the internal development programme p we have in place today, while the amount of investment we are making into our people has never been the level that we had at this stage. The return of that is ten-fold.” It translates to quicker operations. “I am now Esat Sezer able to bring in those differentiated solutions faster than I used to with the external resources coming in, because the internal institutional knowledge married with the core competencies and strategic technologies is the winning formula at the moment.” In the meantime Sezer and his team are gearing up for the next three-year transformation plan, due to come to a conclusion in 2012. He also has to continue to be agile enough to react to changing consumer habits and their different choices of Coca-Cola products, especially with customers increasl h options. ingly being urged to ditch sugary drinks for healthier On top of this, business can easily be lost if the right products are not sitting on shelves and packed into vending machines in a timely fashion. These are all challenges that this enthusiastic tech aficionado is relishing, because wherever Coca-Cola beverages are, the IT behind the product won’t be far behind.
CAPITALISING ON THE GREEN AGENDA Esat Sezer is a champion of CIOs taking advantage of the “buzz” around green IT to create efficiencies, save money and slash carbon emissions. “I don’t know why we need to make this [green IT] more complicated than what it is, quite honestly. As a CIO, I can relate it to the rules introduced around Sarbanes-Oxley. I think many smart CIOs took advantage of the buzz around this act to drive some of the simplification efforts that they would like to make in their IT back office. Green IT is a similar buzz at the moment, and rightly so. We could, especially at companies like Coca-Cola Enterprises, use it as an opportunity to define our corporate responsibility and sustainability, which is an integral part of our operating framework. We take this very seriously. On the other hand, you can also look into the IT space and drive some of the upgrade processes, virtualisation and data centre consolidation, which reduces your carbon footprint and energy consumption. You can also look to print and fax consolidation, as well as reduce paper use. So you need to use the buzz as a tool to drive efficiency-related activities.”
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FINANCIAL SERVICES
Staying one step ahead Edinburgh-based Standard Life has witnessed many ups and downs in the financial arena during its 185-year history. To find out how the IT side of the business has been affected by the recession and just why tech staff love working for the company so much, Julian Rogers catches up with CIO Keith Young. 30 www.cxo.eu.com
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company’s embryonic IT department back in the 1960s, programming code that is still in use nowadays. Around 1000 of the 10,000-strong workforce based in the UK, Europe, North America and Asia are involved in IT and their average length of service is just over 13 years – an impressive stat in anyone’s book. Perhaps more surprising is the fact that management near the summit of Standard Life’s IT hierarchy have an average of 20 years’ experience each at the company. “IT professionals tend to move around quite a lot, and that seems to be a fairly typical model in the industry, but we are definitely atypical,” Young reveals in a distinct Scottish brogue. Many of his long serving IT professionals were recruited as trainees, brought through the ranks to management and have chosen to stick with the company. “The way you keep hold of your most experienced and best ones is by making them feel valued,” Young explains. “You have to spend time with them, you have to make their opinions count and you have to give them careers that play to their strengths.” Of course, not everyone earmarked for management fulfils their potential; others feel removed from the job they originally trained to do. In order to address this “technical streams” were established to allow staff who excelled at perhaps development, design or analysis to specialise in their area of expertise. “We allowed the very best staff to rise into senior management positions with their divisions so that they didn’t have to move away from their specialism in order to have a valuable career with us.” Allowing staff to move up the ladder and still hang onto their technical expertise and experience is fairly unique but one that seems to work here. Although Young still casts his net outside Standard Life’s four walls when looking to recruit, his preferred option is to promote from within. After all, internal staff have the knowledge of what the company is all about and have absorbed its culture. Young says choosing to favour hiring non-Standard Life people damages morale and means risking losing key staff. “If you regularly recruit staff into senior levels rather than promoting from within, the message you send to your staff is that they’re not valuable and, therefore, you will encourage them to look elsewhere for opportunities.” Young also has a trainee programme in place that takes junior IT professionals on board every year and invests in their development. They go through rigorous tests to make sure they are the right candidates and great team players with the ability to collaborate Around effectively. Being an intellectual individual is not what Young is looking for. Next year Standard’s IT numbers will have to swell to cope with the injecof Standard Life’s tion of some serious money into the department as the business and the industry as a whole emerges workforce is from the deepest recession in decades. Young and dedicated to IT his management team will be on the hunt for experihere is a perception, rightly or wrongly, enced people, especially project managers and senior anthat IT is a particularly fickle industry with alysts. “There’s always business cycles – kind of boom and technology professionals swapping jobs with almost bust situations – and you need to make sure you’re in good shape the same frequency as they change their socks. Indeed, actually going into any of these storms.” a statistic sometimes banded about is how even CIOs are thought to spend only around four years in a job beHandling a crisis fore upping sticks and moving on. Keith Young, howWhen Young mentions a storm he is, of course, referring to the hurriever, is the exception to this philosophy, having notched up nine years in the cane of the past couple of years with the meltdown in the banking sector and top tech seat at Standard Life. Altogether his career at the Scottish firm spans subsequent credit crisis and recession. Unlike some CIOs, Young is quick to 22 years, having worked his way up the IT ladder and various management dismiss any notion that he is being asked to do more with less. On the conroles. Likewise, Standard Life’s outgoing CEO, Sir Sandy Crombie, joined the trary, it’s been pretty much business as usual for the IT side of Standard Life,
1000
10,000-strong
T
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Keith Young although he fully expects increased legislation for the financial institutions in the wake of the industry’s economic meltdown last year. “The economic problems of the last 18 months didn’t result in us making major cuts in IT,” he asserts. “In fact, our running costs in investment in IT for 2009 is pretty much the same as it was in 2008 and that investment is actually going to be increased in 2010 to prepare us for coming out of the recession.” He adds: “Although it was business as usual in 2009, we kept an eye on what was happening in the markets to be aware that we might have to make cuts should things get any worse than they turned out to be.” With turmoil in the financial sector and the recession affecting most businesses, Young issues a note of caution about making snap decisions based on the short-term outlook rather than a longterm forecast. “You need to invest for the long-term because this isn’t like selling commodities where one time the market will be very high and then the market falls and you have a big programme of cuts to deal with it. We tend to have a more consistent approach to investment because you are dealing with the long term as you ride out the storms.” Earlier this year a drive for operational excellence was announced in order to be as “efficient and effective as possible”. It was also about reducing silos across Standard Life globally as well as developing and challenging talented people. A key component of the IT strategy is the group’s service-orientated architecture (SOA) which has saved around €26 million to date by replacing legacy systems like the customer database application and reducing the complexity of developing other applications. The amount saved is based on what it would have cost for Standard Life to build each unique business service every time an application was developed. Altogether Standard Life has written a catalogue of 500 business services and the leading ones are used in more than 50 applications. “If you architect it properly and you write the business service once, then it can be used across many applications.” Although Standard Life doesn’t have as many legacy systems as its peers due to a low
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“There’s always business cycles – kind of boom and bust situations – and you need to make sure you’re in good shape actually going into any of these storms” level of M&A activity, some legacy programmes needed to be refurbished and others re-written. “They decay over time simply because business changes or the systems start to get used for functions that they were never designed to be used for, and that’s where some of the problems come,” he warns. Some of the legacy programmes had been altered so many times that they were destined to become impossible to maintain unless steps were taken. “We took them and effectively redesigned and rewrote them before putting them back in place.” Young likens the situation to a railway with lines criss-crossing the network. “Some programmes are used by almost everything, and they become key programmes, and it’s these ones that we took out, redesigned, recoded and put back into production. It means that our legacy systems are more manageable than they would be if you just allowed them to decay.” As well as the refurbishment, the strategy also provides consistency across all channels, which means information sent out to the customer, passed to a call centre operator or uploaded to the website uses the same business service. “The results that you get when we write to you or if you contact us over the phone or the net will always be the same and consistent,” Young explains. On top of this, Young and his team has shrunk the data centre and slashed its carbon footprint by more than 70 percent through virtualisation. In fact, the
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overall cost of Standard Life’s all-important IT has reduced by over 75 percent since 2004 – the year the group demutualised.
Evolution over time With his career at the institution stretching back to 1987 when he arrived as an analyst, Young has seen IT evolve from a back-office function into a real ‘game-changer’ and business enabler. Back then the IT function was a very much inward-facing component compared with today’s customer-facing outlook. Indeed, in one way or another the IT department is often the only contact Standard Life’s 6.5 million global customers have with the business, which offers life assurance, pensions, investment management, banking and healthcare insurance products. “We didn’t used to have any direct contact with customers but that changed significantly and is continuing to change with the growth of the internet and services being provided over it,” Young notes. “Twenty-odd years ago most of the contact with customers was via paper, then it moved to and is still predominantly the telephone, and now it’s increasingly moving towards the internet.” Being able to capitalise on the internet as a way of serving your customers can prove invaluable in retaining customers and cutting costs in other areas. “If you can take advantage of the web you can do two things: you can give your customers a great service, and you can cut your costs because you don’t require big call centres handling customers’ calls.” With the advent of better
technology the back-office function has switched to the front in some respect, as Young explains. “When the customer contacts us over the web and they’re coming directly into the IT function, no other staff are touching that on the way, so it means you need to be secure, reliable, always there and give them the information they need first time.”
Looking back Young, who is gearing up for his retirement at the end of the year – a period of his life he is “very much looking forward to”, says excellent leadership skills have been the most important aspect of his job. He admits, however, that it is a challenge maintaining regular contact with 1000 staff and getting his message across and explaining his strategies. Nevertheless, Young holds face-to-face meetings with employees and regularly attends team meetings. He’s even produced a DVD of himself delivering important messages and has used the media to get his opinion across. “What I need to concern myself with is making sure they understand what they are supposed to be doing and the things that are important, but I don’t have to worry about their technical competence.” So is he a ‘hands on’ boss? “I wouldn’t say I was and I don’t think my staff would describe me as this either, although it is necessary to get involved in some specific issues to some detail. You also need to recognise that some things could potentially cause trouble but these are few and far between.” n
Young (centre) and his experienced IT managers
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TECHNOLOGY
O
n 4 November, Dell Inc. celebrated its 25th anniversary. Having achieved much success in the 1980s and early 1990s – the company was widely admired both in and beyond the technology industry as a model of efficiency and for its shrewd use of IT – you would think Michael Dell’s eponymous firm would have much to celebrate this year. However, thanks to a series of setbacks and poor decisions – not to mention the financial crisis, which has proved tougher on consumer goods firms than most – the last few years have been tough. The press even coined a name for the situation the company found itself in: Dell Hell. It was in January 2007, against a backdrop of these struggles, that the founder of the multibillion-dollar PC-maker returned to his former role as CEO and found himself back in charge after three years away from the wheel. At this point, in January 2007, the company had tumbled from owning over 50 percent of the market in 2005 to around 24 percent just one year later. With an understandably concerned board in front of him, Dell pledged to put his utmost into transforming the fate of the company. A little under 33 months later, and Dell’s CEO has proved as good as his word, leading from the front and revolutionising the company’s previous business model from one focused on direct sales over the internet or by telephone as opposed to retail stores, on hardware as opposed to services, and that primarily looked to the American market rather than an international one. While this model had been incredibly successful for quite some time, Dell recognised that it was not built to last; a new approach was required. Today, Dell has transformed how the company operates, ordering a complete makeover of the earlier model. As soon as he stepped back in to the role of CEO, he immediately began shaking things up, recruiting senior executives from other Fortune 500 companies to lead the various sectors of the firm, including marketing, consumer products, operations and services, as well as rethinking the retail and consumer arm of the business. Often accused of a failure to innovate, the commercialisation of brand new technology and the desire to enter new markets is now unwaveringly and resolutely present throughout the business. Dell himself is now focused on a forward-thinking strategy, one that can attract fresh consumers and capture alternative market share – and, once again, he’s got his eye on reaching the top.
Consumer evolution “When Dell began we made a decision to focus first on business customers – the thinking being that the bigger the customer the more share we have,” he explains at the company’s Austin headquarters. “But today, that’s changing and the consumer market has since become a lot more important to us and offers a lot of opportunity to grow. It’s a combination of new capabilities, new products, new design and new people, which combined with a new leadership approach has allowed us to go after that opportunity.” Indeed, while Dell is and will remain primarily a B2B company, it has recently been increasingly focused on the consumer side of the market, and as such the channel dynamics have evolved quickly. Dell, with the help of his new executives, has rethought the retail side of the business so that consumers are now able to purchase products through 43,000 retailers, commercial re-
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Michael Dell at the building of a new Dell Inc campus in Texas
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THE
COMEBACK KING Once upon a time Dell Inc. was the top
computer-maker in the world. Twenty-five years later, founder Michael Dell is tirelessly working to bring the faltering company back from what the media has called ‘Dell Hell’. Rebecca Goozee catches up with the charismatic, if a little jaded, billionaire at his headquarters in Austin, Texas, to determine whether the shifts in strategy can help the firm reclaim its title and reign supreme.
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Grand Designs Ed Boyd, who joined the company from Nike, is the man in charge of design and is currently working to make design an integral value at Dell as part of the company’s new strategy. Standing in front of dozens of prototypes for future laptops hanging on the wall in the consumer design lab, Boyd concedes that he wasn’t overly excited when approached by the firm just over 20 months ago. “I was like, wow, Dell makes great boxes but they aren’t very moving; they need someone who can think beyond just technology. So in the time that I’ve been here we’ve built a very diverse team – we’ve gone from about five people to around 140 – from many different design companies and consultancies. “We did some research in the beginning and we asked people about customisation. People rated Dell as one of the leaders in the industry in personalisation and I kind of scratched my head, because when I was at Nike doing NikeID, I never thought of Dell as a leader in personalisation. But we realised that we had the customers’ vote of confidence so we started looking at how to individualise the products further. “It became obvious that it was more about what the product looked like than what was under the hood – what processors were used, for example. So last December, we launched a design studio and set up a gallery to leverage our unique ability to customise products. So now, people can come to Dell, pick their products or a piece of art from an upcoming artist and have it printed on the product in a really beautiful way. And we’ve now got great artists from all over the world coming and collaborating with us too.”
sellers and value-added resellers that handle Dell systems around the world, as well as 50,000 partners on the channel side. “There is no doubt that the vast majority of our revenues and profit come from being a business-to-business company, which we don’t necessarily think of as a bad thing,” laughs Dell. “But our consumer business is now growing quite fast. And, you know, in contrast to two years ago where we basically had zero places where somebody could buy a machine other than the telephone, now we have 43,000 retail locations where someone can buy our products. So there have been some fairly notable changes in the business, for sure.” And it’s not just how the products are sold that is making a difference to the increasing amount of consumer purchases, but also the range of various products that are available. Dell’s consumer strategy has changed. Instead of focusing solely on price or storage capacity (or both), trends are showing that consumers are increasingly attracted to well-designed and stylish machines – something that long-time consumer-focused competitors Apple and HP can attest to. As such, Dell has been looking at the various sub-brands under which products are de-
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signed over the past 18 months and re-defined them to appeal to specific consumer groups. For example, Adamo is designed to appeal to the luxury market, focusing on high craftsmanship and experience; Inspiron is a fun, accessible, stylish and high-value brand; and Dimension is the value-driven, cost-orientated brand. Also available is Alienware, for high-end gaming, and Studio, designed for multimedia uses. After employing Motorola’s Ronald Garriques as head of the consumer division and executives like Ed Boyd from Nike, hired to revolutionise the company’s design focus, there is no doubt that the consumer division has been completely revamped. But what about the rest of Dell and the important B2B side of operations? Dell explains that these areas have seen some important changes too. In December 2008, the company was officially restructured into four customer groups: consumers, corporations, SMBs and government and educational buyers. And today, each sector of the company has its own management team responsible for it, as opposed to the old way of doing things that left the organisation decentralised and struggling for identity – again this worked while the company was growing back in the 1980s and even the 1990s, but a €40-billion company requires considerably more structure.
Crunch time
While all four segments of the company are now functioning much more efficiently, nobody was prepared for the economic crisis that hit just over 12 months ago. Nevertheless, Dell himself continued – and continues – to focus on the positives of the situation. “If you look at what’s going on in the economy today, certainly you have to reflect that in your current thinking. There’s a lot of focus, because of the financial crisis, on cost and cash flow, which is a natural reaction to a crisis. And when you focus on cost and cash flow you start to realise that you want productivity because you don’t get far moving a business forward without it, and following productivity you start to think about growth. This might not be the focus that everybody has today, but I feel confident that over time we’ll move back to focus on productivity and growth.” And Dell certainly looks to be increasing its share of the market, with a boost of 11 percent in revenues in the US and the non-Japan part of Asia from the first quarter to the second this year – encouraging signs for a company that was struggling to grow at all just a few years ago. “Even more than that, when we look inside the quarter, we see from a week-to-week, month-to-month basis, a strengthening of the core business,” explains Dell. And despite the challenges presented by the current state of the economy, Dell himself remains confident of the position that the company finds itself in. “I do think there’s been a deferral in spending, but I think we will see it resume in 2010, probably occurring gradually, at different times for different industries,” he says. “There is a lot of old, outdated equipment out there that will need to be replaced to maintain productivity.”
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And in line with this, the launch of Microsoft’s Windows 7 in Q4 2009 and Office 2010 next year could well boost sales at Dell into 2010. Indeed, the corporate replacement cycle is a big focus at Dell. Companies have deferred purchases to the point where they have four or five-year-old systems that are standardised on an eight-year-old operating system – let’s face it, large enterprises never really did move over to Vista – which means the time is ripe for change. “I see the product cycle getting very exciting,” reveals Dell. “When I look at the next six to nine months, I see a few things to get really excited about – the processor from Intel going from the desktop to the notebook, which will drive a huge improvement in performance and power. And Windows 7, which is a massive improvement over prior generations. Plus Office 2010, a dramatic improvement over the previous versions of Office, due out around March, April of next year.”
Solutions and services Dell is in a business where the performance and the use that customers can get out of the products ultimately depends on somebody else’s work: the providers of the software or operating system, such as Microsoft, for example. As such, the health of one company inevitably has a fair amount of impact on the other. So does Dell have any plans to expand the solutions arm of the business? “Dell is evolving itself from a product company into a solutions integrator, where we’re bringing complete solutions to our customers, whether they’re the biggest companies in the world or governments or SMBs or consumers. And those integrated solutions are not just the things that we develop ourselves with the thousands of engineers that we have at Dell, but
they also include technology from our partners.” Within the solutions side of the business, Dell himself believes that there is a lot of potential for the firm in the services sector. “There are some surprising things about our business that aren’t so well known, and one of those is that we have a US$6 billion (4 billion) services business,” says Dell. “This is definitely an area of potential growth and I foresee it growing quite a bit. It’s certainly an area
“At just over 10 percent of the business, the services sector is something that Dell has big ideas for going forward” of emphasis for us as we focus on solutions. And I think one of the things we’ve learnt in the last four or five years is that when we went to our customers and said, ‘Hey, we’ve got this new server and it’s got this many megabytes and disk drives’, there were some customers that said ‘great’; but a lot said, ‘we don’t really care about your server because what we want is a solution for our supply chain or our customer relationship management’. And so we really had to build a much stronger solution here. We’re not done yet, but it is a US$6 billion business, which is a pretty good-size when you think about it.”
Where it all began Michael Dell, notoriously shy of personal questions, was involved with computers from the age of 15 when he took apart an Apple II. From an early age, Dell had an interest in business and by the time he was 17, had earned enough money to pay for a BMW by building his own computers and selling them directly to customers at a much lower price than the retailers. He continued the business as he took classes at the University of Texas in Austin and called the computer company PCs Limited. With a little help in the form of a loan from his grandparents, Dell dropped out of university to run the fledgling company, which later became Dell Computer Corporation and finally Dell Inc. CEO at 19, Dell has received extensive accolades from publications including Inc. magazine, PC magazine, Financial World, Industry Week and Chief Executive magazine. “I’m quite certain there won’t be one computer of the future; there’ll be many different kinds. There’s every shape
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and size you want to think about: computers in your pocket, computers you carry around with you, computers in the sky, computers on your desk. I think there’s still a lot of work to do in the man-machine interface and visualisation continues to be an The age at which important motive of accessing information, Dell had sold which is why people enough hand-built tend to be interested in computers to buy a small screens. And small BMW screens are great ‘cause you can take them with you, but actually, people really want to see more information, not less. So if you look at the desktop computers, the screens keep getting bigger and bigger and bigger. I think visualisation will play a big role. Certainly as there’s more bandwidth you’ll have more server and cloud-based computing models.”
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Dell’s best kept secret At just over 10 percent of the business, the services sector is something that Dell has big ideas for going forward. “If you look at the size of our hardware business versus the size of the services businesses, of course we want the services side to catch up and be more prominent, and there are lots of ways for us to do that.” Organic growth will continue to be a part of that, but so will partnerships, he explains – a major step for a company that has not always been a fan of such affiliations in the past. “One of the things you see in this business is that you can’t do everything yourself, it just doesn’t work. So there are a lot of great companies out there who we’ll partner with, such as the Brocade deal that was announced recently. We’ve done about 10 acquisitions in the last two years, and although I wouldn’t necessarily go looking for an acquisition, we’re going to have a consistent strategy of acquiring new capabilities to enable our business to grow and do more for our customers.” Only time will tell if Dell can successfully return to the market leader that it once was. From the outside there have been some notable changes, and from the inside the company has gone through an extensive overhaul. It is now clear that Dell, the former shortterm thinker, has evolved into someone that is planning for the future. And, if he continues to pull off the rest of the changes he has in mind that are currently kept strictly under wraps – including smart phones and social networking – the future could be looking pretty good for the former computer king. n
Deep in Dell’s Round Rock headquaters resides one of the company’s lowest-profile departments. “I’m going to prove to all the sceptics out there that outside of your desktop, your office and your home, you are in fact using a Dell almost every two hours – and you don’t even know it,” enthuses Josh Kivenko, Global Marketing Manager for the Original Equipment Manufacturers (OEM) market. “The OEM division has been in business for longer than 10 years. We’re global. We have over 1500 customers in well over 40 verticals and the use of Dell hardware is so diverse. I mean you can go from a kiosk to a customer who’s trying to build their own HP PC solution and resell that to a customer like Google who’s building a network appliance that’s all branded Google and selling that ultimately into a data centre. Or an industrial automation company that’s building this hefty enclosure with a desk and a chair and a table and five screens. Or a trading floor solution that is sold into banks that are powered by Dell blades and have an incredible fan and cooling and screen and 3D graphics. All the way through to a company that’s powering switching devices for subway systems. “There’s no doubt that my division at Dell is an element of a diversified portfolio. We’re a diversity player. We’re not talking about virtualisation or systems management or power and cooling – we’re talking about something totally different. Within my group we’re in so many different verticals; there is so much white space out there, which means there’s a big opportunity for us going forward.”
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COVER STORY
Leading the way
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When Germany entered recession in the first quarter of this year there seemed little hope of recovery as demand for exports – the country’s economic lifeblood – slowed to a trickle. But rapid government intervention and multibillion-euro stimulus packages have brought the German economy back to life and out of recession. CXO reports on the bounce back and asks whether its recovery is sustainable.
“
We will do everything possible to make sure Germany not only gets through this crisis but emerges stronger.” These were the words of German Chancellor Angela Merkel in January this year, as the country entered its worst recession since the Second World War. At that time all the odds were stacked against a recovery by Europe’s biggest economy, which relies heavily for its economic stability on the global export market. The effects of the downturn on global commerce, set to plummet a further 10 percent this year, saw orders for goods produced in Germany fall by eight percent between August and September last year. In the fi rst quarter of this year the economy contracted by 6.7 percent – the biggest slump in 40 years. Meanwhile the government slashed its full year economic forecast, predicting the economy would shrink by six percent, led by the fall in global exports. Describing the seriousness of the situation, Professor Iain Begg an expert on EU economic and social policy at the London School of Economics (LSE), says: “The German economy had an
extremely sharp fall in the fi rst quarter of the year and that’s because as an export-orientated country it was being hit badly by the fact that other countries were clamping down on their demand. So they simply weren’t buying from Germany.” However, five months on from the German government’s dire predictions, and against all expectations, it emerged triumphant from recession, posting a 0.7 percent growth in GDP. Its recovery has been attributed in no small part to the intervention of Merkel who, in January of this year, unveiled an economic stimulus package worth around €50 billion, including investments in railways, roads and schools as well as a number of tax relief initiatives. Timo Klein, Senior Economist at IHS Global Insight, says: “The most important role the government played in the beginning stages of the acute crisis was to stabilise matters. Then followed a couple of stimulus packages. If you take these two together they have roughly the magnitude of stimulating the economy to the tune of 1.5 to two percent of GDP by 2010.”
Chancellor Angela Merkel meets with US President Barack Obama to discuss the economic crisis
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Dr Robert Hancké of the Economic’s European Institute of LSE agrees, adding that the effects of the stimulus packages coincided with a lift in conditions across the world economy to pull Germany out of recession: “It really is because of the interplay between the fact that the world economy is slowly picking up, which since Germany is such a large exporter of GDP has massive effects, and the fact that the government made sure that the bottom didn’t fall out of the labour market, and thereby the economy as a whole. I don’t think you can really say one is more important than the other. You really need both factors feeding off each other rather than the government just providing passive support.”
Cash for clunkers Among the most high profi le stimulus measures was Germany’s car scrappage initiative launched in January. Under the terms of the scheme buyers of new fuel-efficient cars were given a €2500 discount in exchange for scrapping a vehicle over nine years old. Although greeted with scepticism, the scheme attracted over 1.2 million applications, resulting in the purchase of over 600,000 cars. In March, just two months after the launch of the initiative, new car sales soared 40 percent compared to the previous year to 401,000 – the highest level since 1992. Meanwhile sales were up by 18 percent over the previous quarter. Th is success prompted the government to extend the funding from the scheme from €1.5 billion to around €4.5 billion. Klein says he does not believe that the effects of the car scrappage scheme will have any longterm affect on Germany’s troubled auto industry; however, he does believe it made a significant contribution to the country’s economic recovery. “Th is was never intended to be a long-term boost. Because, of course, the car industry in Germany, and worldwide, has certain structural problems, such as overcapacity. The idea of it was always to serve as a bridge between the relatively healthy economy of mid-2008 and the hope for the recovery in the second half of 2009. The question is, of course, how far does this bridge carry? I would personally argue that it has been relatively successful, if you look at how GDP has developed between the middle of 2008 and the middle of 2009. The car scrappage scheme was one element that helped to enable the German economy to get above the zero line in the second quarter.” Hancké agrees that the initiative provided a much needed shortterm boost to the German economy but he too is sceptical about its long-term value as a solution: “It’s been successful in terms of the number of people who’ve bought into this. But I don’t think it makes any difference in the long term for the macro economy. It’s not entirely clear in Europe at the moment what the structural over capacity is in the car industry, but everybody, including me, agrees that it’s at least
20 to 25 percent of the existing capacity. So either we need to increase demand by 25 percent over the next 25 years or we reduce the supply of cars by 25 percent over the next 10 years or so.”
Consumer confidence As well temporarily stimulating the auto industry, the success of Germany’s car scrappage scheme also went a long way to restoring consumer confidence in the country – therefore stimulating other areas of the economy, as Begg explains: “If the side effect of the car scrappage scheme was to restore confidence in the German economy, then other sectors of activity might well take up the running, in particular the service sector.” The restoration of consumer confidence in Germany is a crucial part of the government’s recession-busting plan and a means of using domestic spending to counteract the effects of the fall in exports. Analysts agree that the German consumer is typically sensitive to economic conditions and will stop spending in times of economic instability. “In Germany
Q3
Q2
2008
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creases at the close of 2009. It remains to be seen whether private consumption can also fulfi l this supportive function in the coming year.” Inflation too has a major impact on German consumer confidence, and the fact that this fell sharply in the second quarter meant consumer spending received a much needed boost, according to Klein. “The German consumer is one of the most inflation sensitive. Private consumption actually fell in the second half of 2007 and in the fi rst half of 2008, despite the economy having a boom overall, and that was because the oil price went up and inflation in general went up strongly so people felt to be worse off. So when suddenly inflation fell very sharply, which means we’ve had the biggest real wage increase in 10 years or so, that really encouraged German consumer spending.”
“The German consumer is one of the most inflation sensitive” Timo Klein A workable solution
you’re up against the fact that the German consumer, traditionally, has been a lot more cautious than the British consumer,” Begg says. “The kind of workforce you have in Germany is one that doesn’t like spending when there’s a lot of uncertainty around the corner. So they begin to save and the government begins to save and the effect of that is that you have low aggregate demand. That’s the sort of structural condition the German economy has been in for the last 10 years. According to the GfK Group’s monthly Consumer Confidence Index, confidence rose for five months running up until this October when it dropped for the fi rst time in more than a year, from a score of 4.2 to four. According to Gfk, a key reason for the drop was the expiry of the scrappage bonus scheme as well as the rise in the oil price. A report on the results stated, however, that domestic spending would continue to be crucial to Germany’s continued recovery: “Despite the slight setback, private consumption remains a major source of support for the German economy this year, since investments and exports will record large de-
A key element of the government’s work to prevent slumps in consumer confidence and domestic spending has been the Kurzarbeitergeld – the German government’s reduced hours compensation scheme – under which companies can radically cut the working hours of their staff, who then receive compensation of up to 60 percent of their net salary from the government. According to figures released by the International Monetary Fund, Kurzarbeitergeld has meant that despite a sharp contraction in industrial output in Germany, there has only been a rise of three quarters of a point in joblessness. Meanwhile in the UK, where trade unions are lobbying the government to introduce a similar scheme, the IMF predicts unemployment will reach 7.6 percent this year and 9.3 percent in 2010. Klein explains the benefit of the scheme, which was fi rst introduced in Germany in the 1920s: “In the overall scheme of things it has made a huge difference to the labour statistics. Germany is the one country where we’ve seen very little increase in unemployment and the main reason for that is the short time work scheme. Something like 1.5 million people were on the scheme at its peak in 2009. That’s out of a total workforce of about 40 million. Interestingly, during the crisis, in late 2008 and the fi rst half of 2009, we’ve had slightly stronger private consumption than in years past. One of the main reasons for that is the stability of the labour market.”
Q4
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Begg goes on to say that the prevention of mass unemployment across Germany will prevent future problems for when the upturn in the economy creates greater demand for employees: “There’s an argument that if you push too many people out of work they then lose attachment to the labour market. If you’re outside employment you’re less employable and that means that the aggregate labour supply is diminished because the people willing to take jobs are fewer and that means that if there is an upturn in the economy, employers are less willing to take on those that have been detached from the labour markets. Th is means that they will build up wage rates for those that are employable and so you get a combination of inflation and unemployment at the same time.”
A sustainable recovery? But while the German government may be hard at work to restore consumer confidence and consumer spending, another key aim is to cut its own spending in order to reduce its heft y debts. The county’s deficit is expected to reach 3.7 percent worth of GDP by the end of this year and around six percent in 2010, which is double the EU limit of three percent. The Paris-based EU think tank, the Organisation for Economic Co-operation and Development, told the Reuters news agency that the
“We’re in a very delicate position where things could go either way”
Workers assemble Porsche 911 automobiles
Iain Begg German government would need to cut spending or raise taxes in the coming years in order to reduce the deficit. Meanwhile Germany is under pressure from the EU Commission to reduce the deficit and it has agreed with an EU decision that member countries should begin budget consolidation measures by 2011. Analysts warn that the government’s determination to reduce its budget deficit over increasing spending could potentially have a depressive effect on the economy in the long term. Th is impetus to cut debt is drive by the government’s pledge to have balanced its books by 2016, a move which Begg says could lead to a stagnant economy in the long term: “One concern the Germans will have is that they do plan to clamp down on their economy to ensure that their fiscal deficit is back on track. And they’ve passed this constitutional amendment that will, by 2016, mean they have a balanced budget. Th is could tend towards a depress-
Q1
ing effect over a number of years until it’s fully worked out because it means that the state will no longer be spending, or at least spending less than it otherwise would.” He goes on to say that this could counteract the effects of the government’s €50 billion worth of stimulus packages: “That impetus, that injection of momentum to the economy, will be lost. In the short term, if you clamp down on public expenditure, in other words do exactly the opposite of a stimulus package, this would have an anti-stimulant effect.” Klein says there could be confl ict too between the government’s wish to cut taxes and its aim to reduce its deficit: “Cutting spending is what sensible economists would tell the government to do because it is piling up very large deficits at the moment. But it is very hard to see how it would be possible to reconcile income tax cuts with the need to bring down deficits. The burden for the individual wage earner is going to become larger. So all of these problems suggest that one should not expect much at all in the medium to long term from the German consumer.”
Q2
2009
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Consumer confidence is crucial to the recovery of the German economy
Cautious optimism The state of the German economy, when compared to that of the UK and Spain, is relatively buoyant with government stimulus packages having injected much needed consumer confidence and provided labour opportunities. But analysts warn that under normal global conditions the state of the German economy would be considered weak and say they believe that in the absence of long-term solutions to the slump in the country’s manufacturing sector, its recovery remains fragile. “It’s very slightly above zero which is a long way behind what you’d expect under normal circumstances,” says Begg. “They are not doing well, they’re just doing less badly than others. Th at is an important distinction to make. Everybody expects German unemployment to continue rising and that’s something that would damage consumer confidence. It’s only slightly offset by the fact that it looks as though they might have turned the corner. We’re in a very delicate position where things could go either way.”
Timo Klein goes on to say that he believes the country remains close to the brink of another collapse into recession: “I’d say there is now a reasonable degree of stability, due not least to major monetary and fi scal policy measures. But the whole thing is still relatively fragile because it relies on world trade and the stimulus that has come from both government and the Central Bank. If that were to be withdrawn within the next few months that would most likely lead to a collapse into recessionary conditions.” He predicts that proper sustained recovery will not begin until late 2010 when wider global economic recovery will provide long-term opportunities for the German export market. “We at Global Insight expect there will be something of a setback in the fi rst half of 2010, so that a more sustained and more underlying broader based recovery will only start in late 2010. Probably it will mean weaker growth rates in quarter on quarter terms than during the second half of 2009.”
Q3
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Herbert Hainer ED cxo :25 June
SPORT
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Herbert Hainer ED cxo :25 June
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SURVIVAL OF THE
FITTEST Its iconic triumvirate of perfectly parallel stripes have been synonymous with sport for decades. But with profits tumbling in the year Adidas celebrates its 60th birthday, Chairman and CEO Herbert Hainer talks candidly about trimming the fat, beating archrival Nike into submission and why innovation is key to this sportswear giant’s future. By Julian Rogers and Adam Burns
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hen Barcelona FC’s playmaker Lionel Messi Messi is the latest in a long list of sports superstars to don ‘the put his side two-nil up in this May’s UEFA three stripes’ – stretching back to the early days when the company Champions League final you could say the was founded by the late Adolf (Adi) Dassler (Das). The bedrock of diminutive Argentinean tore up the celeDassler’s business strategy more than half a century ago, was to enbration rulebook. There was to be gage with the athletes and pick their brains in order to no acrobatic back flip, no belly-flop slide across the manufacture and refine performance-enhancing and turf and no John Travolta-esque hip wiggling comfortable sportswear. It’s an uncomplicated ideagainst the corner flag. Instead, in front of ology that has stood the test of time, according to 72,000 fans packed inside Rome’s Stadio Hainer. “Just a few months ago we re-launched Number of Olimpico, and millions watching around the the so-called Adi Dassler standards and we tried Adidas group world on TV, he removed one of his glossy to educate everybody to go the way he did it,” employees at the blue boots and pressed it against his lips in an Hainer reveals. “Adi Dassler spoke to the athend of 2008 actions-speak-louder-than-words seal of apletes when he brought in new and innovative proval. A few days earlier those very same F50i products and tried to make improvements. We boots were personally presented by Herbert Hainer to have to make the best products for the athletes and this Messi when he dropped by at Adidas HQ in is only possible if you are permanently in dialogue with the Herzogenaurach, Germany. Whether the kiss by arguably the athletes, if you listen to them and work together.” world’s finest player was impromptu or planned is irrelevant to Hainer, who joined the company as a sales director back in Adidas because the boot’s sales shot through the roof after 1987 before rising through the ranks to Chairman and CEO 14 years Barcelona’s victory. It was a marketing masterstroke. later, refrains from describing the Adi Dassler standards as a back-
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a tinge of annoyance in his voice. “We were not aggressive anymore, the processes were not harmonised and our lack of innovation was shining through.” Hainer says his remit in the top job was to “revolutionise” the company and the Adidas brand.
Restructuring As part of this transformation he offloaded mountain sports company Salomon, although Hainer opted to hang on to the TaylorMade golf brand. “Golf is a natural sport for Adidas,” Hainer explains. “We began 35 years ago when we made golf shoes for Bernhard Langer and for Sandy Lyle.” In 2005, USbased Reebok was aquired for €3.1 billion in order to strengthen the Adidas group and challenge Nike. Hainer also recognised that R&D was to be the cornerstone of the company’s future success. Eight years ago R&D, which employed 30 staff, operated with a management tier between itNumber of to-basics approach. Instead, he says it encapsulates that constant self and the board. So Hainer put measures in pairs of shoes strive to manufacture better and more innovative products for place to ensure they reported directly to the Adidas produces today’s sportsmen and sportswomen. This is especially true in head of marketing on the board. He also every year today’s competitive and fickle sports apparel market with trends ploughed more money into the research facility evaporating just as quickly as they emerge. Adidas and market leader and doubled the team to 60. “This showed the imporNike still battle to see who is top dog, although the likes of Puma – Adidas’ tance we gave to the R&D department within the organisadomestic rival – and specialist sportswear and equipment manufacturers are tion.” R&D was also divided into separate units – one facility in Germany and snapping at their heels. one in the US geared towards the lucrative American sports market. Ever since Hainer took control eight years ago he has refused to let the At his first press conference Hainer recalls how he placed a major emcompany rest on its laurels. The 55-year-old, who describes himself as agphasis on innovation. He vowed to release one innovative product every seagressive in business and impatient to get things done, pushes Adidas, which son – a completely new product and not just a change of colour. This produces 200 million pairs of shoes and 400 million items of apparel a year, pro-active approach to change and ambitious vision has made Adidas a difto perform like a lean, mean athlete. “In 2001 we had a great success story beferent animal. “I definitely do believe that we are today much faster,” he anhind us and four or five good years after the stock market flotation but we had nounces, “much more proactive in how we cater to the market, how we talk become a little bit too self-complacent, a bit too self-confident,” he recalls with to our consumers, how we bring products and concepts to market, as well as
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60 YEARS IN THE MAKING
1960s ‘Fringe sports’ like athletics see track and field stars donning the three stripes. Unconventional high jumper Dick Fosbury launches himself up and over in Adidas footwear
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Adidas is registered as a company, named after its founder: ‘Adi’ from Adolf and ‘Das’ from Dassler
Germany football team battle Hungary with a competitive advantage. They are wearing Adidas soccer boots that for the first time feature removable studs
Muhammad Ali and Joe Frazier face each other in the ‘Fight of the Century’. Both wear special boxing boots developed by Adi Dassler
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how fast we can react to certain trends. We are permanently bringing new, innovative products to the market, and I think this is one of the key success factors for us.” He also sees speed rather than the size of a company being a game winner: “It’s about being faster and not your size, otherwise the dinosaurs would be still alive and all the little animals dead. It’s the fastest one who will win the race.”
Uphill battle The dinosaurs eventually became extinct. In today’s marketplace it is very much a case of survival of the fittest since the economic global meltdown and subsequent recession. In August, Adidas reported a massive 95 percent plunge in profits as consumer spending dried up. Sales grew in the Americas but shrunk in Europe and Asia. It was a headline-grabbing downturn in fortunes for the sportswear titan but Hainer argues that this figure needs to be put into context, especially in the year succeeding the European football championships and the Beijing Olympic Games. He says higher manufacturing costs and devaluation of currencies like the Russian rouble, UK pound and Argentinean peso had an impact. Adidas also shelled out €100 million on restructuring measures. “Compared to the rest of the world and compared to other industries, I think we are still doing very well.” Adidas holds meetings with employees every six months to update them on developments, but during the downturn this has been stepped up to every quarter. Dialogue is paramount in this situation, Hainer discloses. “I want to keep communication with the people going because everyday they hear negative things in the news and then rumours start. If you don’t talk to people then you never know what kind of rumours they have just heard and you cannot correct them if they are wrong.” In a similar fashion to how he shaved expenditure and re-moulded the company in the first half of the decade, Hainer says the crisis opened up opportunities to again trim excess fat. “This crisis gives you a lot of chances to cut out the dead wood or cut out the fat that we gathered over the last eight years. When you are permanently running from one success to the next and from one successful or record year to the next, you are gaining fat. You are
1980s Adidas stars Ivan Lendl, Stefan Edberg and Steffi Graf play their way to the top of the world tennis rankings
not as aggressive anymore and you’re not as strict anymore on cost controlling and process improvement. So we took the opportunity to cut through, to change the way how we do business to a certain extent, to define new processes, to get faster, to get leaner and to get more efficient.” Shortly following the cataclysmic collapse of investment bank Lehman Brothers last year Hainer says he instigated a policy dubbed ‘divest and invest’. On the one hand they had to slash costs, such as putting a freeze on hiring, but continue to invest for the future, including the announcement of increased football sponsorship and investment in company ambassadors. “We have to do the hard and dirty work and to save costs and lose some people to make us leaner, but on the other hand we take this money and we invest it into the future of the company.” Adidas has dabbled in a bit of shopping too, picking up two small companies – Ashworth (golf apparel) and Textronics (chips and sensors). The
“There is still a lot of opportunity for us out there, be it individual categories or in certain regions of the world” latter will boost efforts to implement technology into products for runners and performance athletes. In these tough times Hainer, however, is quick to stress that Adidas won’t be cutting back on innovation and product development, especially with a lucrative football world cup in South Africa on the horizon. Indeed, Hainer describes the world cup products in the pipeline as “fantastic” because “football is in our DNA”.
Ideas factory The shift in emphasis toward the creative side has made a tangible difference to the Adidas products, even just on an aesthetic level, “It doesn’t help if the product is good but looks terrible,” he says. Of course, new durable and lighter materials are constantly improving products and, ultimately, the athlete’s performance. Take the humble football boot, for instance. Forty years ago it was a distinctly unattractive chunky black leather shoe with half a dozen studs pro-
2000s At the Sydney Olympic Games the most lasting impression is left by the Adidas Full Body Swimsuit, in which Ian Thorpe, Australia’s 17year-old national hero, wins three gold medals and sets four world records
1990s At the Olympic Games in Atlanta Adidas equips 6000 athletes from 33 countries. These competitors scoop 220 medals, including 70 golds. Apparel sales increase 50 percent
2009 Lionel Messi shows off his boot after scoring in the UEFA Champions League final, sending F50i sales into orbit
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truding from the sole. Today’s boots come in a wide array of colours, are fashioned from tough, lightweight synthetic materials and don’t absorb water like a roll of kitchen towel, à la the previous generation of boot. It probably explains why Messi was so keen to publicly smooch with his F50i. “A boot used to weigh around 400 grams but today it’s 200 grams, so it’s 50 percent lighter and, of course, if you don’t have to carry so much weight on your foot you can run faster or you can run longer,” says Hainer, a semi-professional footballer in his youth. “Today a football player runs 13 to 14 kilometres in a game but it was seven to eight kilometres 20 or 25 years ago. You can’t do it in 400-gram leather boot sucking in water. The new materials offer functionality, stability and cushioning.” Perhaps anticipating the next question, he’s quick to dispel the notion that sports equipment can magically transform a Sunday morning footballer into a professional. It’s the same with golf. “A new golf club cannot make an amateur a professional, but it definitely can improve the game of a normal golf player from a handicap of 25 down to handicap 15, because he has the ability to play better with the club.” Adidas strives to make sport easier and more fun by introducing groundbreaking products, a case in point being a golf driver released earlier this year – the R9 sporting an adjustable ankle. Within a week of hitting the shelves it was the highest selling driver on the marker. It’s a similar story with the Reebok EasyTone running shoe with its in-built balance pods that create instability, much like the feeling of walking on a sandy beach. EasyTone, which encourages toning in three areas of the wearer’s leg, has proved a huge hit with people looking to work out. “Therefore, in my opinion, innovation is the key to success,” the boss acknowledges. R&D at Adidas adopts short-term and long-term vision simultaneously. One part is dedicated to improving existing products or producing products for new seasons based on existing technologies; the other is about starting from scratch with less time pressures to find that next big thing. Being able to steal a march on the likes of Nike with a groundbreaking trainer, sweatshirt or football can prove invaluable in the tussle for su-
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Q. With your products being manufactured in India and Indonesia there is a perception Adidas is putting profits before the wellbeing of the workers. What’s your reaction to this accusation? Herbert Heiner. “We completely outsourced our production 15 years ago but this does not mean that we are losing responsibility for the production process and for the people who are working in the production facilities. Around 10 years ago we started to work in close cooperation with our suppliers to ensure that the people are treated well. We have a social and environmental department to take care of this, and we publish an annual report that clearly gives targets and objectives of what we want to achieve in cooperation with our suppliers. This ensures no child or forced labour, fair wages, sanitary installations and pregnant women are treated fairly and it puts a restriction on how many hours they work a week or per month. I do believe that we are one of the leaders in our industry, and I do believe that this is highly appreciated by the worker and by the consumer. I go out at least once a year for a tour of between seven and 10 days and visit the key suppliers in the Far East, talk to them, explain about new programmes, and ways we can improve. And I let our suppliers know as well what we are expecting from them.”
premacy. For example, Hainer notes how his company was the first to roll out the ‘intelligent’ trainer two years ago. The shoe could automatic adjust the cushioning by measuring the wearer’s weight and analysing the hardness of the ground. “Developments like that take longer,” he remarks. “It’s a complicated process to put a microchip into a shoe, ensure it works, and glue together different components like metal and polyurethane.” Whilst Adidas keeps a watchful eye on what the competition is up to in terms new products, technologies and sponsorships, the company’s priority
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Hainer on heritage: “Since we acquired Reebok we repositioned it after identifying that one of the key pillars for this brand was the women’s business. Reebok has an extremely good reputation with the female consumer and was the company that founded step aerobics 20 years ago, which created a completely new way of Adidas group fitness. So this is a heritage that Reebok has still has in the mind of a lot of consumers. concept stores and The first success that we already see with is focused solely on its own work and the brand. “First the new Reebok is the women’s category. factory and foremost, we look to ourselves, what our mission and We have a new shoe, EasyTone, which is where we want to be as a company in the future,” Hainer outlets the bestselling shoe in the industry at the says. “Of course, we monitor our competitors quite closely, moment. So, therefore, heritage can definitely and this is not only Nike; you have a lot of other competitors be a very positive tool to guide you into the future, who are good in several individual categories, so you have good runproviding you use it right.” ning brands, good tennis brands, good golf brands, and so on.” He adds: “If
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we have to adjust our strategy then we do it, but on the whole we stay in the direction that we think is right for our company and for our brand.” Not all products, though, are hot sellers, he admits with a chuckle. The company has hundreds of staff dedicated to marketing so Hainer chooses to keep his distance when judging whether a potential product will be a hit. “I’m far away from looking at every product and saying, ‘this is right or this is wrong, and this colour I do like or I don’t like this colour,’ because I’m not the target group. So most probably if I like it then it might be not too good for the market or the other way around. I give the responsibility to the experts and they can work in silence and I keep a distance.” Despite his reticence to get involved with product development, he recognises the importance of being seen as an inspirational figure for his staff. It also means practising what you preach. “As a CEO you are always a role model, whether you like it or you dislike it, because people look to you and follow whatever you do, good or bad.” Hainer offers up an example of this philosophy: “If as a CEO you talk permanently about sport and how people should be active but you don’t do any sport, then they will see it and they will not believe you, and this
applies to whatever you do. There is a saying in Germany, ‘The fish always thinks from the head,’ so your employees believe in what you make them do.” Perhaps unsurprisingly, Hainer is an advocate of team sports at Adidas – not just because it’s his industry but because it keeps in touch with his employees. “I play sport with our people, we play football and run together which gives you the feeling that you are one of them and they can tell me what’s going on in the company.” Aside from getting sweaty in competitive football matches with his staff, the pressing priority for this boss is to put the disappointing results of 2009 behind him and steer Adidas back into positive territory. This he hopes to achieve “as fast as possible” by exploiting new markets. “There is still a lot of opportunity for us out there, be it individual categories or in certain regions of the world. India will be one of the next big emerging markets and I see plenty of other growth potential for us in the years to come, which is what we are trying to harvest.” In the mean time the race for sportswear dominance continues to rage.
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BUSINESS INTELLIGENCE
Doing business the intelligent way Ovum analyst Helena Schwenk explains why BI remains a top priority for CIOs and how they can employ the technology as a recession-busting tool.
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T budgets are coming under increased scrutiny and pressure especially if the economic downturn continues. But, while a recession might well force companies to pull back on some IT investments, Ovum believes that any new initiatives will address specific business pain-points and offer quick and visible payback. BI fits into this category – focusing on key issues like securing and increasing revenue from profitable customers, rationalising and reducing operational costs, providing greater visibility into cross-selling opportunities and improving customer satisfaction. Hence, Ovum believes that BI will continue to rank among the top three priorities for CIOs this year.
as they realise the need to analyse their businesses and the market in order to boost revenue performance and to segment (profitable) customers more clearly. However, BI customers are also becoming increasingly cost-conscious. Companies are insisting they do more and more sophisticated types of BI with less money and IT staff. Ovum believes that’s a good thing – it will make BI more focused and efficient, which in turn has a better chance of returning tangible benefits. It will also continue to force BI vendors away from their traditional premium pricing models, resulting in broader adoption of BI beyond an elite group of executives and analysts to front-line business users.
Recession busting technology While many companies will instinctively use BI as a cost-cutting tool, smart companies will continue to invest in BI solutions to intelligently scale back operations and maximise efficiencies from business processes they already have in place. In a recession, BI allows companies to take a more calculated and informed approach to tightening their belts, making sure that any cost cutting measures don’t cut across their top business priorities or cut out the valuable Brazilian rosewood with the deadwood. Moreover, they will increasingly focus on using BI to maximise revenues, optimise operations and grasp new and lucrative business opportunities before their competitors do. While a recession might well force companies to pull back on some IT investments, there’s rarely any question of a BI project being pulled or cancelled due to a cut in costs. If anything, an economic downturn could in fact speed up its deployment from a piecemeal departmental deployment to deployment across the wider enterprise. Ovum expects the risk-averse fi nancial services sector to lead the charge in new BI projects over the coming year
New models As a result of the economic downturn customers are becoming more risk averse and are looking for more cost-effective ways of implementing BI. Th is will challenge traditional BI and data warehousing implementation approaches and put new development, deployment and packaging models like open source, soft ware-as-a-service (SaaS) and pre-packaged appliances on the radar screens of more BI customers in 2010, particularly SMBs. Additionally Microsoft’s market entry and BI strategy aim to make BI a commodity technology that customers will expect to implement easier and for a lot less than the complex, premium-priced solutions of the past. These are some of the key BI technology trends that are developing: Open source: Open source BI is still a fledgling market and its evolution is still a far cry from its evolution to free solutions that are advanced by the developer community around the globe. However, it is no coincidence that Linux is now the fastest growing platform for new
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BI projects. The continued interest in open source BI in 2009 is a clear counter-reaction against the market dominance of a few vendors due to consolidation. Open source BI pioneers like JasperSoft and Pentaho, which were once considered temporary illegal aliens in the BI market, are establishing themselves as permanent residents, getting funding, issuing new code releases and starting to win over larger non-traditional enterprise customers. Economic forces are also playing directly to open source, particularly for first-time BI buyers. These companies are looking for a cost-effective way to deploy BI without having to fork out a heft y upfront fee for a packaged commercial offering. First-time open source implementations will always be prototypes. But if successful they will evolve into fully productive BI systems that are backed by commercially licensed support services from open source BI vendors. SaaS BI: providing BI as a hosted online service – is gaining increased market acceptance, especially among smaller, costconscious businesses. 2010 will be a decisive make-or-break year for SaaS BI adoption, especially as seemingly similar cloud infrastructure models start to take root. Most of the early adoption thus far has been among SMBs or departments of large organisations. The real test for SaaS BI will be to break into the enterprise market. When SaaS starts to uproot complex enterprise applications, including BI, it will truly have broken into the mainstream. 2009 is probably too early for that to happen. But vendors will start to demonstrate how a small and simple SaaS solution can quickly kick-start an actionable enterprisewide BI strategy without having to undergo a big and complex customised enterprise data warehouse (EDW) project fi rst. In large enterprises, Ovum expects these SaaS deployments to proliferate by fi rst complementing existing BI tools, applications and infrastructure. Ultimately any spike of SaaS BI adoption rests on the success of SaaS’s poster-child application, namely Salesforce and whether it can withstand the economic pressures being put on its slim margins model. However, Ovum expects at least one major breakthrough this year – the on-demand model will also (fi nally) enable BI vendors and partner channels to offer functionally focused or vertically oriented analytic solutions, without the pain of conventional BI deployment approaches. Ovum believes there is an untapped opportunity for vendors to offer vertically focused SaaS that can
Helena Schwenk is a Senior Analyst within Ovum’s software application team and is based in the UK. She has over 15 years’ experience working within the IT industry as both an analyst and IT practitioner. Her areas of focus include business Intelligence, performance management and data warehousing. Schwenk holds a BA (Hons) in Computing and Information Systems.
quickly plug skill-gaps in organisations that are restricting them from doing specialised and advanced analytics like pipeline analysis, predictive analysis and fraud loss prevention. BI in the cloud will also ride on the coattails of steady SaaS BI adoption. Even though the definition of cloud computing continues to shift like the clouds in the skies, the notion of hosting BI infrastructure and using BI services will start to gain the attention of CIOs and IT directors. Much of that is due to the noise that major cloud platform players – Google, Microsoft, Amazon, Salesforce.com and others – have made in 2008. Application form factors: The emergence of new competition from influential vendors like IBM, Oracle, HP, Microsoft and Teradata is helping to reinforce the value of data warehouse appliances and is bringing it into the BI mainstream as an alternative model. The appliance form factor – which gives companies the operational ability to plug and play BI technology without wasting time and money on assembling the hardware and soft ware infrastructure – is catching on fast and threatens to break the traditionally high price-entry barriers for BI. Significantly, it offers mid-sized firms a chance to engage in complex and high-end BI, which can be deployed at a fraction of the cost and time compared to traditional enterprise data warehousing. In the coming year, Ovum expects more BI tools and applications will be increasingly bundled with data warehouse appliances. More data warehouse vendors will also pre-integrate BI tools and applications – either their own and/ or those of their partners – into their appliance bundles. These data warehouse/BI appliances will also be increasingly tailored, packaged and priced for specific vertical market segments and even specific functional applications.
“In a recession, BI allows companies to take a more calculated and informed approach to tightening their belts”
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EXECUTIVE INTERVIEW
Turning data to your advantage Gerhard Rumpff on how analytic warehousing is the pre-requisite for successful business intelligence (BI). Why is BI becoming more and more mission-critical for companies of all sizes and industries? Gerhard Rumpff. BI has become a critical factor in the decision-making process of today’s business world. During difficult economic times like at present, it is essential that executives and managers have all the information at their disposal to make the right decisions. On top of the challenges brought about by the current economic crisis, businesses are further challenged by constantly increasing data volumes and shorter planning and decision-making cycles. It is becoming very apparent that companies which are able to deploy BI to all levels of the company and to as many employees as possible reap the biggest benefits. However, a recent survey conducted by the Business Application Research Centre (BARC) shows that only eight percent of employees at organisations that have deployed BI solutions are actually able to use it. What are the major hurdles facing companies when implementing business BI systems? GR. Given the business and economic challenges most companies are ill-equipped to get the best out of their BI solutions’ so called front-ends. Although most front-ends can be deployed relatively quickly and easily the challenges actually start when it comes to ‘connecting’ the BI-solution to the existing database system, the so-called back-end. To extract information from large, fast-growing databases and deliver it to the BI frontends has become a huge challenge for companies. This is the kind of situation we typically find: data needed for analysis is provided by a database or a data warehouse and one or several of a variety of analytical tools are used to query the data and visualise the required ‘intelligence’. Users enter their query and what frequently happens is that they don’t get the answer they need in the time they need it. The BARC survey also shows that over 20 percent of BI users are dissatisfied with the query performance. And the number of dissatisfied users is increasing all the time. Why is analytic (data) warehousing fundamental to successful operational enterprise BI? GR. Operational BI is all about gaining a significant competitive advantage. In other words, pushing the right information in real-time to the people who drive the business and who are the decision-makers. And this applies pretty much to all Industries. For example, the real test for best practice BI is making information available to the people when they are in front of the customer. Implementing operational BI requires a data
warehousing solution that can deliver real-time data to the analytical or business intelligence front-ends. How should companies approach selecting and implementing an analytic warehouse? GR. For all companies that have recognised the importance of operational BI and want to get the most out of their BI front-end, I recommend that they select and implement a true analytic data warehouse. Fortunately, analytic warehousing technology has progressed significantly in recent years and there are a number of vendors that can provide such necessary functionality, Exasol being one of them.
“Operational BI is all about gaining a significant competitive advantage. In other words, pushing the right information in realtime to the people who drive the business and who are the decision-makers” The major criteria when selecting the right analytic warehouse are: • The product has been developed specifically for complex or real-time analytics • It is easy to implement and integrate into your existing environment • It can provide inherent high availability • Requires no or very little administration • Offers low total cost of ownership (TCO). • And finally, ‘test drive’ it with your own data. With EXASolution, the customer knows that he is getting a proven and tested analytic warehouse which fulfi lls all these criteria. It is an undisputed fact that our customers have achieved significant performance increases (50 to 80 times faster) and cost reductions (up to 85 percent) after implementing our solution. Gerhard Rumpff is CEO at EXASOL AG. He is a 25-year veteran of the software industry and prior to taking over as CEO at EXASOL in 2008, Rumpff was CEO of asknet AG. asknet is one of the leading providers of global e-commerce solutions for software distribution via the internet.
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GAMING SECURITY
With the threats from hackers to high profile websites becoming ever-more prevalent, we catch up with Oliver Eckel, Head of Corporate Security at Austrian-based online betting site bwin, which processes 70,000 transactions a day. How do you strive to keep transactions safe and secure from hackers when just one security breach can have a serious effect on the business’ integrity, along with damage to reputation? And does being such a highprofile company increase your chances of being targeted? Oliver Eckel. Online gaming is all about being high profile. The brand and the reputation are very important in our industry. On the one hand our profile perhaps increases the chances of being targeted, as the first gaming company that comes to a hacker’s mind is probably bwin. Then again, due to our size, we are in a position to invest more money and effort into securing our systems. bwin operates under a detailed, rigorous information security policy designed to protect the integrity and confidentiality of our financial transactions. Security measures include, but are not limited to, the implementation of stateof-the-art anti-virus protection on all computers, sophisticated firewalls to block unauthorised access to the bwin network, intrusion detection systems to spot suspicious behaviour and highly secure encryption systems to ensure that transmitted and stored information remains confidential. In order to en-
sure the integrity of our systems, all changes are managed and need to be approved. Additionally, periodic audits of infrastructure, application and access rights are performed to ensure that systems are secure. For our source code audits, we use Fortify to make sure that potential vulnerabilities in the developed software are identified and fixed before deployment. A few years ago many of the major betting companies, mostly in the UK, were bombarded by ongoing Denial of Service (DoS) attacks that crippled their websites. The hackers said they would stop the DoS threats in return for hefty ransoms. Was bwin affected by this and would you ever give into ransom demands like this? OE. Occasionally, bwin is the target of DoS attacks. However, giving into ransom demands would mean that bwin is not able to set efficient countermeasures and doesn’t have the necessary controls in place, which is definitely not the case. As part of bwin’s risk management strategy, a layered defence strategy was adopted to mitigate the effects of service degradation pertaining to types of DoS attacks on applications, platforms and network service infrastructure. Dynamic monitoring allows automated spotting and analysing of anomalies, whereas in case of a DoS detection defensive measures are activated. Applications and infrastructure are regularly audited to detect systems prone to DoS attacks so that potential vulnerabilities can be fixed before they can be exploited. Redundant systems and load balancers increase reliability and availability to act as a buffer in case of successful DoS on single machines.
PLACE YOUR BETS NOW
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What would you say are the biggest challenges that you face as Head of Corporate Security? Is following strict compliance regulations one of them? OE. Assuring compliance is certainly one of the main challenges for me as Head of Corporate Security, as it includes more or less all other security-related challenges. As an international online gaming operator, bwin is subject to a wide range of laws, standards and regulations. Therefore, compliance assurance is a major factor of our business continuity management. If we were to fail to comply with the requirements of our gaming licenses for example, we would be out of business in no time. Beside the regulatory requirements, we are also striving to comply with various industry and governance best practice standards and frameworks. This is extremely important for the development of our organisation. It helps us to raise the maturity of our processes and therefore improve the quality of our services, which gives us the edge over our competitors in an extremely dynamic market. On top of that, assuring compliance with several security standards, such as PCI DSS or ISO 27001, makes my life as Head of Corporate Security a whole lot easier, as I can rely on state-of-the-art security measures and processes being in place. So even the operational side and the daily security business is directly linked to our compliance efforts. Sometimes the most serious security threat you face is from within. How do you go about trying to prevent a rogue employee from stealing customer information or leaving bwin offices with confidential data possibly stored on a small memory stick? OE. There is no doubt that the highest security risks for organisations can be internal ones, not external ones. Our strategy is to prevent data theft from happening in the first place. We use state of the art access right audit tools and our back office application logs relevant events. Log files are collected and evaluated centrally by Corporate Security. Our dedicated Data Protection Officer ensures that access to data is kept to a need-to-know basis. Security awareness is constantly raised and everyone with access to sensitive data is in-
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formed about the consequences of a potential disclosure. With all these measures in place, we are confident that data theft at bwin is unlikely. In general, we feel that we are also handling the soft factor of data theft prevention well. So why are people tempted to steal data? Well, most of the time, they are unhappy with their job or their employer. At bwin, employees feel that each and every one is contributing to the big picture, which is nothing less than the best online gaming platform in the world. We have lots of teambuilding events and there’s definitely a strong spirit within our organisation. You have signed a deal with Fortify Software. How will it strengthen your security? OE. We wanted to emphasise security awareness within the development department to make it a top priority. But we were aware that technology alone wouldn’t guarantee security. Other factors such as training and metrics were required, too. A concerted effort to introduce security procedures and technology at the earliest possible phase of development and throughout the lifecycle of the application helped us identify and fix security vulnerabilities at the very beginning of the software development lifecycle. The integration of Fortify into the software development process helps to actively manage application security risk. As for PCI-DSS compliance, the automated scans and the reports generated by Fortify are crucial for passing the strict audits. Compliance, especially compliance with PCI-DSS, is a complex task and the more support you can get by deploying tools, the easier it gets. The most important benefit from deploying Fortify, however, is the general improvement of the development process with regard to security. Installing, deploying and dealing with Fortify’s results helps the company see application security in a new way. Development systematically weeds out vulnerabilities and executives receive detailed risk reports on a regular basis. Security is now a part of our corporate DNA like never before. Ultimately, bwin is able to deliver highly secure applications to our customers, which is critical in our business. n
Escrow Ad.indd 1
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NEXT BIG THING
Treat your apps better Kirby Wadsworth outlines the importance of the application delivery controller (ADC).
D
o you want to do the Th is, clearly, is a networking function. Innobest by your applicavation in the area – now over a decade old – tions? The question focused initially on inbound traffic issues like has some important session persistence and SSL offload. implications. ApplicaLater, attention focused on outbound tions are the lifeblood traffic too by improving the performance and of your business. It’s critical that delivery of security of applications on the network. At applications is optimised in order that user this point, the term ADC was coined by the experience is maintained at a suitably high industry analysts Gartner. What started out level. Today this is accomplished through as a network technology became something the use of an ADC. Th ink of an ADC as the that touched the server, application, security equivalent of an intelligent and operations functions as switchboard within the netwell as the networking team. work. The ADC understands ADCs, such as F5’s marketthe content of communicaleading BIG-IP, are currently tions and is able to manage it in place within many orappropriately – routing your ganisations. When upgrade best customers to your fastcycles or infrastructure est servers, for instance, or requirements dictated that blocking unwanted intruders their server load balancer from accessing sensitive apwas to be replaced, compaplications. nies often bought a replaceToday’s application dement which has tended to be livery controllers grew from some form of ADC. What Kirby Wadsworth, Vice President of server load balancers and now they got, then, was a device Global Marketing at F5 Networks, has over 25 years’ experience offer a wide variety of functhat performed server load developing and implementing tions and services beyond balancing, but was capable breakthrough strategies for emerging and established load balancing. The original of much more. Does this companies. He has played a key role in several significant data storage load balancers resulted from matter? Few organisations industry transformations and is a specific need: to distribute utilise the full capabilities a frequent speaker at industry conferences and events, as well as load across multiple servers of each and every one of a contributing author to numerous publications. sharing responsibility for their purchases, soft ware or delivering a web application. hardware. Which end-user
uses every application that makes up Microsoft Office? But properly optimising and securing application traffic matters a great deal. ADC platforms sit in a critically important position in the data centre. ADCs provide a real-time view, across all applications of resource requirements and data flows and patterns. They are a critical and strategic point of control in the data centre. Our customers often tell us that their business simply could not operate without the presence of application delivery controllers. Web 2.0, virtualisation, the need to reduce power usage within data centres, cloud computing – these approaches, imperatives and technologies all place increased strain on the infrastructure. Without techniques to manage bandwidth, increase security, mitigate latency and reduce round trips, they are almost certainly going to be challenging to implement effectively. Technologies to address these issues are in place and proven within the best ADCs. They can reduce the number of required servers, provide control mechanisms to assist in data centre virtualisation, and reduce power and cooling requirements. The best ADCs are customisable by the individual end-user as well – programmatic interfaces and rules can be used to customise traffic based on specific needs, avoiding the need for application re-engineering. However, effective deployment of an ADC requires that various silos within an organisational IT team interact with each other. Breaking down these intra-function communication barriers often requires cultural shifts. Incremental investment in properly deploying ADCs, whether that involves buying the first one or switching on unused functionality and working cross-functionally to properly use it, should be easily covered by the fully leveraged ADC’s benefits: improved IT flexibility, faster response to business challenges, reduced server and bandwidth use, improved availability, and much better end-user experience and thus higher productivity. Ownership of the ADC can also be highly rewarding for top-performing individuals. People with strong networking, application and communication skills can use responsibility for application delivery to break down functional walls and thus benefit the whole organisation. If the ADC is treated like the strategic platform it should be, measurable rewards are guaranteed.
60 www.cxo.eu.com
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IT SECURITY
The
big
question
Senior IT professionals from 1900 organisations in over 60 countries were interviewed for Ernst & Young’s 2009 Global Information Security Survey. Here CXO reports the survey’s main findings and the pressures currently being faced by IT security managers.
H
ow do you protect your organisation’s brand and reputation in an environment of change? How do you identify and manage new risks? How do you overcome increasing challenges to deliver an effective information security programme? How do you comply with new regulations and industry requirements? These are just some of the questions that information security leaders are struggling with – and must find answers to – if they are going to outpace change and protect their organisation’s most critical information assets. Over the last year, we have witnessed a global economic downturn become a crisis for many countries and many organisations and we have seen the competitive landscape drastically altered for many industries. Although there are signs of economic recovery, the impact of these difficult times will continue to be felt by many companies as they reshape, restructure and reinvent themselves.
Information security leaders are facing considerable challenges as a result of the current environment. It would be naive to think that information security has not also been impacted by economic pressures; the need to reduce costs and provide more results from investments already made extends to all areas of the enterprise, including the information security function. To support this statement, there is evidence from our survey that many more organisations are struggling with a lack of skilled and trained information security resources. Our survey respondents are also reporting that finding adequate budget for information security is a major challenge for the coming year. These are clear indicators that information security is not immune to external economic forces and must find ways to improve efficiency and effectiveness while keeping spending to a minimum. The current environment is also producing a rise in both internal and external threats. Our survey participants reveal a growing concern with reprisals from recently separated employees as well as noting an increase in external attacks on their company websites and networks. Regulatory compliance is also top of mind for information security leaders, and our survey confi rms that it continues to be an important driver of information security improvements. Several industries and countries are moving toward more regulation, primarily related to data protection and privacy. Correspondingly, companies are reporting an increase in the cost of compliance as the complexity and the number of regulations also increases. In this 12th annual global information
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Survey Results Compared to the previous year, does your organisation plan to spend more, less or relatively the same amount over the next year for the following activities? 39%
50%
Improving information security risk management Implementing or improving DLP technologies and processes
41%
Implementing virtualization technologies
39%
Internal security awareness and training
32%
5% 5%
42%
36%
Risk management
5% 6%
47%
43%
8%
9%
49%
7% 5%
54%
4% 6% 8% 5%
55%
Performing security testing
30%
56%
6% 8%
Implementing or improving secure development processes
28%
57%
7%
Implementing or improving IAM technologies and processes
28%
60%
Regulatory compliance
58%
20%
Staffing
17%
Implementing other technologies
14%
Forensics/fraud support
14%
Outsourcing of security functions
9%
8%
16%
6%
39%
5%
39%
9%
67% 59%
10%
18%
Same or constant
Spend more
8%
6% 6%
59%
24%
Implementing standards
9%
Not answered
Spend less
Has your organisation implemented an information security management system (ISMS) that covers the overall management of information security? 8%
Yes, implemented and formally certified Yes, without certification objective
19% 17%
Yes, currently in the process of implementing No, but considering it
32% 24%
No, and not considering it
What is the level of challenge related to effectively delivering your organisation’s information security initiatives for each of the following? Availability of resources Adequate budget Organizational awareness Assessing new threats and vulnerabilities
36%
20%
31%
19%
11%
23%
Business uncertainty
12%
21%
Understanding emerging technologies 5% Management sponsorship
8%
19%
Significant challenge
31%
23% 25%
25%
3
2
7%
23%
35%
4
5%
19%
20%
29%
7%
14%
20%
27%
22%
22%
14%
36%
23%
5%
11%
33%
29%
9%
8%
29%
35%
13%
Organizational change
Regulatory change or uncertainty
28%
security survey we take a closer look at how organisations are specifically addressing the changing environment, including the risks, challenges, increasing regulatory requirements and new technologies.
20%
16% 13%
19%
Not a challenge
Managing risks In the last several years, we have seen a shift in the way technology is being deployed to support the flow of information. The increasingly mobile and global workforce, coupled with the rapid adoption of broadband and over-the-air technologies, has changed the way many organisations use technology and information. As a result, it has expanded or perhaps even eliminated the traditional borders of the organisation and the conventional digital perimeter paradigm. Organisations must now adjust their information security risk management approach – from ‘keeping the bad guys out’ to protecting information no matter where it resides. We consider this to be a more ‘information-centric’ view of security and a more effective approach. Not surprisingly, improving information security risk management was the top security priority for our survey participants, with 50 percent of respondents indicating that they plan to spend more and 39 percent planning to spend relatively the same amount on this initiative over the next year. In addition to the technology shift , the current economic environment is fuelling an increase in the number of threats organisations are facing. The increase is driven not only from external sources – our survey found that 41 percent of respondents noted an increase in external attacks – but also from within the organisation: 25 percent of respondents witnessed an increase in internal attacks, and 13 percent reported an increase in internally perpetrated fraud. A structured and repeatable risk management approach is the core element of an information security management system (ISMS). It is also the approach chosen by a majority of companies to address their information security risks. Our survey results show that 44 percent of respondents currently have an ISMS in place or are in the process of implementing one, with another 32 percent considering an ISMS solution. Information security standards are also playing an increasingly
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important role in shaping the ISMS for many organisations. Although only eight percent of respondents have achieved formal certification, 36 percent of respondents indicated that they are using the ISO/IEC 27001:2005 security standard as the basis for their ISMS. Standards can provide organisations with a set of leading practices related to information security risk management and are a logical starting point in developing an effective and comprehensive ISMS.
“Information security leaders are facing considerable challenges as a result of the current environment. It would be naive to think that information security has not also been impacted by economic pressures” In 2009, the primary challenge to effectively delivering information security was the lack of appropriate resources, with 56 percent of respondents ranking this as a high or significant challenge; this is an increase of eight percentage points compared to our 2008 survey results (48 percent). In somewhat of a contradiction, our respondents indicated that the two leading areas for reducing spending over the coming 12 months will be for outsourcing services (18 percent) and in-house staffing (16 percent). It appears that although organisations recognise the availability of resources to be their most significant challenge, only 20 percent of respondents plan to hire more in-house resources and only 14 percent plan to spend more on outsourcing to help alleviate this issue. Allocating adequate budgets to information security continues to be a challenge in 2009, with a total of 50 percent of respondents ranking this as a high or significant challenge; this is a very notable increase of 17 percentage points over 2008 (33 percent). Th is is also particularly interesting in light of the fact that 40 percent of respondents indicated that they planned to increase their annual investment in information security as a percentage of total expenditures, and 52 percent planned on maintaining the same level of spending. The survey results clearly show that information security budgets are not being significantly reduced, nor is the security function being asked to take on more responsibility than in previous years. So why do organisations continue to struggle to fi nd adequate security budgets? One contributing factor may be that 44 percent of the organisations that participated in the survey still don’t have a documented information security strategy. In the absence of a well-thought-out information security strategy, it will continue to be difficult to articulate and build the business case for an appropriate budget allocation, particularly in today’s economic climate. The lack of a cohesive strategy also makes it difficult to prioritise spending decisions and to ensure that scarce resources are being allocated to where they will provide the most benefit. It is more important than ever for organisations to develop comprehensive, risk-based security strategies, prioritising spend based on the value of the assets at risk, both in order to justify budget requests and to make sure that they are getting maximum benefit out of those budgets.
It has long been generally accepted that authorised users and employees pose the greatest security threat to an organisation and that raising and maintaining the awareness level of those people is a crucial part of an effective information security strategy. In spite of this knowledge, this remains a significant challenge and a significant issue for many organisations. While most organisations (74 percent) have a security awareness programme, less than half of all respondents indicated that their programme includes such things as: updates and alerts on current threats (44 percent), informational updates on new hot topics (42 percent), specific awareness activities for high-risk groups such as social networking users (35 percent). Furthermore, only 20 percent of respondents indicated that they measure the effectiveness of their awareness programmes and modify those programmes based on the results. Given that the challenge associated with organisational security awareness has not been reduced over time, it can be concluded that many current security training and awareness programmes are not working as well as they could be. It should also be noted that 73 percent of respondents have no plans to outsource their security training and awareness programmes. Yet, when we look closer at the 12 percent of respondents who currently outsource this activity, we fi nd that organisational awareness is less likely to be a significant challenge. In fact, it does not make it into the top three challenges for these organisations. Th is may illustrate the fact that more organisations should begin to look for outside help to design, execute, monitor and (or) measure the effectiveness of their security training and awareness programmes. Regulatory compliance continues to be one of the top priorities for organisations and an important objective of the information security function. When asked about the importance of specific information security activities, 46 percent of respondents indicated that achieving compliance with regulations was very important with an additional 31 percent considering it important. Th is is not surprising, given the considerable attention and focus on compliance efforts over the last several years by most organisations. When we asked how much companies were spending on compliance efforts, we found that 55 percent of respondents indicated that regulatory compliance costs were accounting for moderate to significant increases in their overall information security costs. While this number is down from 65 percent for the preceding three years, only five percent of respondents plan on spending less over the next 12 months on regulatory compliance. Th is may be an indication that organisations are spending too much of their security budgets on demonstrating point-in-time compliance as opposed to implementing a comprehensive information security programme where compliance is a by-product and not the primary driver. The point is further supported by the fact that only 36 percent of our survey respondents have deployed a solution for continuous monitoring of security controls. Moving to a more risk-driven security programme and leveraging continuous compliance monitoring technologies may allow organisations to reduce the amount they spend on demonstrating compliance and either reduce their overall security investment or focus it on more value-added information security services. Data protection and privacy are key components of regulatory compliance and are gaining more attention from governments and
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STARFACE AD.indd 1
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regulators. The number and complexity of privacy-related regulations is increasing; yet, 68 percent of respondents stated that they have a clear understanding of the privacy laws and regulations that may impact their organisations. In addition, 63 percent of respondents indicated that they include privacy requirements in contracts with external partners, vendors and contractors. Although it is encouraging that companies are recognising their privacy requirements, it is also clear that far too few organisations have taken the necessary steps to protect personal information. Only 32 percent of respondents have produced an inventory of information assets covered by privacy requirements, and an even fewer number (26 percent) have conducted an assessment of the personal data life cycle (gathering, using, storing and disposing). Our 2009 survey shows that companies and information security leaders are facing an environment of change; escalating levels of risk, new challenges and increasing regulatory complexity are now driving information security decisions. Companies are also struggling to leverage new technologies – to get the most benefit and cost savings possible – while understanding the potential security impact to the organisation. Our survey also revealed that many organisations continue to be challenged by a lack of skilled information security resources and inadequate budgets. These challenges have been identified in our previous surveys, but this year, they have become more significant, driven by heightened economic uncertainty. To address the risks and challenges of the changing environment, information security leaders are abandoning the old paradigms and taking a more information-centric view of security. It is a more flexible, risk-based approach that is focused on protecting the organisation’s critical information, and more suited to supporting a connected business model and today’s increasingly mobile and global workforce. By leveraging the information in this survey and taking action on the suggestions for improvement, organisations can achieve more effective information security and continue to outpace change. Visit www.ey.com/lessons-from-change to learn more about Ernst & Young’s recent research and the resulting eight performance goals that companies are, or should be, adopting to prepare for the rebound.
Survey Results Does your organisation have a documented information security strategy for the next one to three years?
44% Yes 56%
No
What elements are currently covered in your organisation’s security awareness programme? Improving information security risk management
39%
Internal security awareness and training Risk management
32%
Implementing or improving IAM technologies and processes Regulatory compliance Implementing standards
55%
20%
Implementing other technologies
17%
Very important
8%
4
3
24%
6%
16% 5%
8% 6%
6% 9%
39%
8%
7%
60%
58%
5%
6%
59%
24%
5% 6%
8%
57%
28%
Staffing
7%
56%
28%
8%
4%
54%
30%
5%
9%
49%
36%
Performing security testing
5%
42%
41%
6%
5%
47%
43%
Implementing virtualisation technologies
Implementing or improving secure development processes
39%
50%
Implementing or improving DLP technologies and processes
39%
17%
2
Not important
Which of the following statements can be made by your organisation regarding privacy? We have a clear understanding of the privacy laws and regulations that may impact the organisation
68%
We have included privacy requirements in contracts with external partners, vendors and contractors
63%
We have implemented specific controls to protect personal information
59%
We have established a response and management process specific to privacy-related incidents
34%
We have produced an inventory of information assets covered by privacy requirements We have implemented a process to monitor and maintain privacy-related controls We have conducted an assessment of the personal data life cycle
32%
29%
26%
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EXECUTIVE INTERVIEW
Trimming the fat 10ZiG Technology’s Martin Pladgeman discusses the role of virtualisation and the migration to thin clients in business today. Cost is obviously a key area for consideration for desktop virtualisation. What is your advice for companies finding it hard to calculate the cost benefits of virtualisation? Martin Pladgeman. The cost benefits of desktop virtualisation include the savings found by managing desktops centrally therefore decreasing upgrade, support and maintenance costs, the reduction in energy consumption, and long-term hardware savings. These benefits are significant, but calculating them is certainly not cut and dry. I recommend that companies looking to adopt virtual desktops reach out to desktop virtualisation vendors for insight on what to expect based on their specific plans and requirements. Often these vendors have information from customers who have already gone down this path. Many vendors offer resources like whitepapers and ROI calculators on their website, which help with both calculating the actual cost and the cost savings. Here’s an example of a savings calculator: Quest Solutions’ ROI Calculator www.vworkspace.com/ROI-analysis.aspx Does desktop virtualisation offer the potential for enhanced enterprise agility and what benefits does it offer in this regard? MP. Virtual desktops offer cost savings in addition to increasing productivity, enhancing security and providing easier management across the enterprise. With centralised management, deployment of new soft ware and the ability to clone and patch is very simple allowing companies to take advantage of new features, quickly giving them a competitive edge. What effect, if any, has the economic downturn had on the adoption of this technology and ways of working? MP. Most companies in this economy are looking hard at any purchase. More research and thought is going into purchases to determine the ROI. The advantages of desktop virtualisation are that it offers a fairly quick ROI, therefore we find that companies are still pressing ahead with these types of deployments. There are also many companies conducting their testing now so that they are ready to proceed when the time comes. I expect that we’ll see many companies adopting desktop virtualisation in 2010. What are the common misconceptions that still exist today with virtualisation? MP. There’s a misconception that desktop virtualisation is expensive. Many compare the price per virtual desktop
versus what they are currently spending per desktop, but that doesn’t factor in the cost savings found with the reduction in energy consumption, long-term hardware savings, savings found by managing the desktops centrally, etc. Calculations typically include the cost for all new thin clients to replace current PCs, but that’s not always necessary right away. We offer soft ware, Th in Desktop, which repurposes old PCs into thin clients. Th is allows customers to save money and leverage their existing infrastructure while benefiting from a standard user interface, centralised management and increased security. With soft ware like this, companies can replace their PCs with thin clients when they are ready. After moving to thin clients, customers will realise significant long-term savings with their new hardware because thin clients have no moving parts therefore they typically last twice as long as a PC. In your opinion what does the future hold for virtualisation? MP. Clearly new technologies are coming to the forefront like PCoIP, RDP7, RGS, Ericom Blaze, and so on. Th is will offer improved performance for desktop users over WAN and LAN connections and the promise of graphics performance close to a PC. With the management benefits and now the performance enhancements it’s clear that thin clients are the end device of choice, providing companies with low power consumption, no moving parts, locked down security and easy deployment. It is difficult to see why any environmentally aware company with a VDI deployment would continue to purchase PCs. I believe within the next couple of years we’ll see a significant increase in desktop virtualisation and thin client deployments.
Martin Pladgeman is President of 10ZiG Technology, a leading developer of enterprise-class thin clients. He is a VMware certified professional and expert in the field of desktop virtualisation. 10ZiG offers a wide range of thin client hardware including thin clients optimised for virtual desktops. For more information, visit www.10zig.com
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INDUSTRY INSIGHT
Standing on a whale, fishing for minnows J. Tyler Rohrer highlights the technical advances in the PC market over the years to illustrate the benefits of desktop virtualisation.
I
have spent the better part of the past three years as an evangelist for the business and technical merits of virtual desktop infrastructure (VDI), as well as all of the associated hosted, streamed, ‘hypervised’, abstracted and delivered methods those three letters stand for these days. Recently reading a document regarding Windows 7 migration, it dawned on me why exactly we are all so fascinated with new desktop strategies. Here is my manifesto.
VDI benefits What is the primary driver for VDI? CAPEX savings? No, this driver will convince you to pay more I am betting. OPEX savings? No, soft costs are cool, but there is more. Agility? Important, but no. Central management? A bonus, but no. Security? Really important, but no. Buy your own PC? Cool, but no. Business continuity? Again, valuable, but no. Roll the clock back to 1977. Everyone is sitting at their nice and stable US$299 IBM Selectra typewriter, typing away, writing memos, putting them in bins, folding them into envelopes, and moving information around quite well. The typewriter not only cost a few hundred dollars, it only needed one SKU to support it and give or take a ribbon cartridge, hardly ever broke, and did the job perfectly, lasting for years. A sales person comes in one day, and says, “I have a new thing for you. It costs US$2999, needs about 20 SKUs to support it, and you’re going to have to hire a bunch of people to learn how to work the soft ware and stuff needed to keep it working. It breaks a lot too. When it does, you may not know what actually happened, it will last about three years, then I will be back to sell you a new one and then your users will have to start from scratch. We call it a Personal Computer, or PC. How many would you like to buy?”
The salesperson leaves, we think that this PC thing may suit some users, but gosh, at that CAPEX versus what I pay now, I just can’t justify it. Oh, and this is all taking place during the oil crisis, during horrible economic times. Yet within five years, almost every single typewriter on the planet was ripped out, and replaced with this new thing, the PC. It’s now 2009. We have US$299 PCs, and a sales person comes in and says, “I have this new thing for you. I won’t be able to match the CAPEX you spend now, I believe I can lower OPEX and I believe my technology leads to security, agility, easier management, disaster resiliency, and a host of other good things. Applications may get easier to use, you may be able to buy less of some stuff, but probably more of others. My solution comes in a million flavours, can be complex to configure, defi nitely will not work for everyone, is new, and ultimately may lead to your cloud dream fulfi lment. We call it VDI. How many would you like to buy?” The salesperson leaves, we think maybe for some users, but gosh, at that CAPEX versus what I pay now, I just can’t justify it. Oh, and this is all taking place during the fi nancial crisis, during horrible economic times. And within five years, almost every single PC on the planet could be replaced by this new thing, VDI. Why did we migrate away from the typewriter, to the PC, and why will we migrate to VDI? For one reason, and one reason only – productivity.
“Why did we migrate away from the typewriter, to the PC, and why will we migrate to VDI? For one reason, and one reason only – productivity” The current debate has me thinking we are “standing on a whale, fishing for minnows”. VDI is not about CAPEX. VDI is not about OPEX. Those are nice benchmarks to pass smile tests. VDI is about potential productivity. What would you pay for that?
J. Tyler Rohrer, COO and founder of Liquidware Labs Inc., was a partner at FOEDUS, a successful consulting organisation that was acquired by VMware in 2008. As an evangelist of VDI, Rohrer is a regular contributor to industry forums, and speaks nationally on topics such as application and desktop virtualisation. He has extensive knowledge and experience of VDI.
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TECHNOLOGY FOCUS
On cloud nine The buzz around cloud technology is reaching fever pitch with both multinationals and SMBs embracing its potential. But is it the future of computing or just a flash in the pan? CXO’s Youssef El Kardouri puts his head in the clouds and takes a closer look.
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ith cloud computing promising so much for organisations it is little wonder that the technology is on the lips of most IT chiefs and tech vendors. For those of you marooned on a desert island for the past few years, this means that computing will increasingly be available as a service over the internet. Your documents, email and multimedia will be held online in a virtual cloud and accessible from any computer or internet-enabled mobile device. According to a 2008 report from analyst firm AMI-Partners, small and medium businesses (SMBs) are flocking to use these new IT services. Around 31 percent of midsize companies currently use cloud computing as a soft ware service, double the uptake of those in 2004. So why has cloud computing become such a valuable business proposition to SMBs? Agatha Poon, Senior Analyst in Yankee Group’s Anywhere Enterprise research group, believes a big driving factor is around cost saving, particularly with the economy in its current state. “Cost saving is the value proposition for a lot of providers,” says Poon. “It is defi nitely one of the strongest benefits areas, but interestingly we also see that some SMBs consider cloud computing as a method for disaster recovery. This makes sense if you consider that many SMBs have a basic infrastructure in place for keeping serv-
ers and data, however, not so many have the practice to backup data or maintain a redundancy because it is very costly to keep one server in one location and another one as a backup in an alternate location.” Poon goes on to explain that a small number of SMBs will consider the flexibility and scalability of cloud computing as a further value proposition for the business. “Typically they are very business driven and don’t want to invest a lot of money up front. They want an appropriate budget for growth, but as the business grows of course they would like to have access to resources that can help them scale, which cloud computing can help them do.” Doug Menefee is one such CIO that has adopted cloud computing. The Schumacher Group provides emergency department physicians to 150 hospitals across the US, and because it is a medium size business, Menefee is charged with leveraging IT processes in order to drive efficiency in the emergency room in which the group operates. Over the past five years he has deployed a multimillion-dollar technology initiative to upgrade or replace every enterprise system in the company. He explains that he has essentially worked to automate the entire recruiting office, credentialing processes, utilising soft ware and building our custom applications.
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As Menefee was looking to redefi ne and redeploy new applications, army of individuals and their only job is to protect and secure the data he chose to leverage a cloud solution.“By leveraging the cloud solution that’s inside their systems. Being a midsized business I can’t keep that we had multiple instances of our data that were being hosted either on individual or individuals busy for that amount of time.” the east or west coast or both, that were inside a multimillion dollar data And it is true that instead of pressurising a small team of IT staff to center with full-time technical support,” explains Menefee. “A big driver perform at a level consistent with larger competitors, it is possible for for us was business continuity purposes – knowing that out data would SMBs to access enterprise-class capabilities with an initial low investbe accessible 24 hours a day, seven days a week, anywhere that we could ment and the chance to scale. However, for those that remain concerned fi nd an internet connection. We realised that we would no longer have to about the privacy and security of their cloud, Poon advises working with rely so heavily on our own data centre to keep operations going.” a transparent provider who is able to provide documentation and demSince deploying cloud computing technology, Menefee has been able onstrate the level of security in place. “Typically many cloud providers to leverage a range of custom options, including platform and hardware services. “On the platform side, we do development on top of salesforce. com and then inside we have a hosted solution in PeopleSoft where they simply have the hardware at their location and they maintain all of the soft ware for us and then we do the development on top of that. The custom work that we do inside of salesforce.com is typically because the application doesn’t provide an out of the box solution for us, so we go and write a custom solution using Apex code. From here we can develop anywhere from three to four times faster in that environment than if we were developing in any other platform,” explains Menefee. There are a number of benefits around being able to design a custom range of options. In Menefee’s case it means that he is able to deliver will have the classic SOA programme in place, but any enterprise users, products faster to internal customers so that they are received within a from SMBs to one large enterprise, need to read the fi ne print in their matter of hours, days or weeks depending on the individual case. “The service level agreements and be ready to really negotiate for a stronger solutions that are housed inside of our data security programme,” she says. center, such as patient billing operations and Laurie McCabe, Partner at Hurwitz & AsCLOUD SERVICES TRENDS IN paperless charts will take me a couple of weeks sociates, agrees that it is important to go with THE FINANCIAL SECTOR to a couple of months to deploy, whereas with a reputable provider and recommends noting a our cloud services it takes a couple of hours to checklist of points that need to be in place with • 83 percent of firms surveyed are a couple of weeks. So the cloud solutions, in a that provider to ensure the data is protected and making private clouds their first programming world, are much more agile and a secure as well as available at any time. “Even priority with the majority planning faster application development environment.” though SMBs are very busy and are trying to to increase their investment in grid install a million different things at once, it does and high performance computing Concerns pay to evaluate at least a couple of different serin the next 12 months But while there are many reasons to emvices,” says McCabe. “Check it out a little bit, brace cloud computing there is also an area search around, find at least a couple of provid• 43 percent are choosing of concern that is potentially keeping SMBs ers that might fit your needs before doing free virtualisation as their main from using the technology, namely IT security, trials and evaluating exactly what best works infrastructure priority in 2010 which is the number one concern cited by IT for your specific needs.” • Security is now the biggest worry managers when they think about implementing Poon goes on to explain that on the supply for those looking to invest in the the technology in their business. side, aside from security or service availability, cloud, a major development on the Menefee has no such concerns; he believes is other potential barrier to adoption that may concerns that existed a year ago that as a medium sized business he is able to play a part in whether it will help drive market ensure that he actually boosts the security uptake or not, namely whether the vendor is Source: Platform Security survey. of the Schumacher Group as there are more sustainable. She says that there are many small people looking out for the business. “I’m always concerned with security cloud providers quickly jumping into the market and their fi nancial inside our enterprise,” he says. “As a midsized business with about 30 health could make an impact in terms of infrastructure requirements individuals inside information technology, I can ensure that one or two and whether or not it will help drive market uptake. of those individuals are primarily focused on security, and that’s what we Financial situation do for the protection of our database. However, when I use a cloud comThe fi nancial health of vendors will no doubt play a part in whether puting solution I get the same benefits as every one of the enterprise level, or not we continue to see increased adoption of cloud computing, as does publicly traded companies that are also customers of the cloud computthe current economic crisis. As one of the main drivers, cost saving is key ing solution. So salesforce.com or Workday for instance, has literally an
“A lot of cloud providers are focusing on the downturn and saying that it’s in their favor because in this economy, it’s a cost saving”
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in the current market as many companies are able to recognise the clear value of implementing the technology. “A lot of cloud providers are focusing on the downturn and saying that it’s in their favor because in this economy, it’s a cost saving and through this they are able to facilitate, if not drive, sales,” explains Poon. “But if you look at it the other way round the situation is actually forcing companies to become more innovative. They have to look for technologies that can help them cut costs while maintaining the performance, so typically the classic cloud computing model is in demand.” So, what about the future of cloud computing, how should we expect to see the technology develop? Poon is a little reserved in her evalua-
tion of the future of cloud computing. She believes that while there is no doubt as to the value that cloud computing can bring, adoption depends on how useful the technology is to a particular business. “If you are looking at a retailer for example, they have the seasonal sales for their ’09 store and they can pick times such as Christmas or Valentine’s Day where they know they are going to see a traffic peak. Therefore they need a lot of processing power and capacity in order to keep their website running quickly and efficiently and cloud computing will be very useful to them in that sense,” says Poon. “However, there are companies that will simply need to update their website information occasionally and don’t have a need to store data in a cloud because they know that traffic will be regular, they just need minimal support.”
THE SILVER LINING TO CLOUD COMPUTING
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erner Vogels, CIO of online retail behemoth Amazon, offers his take on harnessing the power of this revolutionary development. “Cloud computing refers to the idea of making massively scalable IT capabilities available to anyone who would want to use them, on a pay-asyou-go basis. It means highly reliable IT components can be used by startups, midsized and very large enterprises alike, to provide an environment in which developers or engineers no longer have to worry about managing physical resources. Instead, they can use these resources as a service over the internet, and that will have a major effect on how applications are built. Applications will become more reliable, they will become more secure, they will become more cost-effective. There are a number of benefits. Just look at the amount of time that businesses currently waste on managing physical resources: companies both large and small invest an enormous amount of manpower on just getting their infrastructure off the ground; factor in the cost of maintaining that infrastructure so that it is highly reliable and performing in such a way that customers can actually make use of it,
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It seems cloud computing for SMBs will ulti-mately depend on whetherr it is possible to articulate thee value of cloud computing to the market of potential users rs of the technology. Despite the solution being in place, it is only those who require it that will in fact adopt it. And, while there is no doubt that cloud computing is still in the very early stages of development and it is hard to say just how the capabilities and benefits will change, it is certain that it will indeed evolve to become a much more sophisticated solution as time goes on.
and that’s a big commitment. Companies are investing a lot in managing a physical infrastructure when it doesn’t actually help them build a better product for their customers. So at Amazon, given that we had to invest in these technologies and build them at very large scale for our own operation, we are now looking at using them to help other companies also become more reliable, more cost-effective and more productive – without having the massive cost of actually building and maintaining those technologies themselves. We can help companies become more reliable and more secure than they are now, at a much lower price point. Plus the pay-as-you-go model means that you only pay for those resources that you use. If you look at starting a typical new enterprise product, then often you have to get a large budget upfront to make sure you have the physical resources to execute on. By using web services, there is no upfront investment, and only if your product becomes successful will you carry the cost for the resources that you’ve been using. So that’s a shift from a capital expense model to an operational expense model, which at the same time lowers the risks for enterprises to do new product innovation. There are no boundaries anymore for any company in any country to access these resources. In some ways, cloud computing provides the democratisation of business creation. You no longer need access to huge sums of money to get access to physical computing resources in order to get your business or product off the ground. I think technology development will shift – from actually having to manage physical resources and having multiple system administrators in order to keep your service going, towards building better applications for your customers. That’s where the focus will be. Cloud computing will trigger a whole new range of application building that wasn’t possible before because we were so focused on just getting the basics right. And we will see that applications become more available with better performance, because there will be more automation in terms of keeping these enterprise applications running – under all circumstances – in the cloud.
FROM VIRTUAL TO REALITY London 2012 Olympic Games gets set for an actual digital cloud.
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loud computing is an invisible technology for users but an actual digital cloud is being considered as the centrepiece of London’s Olympic Village. The cloud would 'float' over London's skyline and would be made up of 120-metre towers holding a series of interconnected plastic bubbles that would display images and data. It would also be used as an observation deck as well and a park. The unique structure has come from the minds of an international team of architects, artists and engineers and due to its 'flexible nature', the design team are planning to raise funds for the scheme by asking for micro-donations from millions. “It's really about people coming together to raise the Cloud," Carlo Ratti, one of the architects behind the design from the Massachusetts Institute of Technology (MIT) told BBC News. "We can build our cloud with UK£5m or UK£50m. The flexibility of the structural system will allow us to tune the size of the cloud to the level of funding that is reached.” Mayor of London, Boris Johnson, has said he is committed to building a tourist attraction in the Olympic Park “with a legacy for the East End [of London]" and thus far, the cloud is in the short list. Despite no decision yet being reached, the cloud's team have decided to release details, no doubt in a bid to drum up debate and attention for their idea. The towers that would support the spheres would be similar to those used in Japanese skyscrapers to resist earthquakes, which prevents the towers being buffeted by the wind.
Environmental impact In keeping with the Olympic Committee's desire to make the 2012 Olympics a 'green Olympics', the cloud will also be a 'harvesting effort'. According to Alex Haw, digital designer for the project, "people can choose to ascend the cloud on foot or bicycle; the energy that it would take to descend the cloud is converted, on the way down, into electricity through elevators with regenerative breaking, similar to those that are present in hybrid cars. The people's energy coupled with solar energy collected through on-site and off-site photovoltaic cells and various energy saving strategies will allow us to reach carbon neutrality, whereby the cloud produces all the energy it uses." With the power used, the spheres would also light up at night creating a spatial, 3D informational display over the skies of London.
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highly available? Do the provider’s service level agreements align with internal objectives?
Blue-sky thinking
Flexibility: the cloud should afford the company some flexibility. Can the provider accommodate hybrid solutions, connecting their cloud to existing dedicated deployments? Do they have the flexibility to provision the types of resources the applications need – virtual or physical? Does the provider offer both public and private networking options to accommodate different applications?
Joseph Crawford and Christopher Gesell of Verizon Business explain how cloud computing offers a multitude of benefits for businesses today. What are the advantages of cloud computing for enterprises? Joseph Crawford. Enterprises today are focused on minimising capital investments, so there are real economic drivers to looking at the cloud. Cloud computing offers flexibility in infrastructure planning while improving time to market. Capacity can be scaled as needs change, leaving companies to pay only for what they need. Our cloud computing platform is designed to meet the needs of large enterprises, with an enterprise-class solution for medium-sized businesses. Verizon’s Computing as a Service (CaaS) is highly resilient and redundant with security levels that enterprises expect. By leveraging an enterprise-ready solution, we’ve found that IT leaders often gain increased levels of visibility and performance. CaaS is one way companies can become more flexible, achieve greater efficiencies and control costs. How challenging is it for IT managers to manage and secure applications and resources in cloud environments and how can they overcome these challenges? Christopher Gesell. Not all clouds are the same. Some require the enterprise to re-write their existing applications, changing the architecture and how they manage those applications in order to get the full benefits of the cloud. Verizon approaches cloud
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computing as a new and secure delivery model, but we don’t think it should fundamentally change how companies architect or manage their applications. Our CaaS platform was designed to support commercial off-the-shelf applications as well as traditional two and three-tier applications. Security was top of mind when we developed CaaS. From the physical to the logical, with the option to wrap additional layers of professional security services, the result is simpler and secure management of those applications. Which factors should companies take into account when choosing their cloud solution? JC. When considering a move to a cloud computing environment, today’s IT leaders should consider: Security: companies are understandably sensitive about potentially moving data outside of their company firewall. How does the provider protect the infrastructure? Are activity audit trails available? Do they understand the policies, processes, and procedures used by the cloud computing provider? Their standards should meet or exceed those they would impose in-house. Availability and performance: moving to the cloud shouldn’t require a sacrifice of availability or performance. Are redundancy and resiliency built into the solution, making cloud resources
How does your solution in particular address companies’ needs and how does it differ from other solutions in the marketplace today? CG. By embedding on-demand computing centres into our global IP backbone, we’ve created a secure network platform to deliver our next generation of infrastructure and application solutions. These cloud-based services span computing and communications applications like conferencing, email, video applications and VoIP. Businesses can dynamically provision and manage physical and virtual servers, network devices, and storage and backup services through a secure portal. Our leading network enables access across the internet, including private networks like our global MPLS backbone, or VPNs. As a global leader in information security services, we’ve used our knowledge and experience to embed multiple layers of security around all solution components including identity and access management, and threat and vulnerability scans. We also provide comprehensive migration support to make the transition painless. What sets us apart is our experience in managing global IP networks and data centres, and our leadership position in information security. We bring it all together to deliver a flexible, cost-effective computing solution, while providing security for one of the enterprise’s most valuable assets – its data. For more information about Computing as a Service, visit www.verizonbusiness.com/products/itsolutions/caas/ Joseph Crawford is the Executive Director of the IT Solutions product portfolio for Verizon Business. Crawford has held a number of positions at Verizon Business and its predecessor companies, bringing more than 15 years of experience in the design, development and deployment of IT Solutions. Christopher Gesell is Director of Product Strategy at Verizon Business. Gesell has held positions in sales, marketing and strategy at Verizon Business and its predecessor companies. He has over a decade of experience in IT services and is a frequent speaker on cloud services.
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ASK THE EXPERT
Virtual desktop reality The requirements for fast, scalable and manageable virtual desktop infrastructure, according to Mike Jansen, DinamiQs’ VirtualStorm Lead Architect, and Erik Westhovens, DinamiQs’ VirtualStorm Lead Developer.
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he current buzz in the IT industry, apart from cloud computing, is defi nitely virtual desktop infrastructure (VDI). Less elusive than cloud, VDI has been building momentum in the past few years, promising high performance, centralised desktops with full application stacks. To deliver on that promise it is key to understand the challenges and demands of large-scale centralised desktop environments. The list below addresses the main issues, but there are many more, smaller issues that need to be resolved in order to make any solution work. The challenges of the traditional VDI (and for that matter fat client) solutions are many: • • • •
Deploying desktop images takes a lot of time. Automating deployment is not trivial. Managing images is like managing fat clients, nothing changes. Traditional VDI total cost of ownership (TCO) is not compelling versus regular fat clients. • Storage for traditional VDI becomes huge, unmanageable and expensive. • Density of virtual machines on physical servers is constrained by memory, network and IO. • Updates and upgrades to applications cause downtime, especially in large-scale environments.
“Unfortunately, all of these technologies have advantages as well as disadvantages and implementing these technologies means there will be trade-offs” In the industry today you will find many solutions that aim to improve any of the mentioned items. But unfortunately none address all of them. What you will find is that in many cases you trade off an advantage with a disadvantage. In fact, it seems that most solutions work around three SBC concepts: sharing, streaming and isolation. And most solutions will provide you with a hybrid solution that is neatly encapsulated in an ‘intuitive’ management environment. So far so good, but for any solution to actually scale, you need to ask yourself a couple of questions and see if and to what extent you meet a particular set of demands. Unfortunately, all of these technologies have advantages as well as disadvantages, and implementing these technologies means there will be tradeoffs. But in order to effectively scale an environment and to make sure that the end-user experience is ‘asgood-as’ or better than a traditional fat client environment, no tradeoffs can be allowed. And this means that we have to create a system that is perfectly optimised to do just one thing and to do that extremely well.
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The demands and requirements for true VDI are: • Deploying desktops in (semi) real-time. • One user per desktop with – if so required – full admin rights for that desktop. • Persistent, roaming profi les outside the OS image. • Simple automation and pre-provisioning of desktops. • Abstract applications from OS and OS from hardware. • Manage both image and applications inside the image. • Improve installation and de-installation of applications. • Reduce the storage requirements of desktops versus traditional VDI. • Reduce OS importance and focus on applications (ie, make any Windows an application launch platform). • Increase density of virtual desktops on servers through IO and memory optimisations. • Reduce management effort to the extreme (one admin for 10,000 desktops, or better). • Make it as ‘green’ as possible. • Make it as economically attractive as possible.
together form the DVS4VDI product suite. In effect, VirtualStorm is a highly scalable, well-behaved, low IO, high-density environment that virtualises desktops and applications to the extreme. And with everything that occurs, these questions have to be answered to full satisfaction: “Will this scale? Will a double workload within a short period of time work? How to keep it manageable? How to distribute workloads properly?” There are currently many large customers who are setting up demos and proofs of concept and, considering the pace at which VirtualStorm is growing reseller and customer base, there are very busy times ahead.
“In many of the currently available products, the trade-offs become visible when you ask yourself a simple question each time you look at a solution” About the future of true VDI
Actually these were the demands from one of our customers for their intended VDI implementation. We found them to hold true for most if not all environments. In many of the currently available products, the trade-offs become visible when you ask yourself a simple question each time you look at a solution. That question is: “What about 10,000 users simultaneously?” All of a sudden you start finding bottlenecks if you apply those 10,000 users to the demands mentioned. If you share in this environment, you’ll have many servers to manage, if you stream applications to (virtual) desktops you’re running into severe IO problems both on the network and on the disk, but also in the number of provisioning servers required for specific and popular applications. Isolation is of course completely unmanageable for 10,000 individual clients. To meet these demands, DinamiQs developed the VirtualStorm concept: A highly optimised VDI environment that meets and exceeds today’s standards.
The current state of the virtual world So what is VirtualStorm really? It’s actually a best of breed solution that is leveraged by a few pieces of code that glue all these solutions together to the concept that we call VirtualStorm. The components are VMware ESX, Microsoft Windows (yes, all Windows versions since 2000), Symantec Workspace Virtualization and the agents and applications that
This article describes an optimal environment for large-scale VDI implementations in which both end-user experience, ease of support and scalability are maintained, to the extreme. This will result in certain paradigm shifts that require thought and perception to introduce in any given organisation. So keep the following in mind: • Your desktop will become a screen. No more than that. A window on your actual desktop into the data centre. Best example of a simple screen device is Sun Microsystems’ Sun Ray device. There will be In the past 15 years Mike Jansen, who others, no doubt. resides in Amsterdam, has designed and • Your OS will become a launch platform for implemented your applications. After all, what do you use large-scale infrastructures for an OS for, really? various organisations. In recent times he has • Density of desktops on physical server hardapplied his knowledge ware will increase drastically. In general, Virto desktops and end-user experience tualStorm is not doing a lot with all the power in virtualised environments, at its disposal, so densities can increase as long resulting in a huge as Moore’s Law is in effect. contribution to the invention and creation • Reduction of centralised storage for desktop of VirtualStorm. OS and applications. Why provision many Erik Westhovens is times when you only have to, once? an IT specialist with • Real-time deployment of OS and applications. in-depth knowledge of SBC environments • Strongly reduced data transport, resulting in and Windows infrastructures. He instant availability of profiles and applicais one of the top tions. Why use IO if you don’t have to? application packagers in the world today and • For management it means one desktop to a frequent contributor to Symantec Connect. maintain, one central unlimited repository, His experience scaling to millions, but managed by few. This and knowledge have allowed him is called the Power Of One. to develop the components that are integral to VirtualStorm.
But really, this is not the future of VDI. This is what is available right now in VirtualStorm.
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Optimisation through virtualisation Saumya Upadhyaya of Frost & Sullivan explains how companies can get the best out of virtualisation technology.
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nterprise computing is expected to do the same amount of work, if not more, irrespective of the business environment that the enterprise operates in. However, with budgets on a downslide, enterprises are exploring means to improve the utilisation levels of their current technology assets to cater to their mounting infrastructure needs. Enterprises across the world are aiming to transform their rigid data centres into agile environments, which can provide rapid scaling and sharing of infrastructure resources. Over the years, enterprises have built up silos
in infrastructure, often leading to over provisioned, unmanageable infrastructural components. Virtualisation enables these enterprises to benefit through better use of existing resources, agility in deploying new envi-
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ronments, a significantly smaller hardware footprint, and thereby a reduction in the cost of computing infrastructure resources. It assists IT administrators to optimally exploit resources and achieve significant costs and business benefits.
Virtualisation in action Globally, virtualisation has long been portrayed as a technology that would change the dynamics of enterprise infrastructure. Virtualisation is shaping up to be one of the major trends that would influence the end-to-end infrastructure of an enterprise, namely server, storage, network, application, desktop and so on. The ability to consolidate disparate infrastructure ele-
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ments, increase utilisation levels and minimise the mounting space and power expenditures are a few of the key drivers for the adoption of virtualisation solutions. Enterprises with a large computing infrastructure, are the first to adopt virtualisation owing to the benefits that consolidation brings to space, power and cooling expenditures. Server virtualisation is the forerunner in the adoption of virtualisation, primarily because of the visible benefits of consolidation, reduced operating expenditure, and limited impact to user operations. Since its introduction, server virtualisation has been growing at a rapid pace. Enterprises with large server farms are expected to increase adoption and benefit the most out of server virtualisation. When implemented the right way, virtualisation has a proven record of providing considerable reductions in direct infrastructure costs, indirect costs such as optimised IT infrastructure performance, business continuity and stability, as well as capacity management. For instance, power consumed by servers and cooling systems could be reduced by up to 60 percent to 70 percent and the space requirements reduced by a factor of the number of virtualised servers per physical server. Similar to server provisioning, storage infrastructures across enterprises are over provisioned due to storage silos created by different business units within the same organisation. As a result, typically enterprises buy almost double of the amount of storage they actually need. Storage virtualisation would help organisations achieve a more efficient centralised management for their storage and data replication needs along with enhanced security of enterprise data. Storage virtualisation solutions enable enterprises to increase their storage efficiencies from 25 to 30 percent, to almost 80 percent. With such an increased utilisation rate, organisations can delay the purchase of additional storage hardware by using existing storage to meet increasing data demands and consolidate IT assets.
Barriers to wider adoption In-spite of its benefits, virtualisation is not necessarily easy to adopt. Concentrated risk, increased infrastructure complexity and migration challenges to a virtualised environment, are a few of the key restraints for adoption of the virtualisation solution. While a well-executed virtualisation strategy can bring significant benefits to the organisation, an unplanned strategy could create manageability issues. Organisations need, therefore, to have the right networked infrastructure to extract the true benefits of the technology. A holistic view of all the organisational assets is required as implementation of virtualisation impacts organisational business and operational processes. Virtualisation should be viewed not merely as an IT decision but as a strategic decision, the benefits of which can be accrued over a period. The implementation planning should start with a thorough assessment of technology assets and IT infrastructure along with the supported business processes and then calibrate Key Performance Indicators (KPIs) to track the benefits. A big bang approach to virtualisation can easily be a recipe for disaster. Organisations typically start with virtualisation of single infrastructure components such as only servers, only storage, only application and so on. While this provides organisations with flexibility of upgrading systematically to a completely virtualised environment, virtualisation at dif-
ferent levels of the IT infrastructure also poses a manageability issue. Virtualised applications may suffer from lack of resources due to outages and multiple levels of virtualisation make it difficult to isolate the problem to a certain level of virtualisation in the scope of the entire infrastructure. As a result, organisations require clear planning of their virtualisation upgrade strategy to enable end-to-end management of their virtualised infrastructure. End-to-end virtualisation orchestrates various levels of virtualisation providing the ability to recover from failures within minutes, thereby achieving high efficiency, productivity and cost savings. End-to-end virtualisation helps in eliminating virtualisation silos and uses end-to-end failure automation practices to detect failure and recover from the outage by fixing or replacing the affected device from the network.
“Since its introduction, server virtualisation has been growing at a rapid pace. Enterprises with large server farms are expected to increase adoption and benefit the most out of server virtualisation�
Consolidating infrastructures Infrastructure consolidation, followed by virtualisation, is a key trend currently witnessed in the market. With controlled capital expenditure across the board and virtualisation solutions becoming increasingly affordable, virtualisation is set to become a mainstream technology in the coming years. As virtualisation enablers such as hypervisors become increasingly commoditised, virtualisation management solutions and endto-end virtualisation solutions are increasingly becoming a key focus area for a number of enterprises and virtualisation vendors. With enterprise focus moving from a capital expenditure model to an operational expenditure model, virtualisation serves as an enabler for cloud computing; this enables everything from IT infrastructure to software to be provided as a service. Enterprises could choose between internal clouds with sharing across business units or external clouds that facilitate the pay-per-use model. Virtualisation is the building block of any robust, flexible, scalable, and cost-efficient cloud service. Without virtualisation at server, storage, and network levels, infrastructure sharing and cloud computing would be a distant reality. In essence, virtualisation spanning across the organisation’s IT infrastructure, that is, from the data centre to the desktop, enables enterprises to create a dynamic IT environment capable of catering to the rapid scaling of enterprise computing requirements. In addition, the benefits accrued on the total cost of ownership of the enterprise IT infrastructure make virtualisation an appealing investment for enterprise decision makers. Saumya Upadhyaya is Industry Analyst, Information and Communication Technologies at Frost & Sullivan. For more information, contact: tanu.chopra@frost.com.
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Breaking down barriers to enterprise-wide virtualisation Red Hat’s Geert Jansen explains why the current barriers to 100 percent virtualisation are neither inevitable nor insurmountable.
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he well-known advantages of virtualisation include greater efficiency and flexibility, improved compliance, reduced risk, enhanced business continuity and lower costs. Having a more agile IT infrastructure with fewer physical servers to procure, power and manage is an extremely attractive proposition, especially in today’s climate of shrinking budgets and volatile operating conditions. Yet analysts estimate that, to date, only approximately 15 percent of servers are virtualised. The limitations in currently available proprietary solutions have prevented pervasive adoption of virtualisation across the enterprise.
Technical barriers The wider application of virtualisation is constrained by poor performance, due to significantly increased server overhead; limited scalability, with only a small number of virtual
Five tough questions to ask a virtualisation provider: Q. What percentage of our server workload can realistically be virtualised? Q. How can we safeguard workloads, without introducing silos and while still enjoying dynamic placement? Q. What are the scalability limits of your solution? Q. What are the total costs of running your solution over a three-year period? Q. Will my ISV require me to reproduce problems on physical hardware?
CPUs normally supported; and security conThe user becomes caught between the indecerns, with typically a single level of isolation pendent soft ware vendor (ISV), the provider between low and high security workloads. of virtualisation solution, and the operating Red Hat has removed these barriers by system vendor – with all parties reluctant to using the latest generation Kernel Virtual own the problem. Machine (KVM) technology to turn Linux, Red Hat removes these barriers by ensurthe world’s most scalable ing that Red Hat Enterprise and highest performing Virtualisation inherits the operating system, into a broad hardware and soft ware virtualisation platform. ecosystem available to our Red Hat Enterprise Virtucustomers for over a decade. alisation capitalises on the KVM is integrated into the effort that has been invested Linux kernel, so if the hardin Linux over many years, ware runs Red Hat Enterresulting in impressive perprise Linux and it supports formance, scalability and virtualisation hardware exsecurity. Users experience tensions from Intel or AMD, the benefits of a proven virit runs Red Hat Enterprise tualisation platform, tested Virtualisation. Th is creates a and certified by the leadchoice of over 1000 certified Geert Jansen, Product Marketing Manager EMEA at Red Hat, is ing hardware vendors and hardware platforms. responsible for product marketing of Red Hat’s infrastructure products in hardened in exceptionally Similarly, thousands of Europe, Middle East and Africa (EMEA). demanding environments. soft ware applications that Prior to joining Red Hat, Jansen spent five years at Royal Dutch Shell and Applications previrun on Red Hat Enterprise prior to this as a software engineer at an internet search engine company. ously excluded from Linux can also run virtuavirtualisation projects lised under Red Hat Enterbecause of performance prise Virtualisation. Th is and scalability limitations under proprietary supports pervasive virtualisation deploysolutions now become suitable candidates. ments because now, if there are application Furthermore, a proactive, military-grade seissues, enterprises do not have to recreate the curity system, co-developed by Red Hat and problems on physical hardware. the US National Security Agency, protects Cost barriers sensitive applications and data by maintaining an extremely strong, multi-level separaThe high cost of soft ware licences, future tion between workloads. upgrades and updates, and the requirement to
Ecosystem barriers The entire hardware and soft ware ecosystem needs to be aligned to support costeffective virtualisation deployment. For example, there can be compatibility issues where third-party applications have not been certified to run on a virtualised platform.
sign up for long-term contracts deters many organisations from extending virtualisation enterprise-wide. Red Hat removes these barriers with a ‘pay-as-you-go’ subscription model. Capital expenditure is turned into operational expenditure and, with yearly subscription fees in the same range as the support fees for current proprietary offerings, all the expense of licensing can be eliminated.
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EXECUTIVE INTERVIEW
centre switch/server links will likely migrate to 40G within the next five years.
Prepare now for 40G CXO sits down with Nexans’ Martin Rossbach to discover what next generation data centres will look like and how comprehensive migration strategies will play their part. How important is the data centre and what should system designers take into account? Martin Rossbach: The data centre market has been booming for over a decade and is still expanding despite the financial crisis. This shows how vital this technology is for major companies. Companies going through a data centre re-design today are very concerned about energy and cooling and the design of the SAN but often do not pay enough attention to the cabling infrastructure. The design of the network and the cabling infrastructure are often treated as two separate entities but this needs to change. Since cabling brings the whole network together they need to establish a forward looking infrastructure to cope with future needs. The design needs to be application independent and modular in order to cope with the increasing lifetime expectations of modern data centres which can be 20 years or greater. How should the data centre ICT infrastructure be configured? MR. Although ‘Top of Rack’ switching has had some success, the need to get data in and out of the data centre as fast as possible has placed more emphasis on the need to adopt an ‘End of Row’ solution. Data centre networks are moving to a flatter hierarchy as opposed to a Christmas tree design so fewer switches will have less effect on latency. Top of Rack adds to the latency problem. By moving to an End of Row switching solution you can also achieve connections between any two points
What does this mean for cabling? MR. First of all you need to look at what is happening in the standards bodies such as IEEE to understand what developments are taking place for 40G and 100G Ethernet. The specifications for 40G over fibre are already fi nalised and defi ne parallel optics using totally new connectivity. Th is is a paradigm shift from what people are used to, so considerable care must be taken when designing an infrastructure that will not only support legacy systems of today but also give a migration path and easy transition when upgrading to 40G. Nexans has already developed and launched a new range of fibre products for exactly this application. Copper cabling on the other hand has yet to be fully resolved. There are standards available for 7m short reach point to point systems and if a standard becomes available for longer reach it is very likely to be a balanced twisted pair solution such as CAT7a. Again both solutions use different connectivity than 10G, so good forward-looking planning is really required.
in the network at reduced latency. Th is is facilitated by a cabling cross-connect, which can be configured through simple patching and cuts out the need to travel through more switches. Structured cabling is a much better option than point to point, since powerful, energy hungry servers can be dispersed across the data centre and interconnected through the cross-connect, reducing hotspots and balancing out power loading conditions for equipment and cooling systems. Bandwidth is another important factor. Adopting the highest copper cabling spec available will future-proof the network for many generations of ICT Martin Rossbach is Director of Product Marketing and New Market equipment; resulting in less Development at Nexans Cabling disruption and cost. Solutions SA, Belgium. Rossbach
What is the best advice for companies planning a system that will need 40G capabilities in the future? MR. There is no point in putting in a system today that can only carry 10G with no capacity for future upgrades to 40G. The cost of replacing has more than 17 years’ experience it (if possible, many cabling in the IT and telecommunications industry, gathered in technical, What should designers systems are left installed) sales and marketing roles within consider in terms of future would be horrendous not hardware vendors like Canon and Alcatel. Rossbach holds network speeds? to mention the disruption a postgraduate diploma in management from TiasNimbas MR. Ten Gigabits per second it would cause. Our advice Business School. (10G) is today’s benchmark would be to install both the Nexans copper and fibre transmission rate for large data 40G ready systems so you have this capacity centres. But high definition video on demand from day one and the transition to 40G would (IPTV), IO-Consolidation and server virtualibe a very easy and simple retrofit of patch cords. sation will soon require the use of ‘bigger pipes’ The whole infrastructure core stays intact and on the network and will drive that benchmark does not have to be moved. This is the less disto 40G and even 100GB in the data centre ruptive option at the lowest cost. backbone. Many IT experts expect that the data
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AVIATION
Welcome to the cheap seats Budget airline Ryanair may be best known for its low prices, but when it comes to investing in technology it is prepared to spend big bucks, as Head of IT Eric Neville, reveals to CXO.
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espite the seeming unpopularity of its charging policies and the introduction of a raft of new ‘hidden costs’ for passengers, Britain’s most successful budget airline, which featured in the BBC Panorama Documentary Why Hate Ryanair earlier this year, continues to go from strength to strength. In the fi rst six months of 2009, its total passenger numbers rose 15 percent to 36.4 million and it currently carries more people across Europe than any other airline. It’s a major achievement in economic conditions that has left its larger rivals floundering. Indeed in a recent interview with the UK’s Times newspaper, Ryanair’s CEO, Michael O’Leary, boasted that his airline could soon topple British Airways as the UK’s dominant carrier; “It is hard to know when it will happen because it is hard to keep up with how fast BA’s passenger numbers are declining. We will overtake them at some point.”
Behind the scenes The airline’s success is due not only to its aggressive pricing strategies, but also to the work going on, unseen by the public, in its back offices to streamline the carrier and support its rapid growth. Head of IT Eric Neville is behind the technology driving the airline’s success. Despite predictions by the aviation technology provider SITA that investment in airline IT is expected to drop to an all-time low this year, he is upbeat about the prospects for Ryanair’s own IT expenditure: “Obviously we’re looking at anything we can do to reduce the cost of what we’re doing. Everybody in the industry is. But at the same time we do realise that to change your processes you have to invest. And sometimes you have to spend money to save money.” With this philosophy in mind Ryanair recently awarded a €15 million contract to Cable & Wireless to manage its European IT and communications network in the 151 airports to which it fl ies. Under
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the terms of the contract, Cable & Wireless will provide an ‘always on’ communications network for the airline, which will cover all passenger interactions with the airline, including check-in kiosks and each Ryanair site will be connected to a secure wide-area network. The arrangement will dramatically improve Ryanair’s operational effectiveness, says Neville, who explains how, under the previous system, Ryanair would have to apply for licenses from the telecoms authorities of the countries it fl ies to for back-up broadband connections. It will save costs and improve efficiency by using VoIP as part of the Cable & Wireless network: “In the current set up, we have hundreds of invoices every month from telecoms providers. We also have outbound voice charges. At the moment we pay local rates to the local telecoms providers, which are higher compared to what you’d pay if you had a consolidated voice offering. The new system will reduce the voice costs for everybody and centralise the billing and invoicing process, which currently creates a huge amount for work for our fi nance department. Th is Budget airlines will be a much simpler model.” The system will improve the reliability of Ryanair’s communications, support25 ing such crucial parts of the operation countries 13 as the timely taking off and landing of countries fl ights: “Obviously these time slots are quite crucial,” says Neville. “If there’s Countries served critical information that needs to be passed around, then you need a robust telecommunications infrastructure in 7.5 million place to make sure the communications are clear and reliable. More robust telecommunications technology will also support the introduction of Ryanair’s self-service check-in 50.9 million kiosks, which currently operate in 10 Passengers travelled (2008) airports. The Cable & Wireless network will ensure that there is a reliable communications link back to the main Ryanair IT system, as Neville 200 explains: “Cable & Wireless will be providing the primary circuit and the back-up circuit for the kiosk so that it 73 can get back into the overall reservation system to process the data. So locations with kiosks, such as Stanstead (number of aircraft) or Girona, will be very reliant on our infrastructure to make sure they keep running.” Looking ahead, Neville predicts some major changes to the way airlines operate and to the passenger experience in particular. While self serviceAverage route distance check-in may seem a forward-thinking concept, it is just the tip of the iceberg according to Neville, who predicts
it won’t be long before paper boarding passes no longer exist and passengers hold all their fl ight details on their mobile phones: “In an ideal world, passengers would be able to just scan their mobile phones in order to get on to a fl ight. That’s the direction the airline industry would like to go in because it’s easier. But obviously you’re dependent on airports having this functionality. And that’s probably still a bit of a way off. But this is one of the projects we will be looking at because we think that in the future the mobile phone will be a major part of how passengers interact with the airline.”
Big spenders For now, however, he says he and his team have “an endless stream of projects” they are working on, with none, he claims, threatened by the economic downturn and the reductions in IT spending across the European aviation industry. “I have enough projects to keep me going
950 routes
29 countries
380 routes
184 routes Routes by airline
€3010 million Ryanair is Europe’s biggest airline in terms of passenger numbers
£2622 million
43.7 million
€594 million
2008’s revenue
165 3000
5262
6107
Number of employees
151 airports
113
774 km
airports
66 1277 km
airports
1300 km Number of airports served Source: Figures from respective websites
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From left to right: Gerry Lawlor, Cable&Wireless Worldwide; Sean Mahon, Cable&Wireless Worldwide; Michael O’Leary, CEO, Ryanair; Eric Neville, Head of IT, Ryanair
for quite a long time here,” he says. “There’s no plan to end any of them because ultimately the projects we are doing are either beneficial to us, the customer or to streamlining the process.” Indeed, he goes on to say that automation of some processes could ultimately help airlines to steer their way through the downturn: “If you look at us, 99 percent of our bookings come through the web, which obviously saves costs. Simplifying the process of getting people from the check-in area to the aircraft is what we want to look at now, which is why we’ve introduced the 100 percent check-in system. As much automation as possible is what we’ve got to try and aim for.”
While Neville is optimistic about Ryanair’s plans to continue spending on IT improvements, he is aware too of the challenges posed by working in such a security conscious industry, particularly when it comes to the handling of passenger information. Neville says one of the biggest problems around such data regulation is the lack of a common European standard across the region: “One of the biggest challenges we have is regulatory requirements. There’s obviously a huge drive right now for passenger information. My biggest issue with that is that there is no single European common approach to what information has to be passed where and how. We have one central reservation system, but the Spanish have requirements for data to be transmitted in one format then the UK needs it in a different format. It’s a huge challenge for us because regulatory requirements can suddenly change and then we have to spend six months on a project to work around that. It’s not just a simple code change. It would be lovely to see one consolidated European standard rather than individual mandates coming in from different countries all with different requirements.” The greater focus on passenger information in light of tightened airline security means, says Neville, that Ryanair is now required to gather more passenger information than ever before. That, coupled with the increase in passenger volume, means the airline’s IT system has to process more information than ever before. This, he says, does create some techni-
RYANAIR TIMELINE
1990 Ryanair accumulates UK£20 million in losses and goes through a substantial restructuring. The Ryan family invests a further UK£20 million. The airline is re-launched under new management. It moves to a single aircraft fleet type, scrapping free drinks and meals on board and reducing the lowest fares from UK£99 to just UK£59 return. Passengers: 745,000
1991 1985
1986
Ryanair is set up by the Ryan family with a share capital of just UK£1, and a staff of 25. The first route begins operating daily from Waterford in the southeast of Ireland to London Gatwick. Passengers: 5000 88 www.cxo.eu.com
Ryanair launches flights from Dublin to Luton after obtaining permission from the regulatory authorities to challenge the British Airways and Aer Lingus duopoly on the route. The launch fare of UK£99 return is less than half the price of the BA/ Aer Lingus lowest return fare of UK£209. Passengers: 82,000
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The company switches its main London base from London Luton Airport to the new London Stansted Airport in Essex. Despite the impact of the Gulf War, Ryanair makes a profit for the first time, of UK£293,000 for the year. Passengers: 651,000
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cal challenges: “The sheer volume of what we put through the system each day is huge. We have millions of hits each day to our system, particularly when we have our free seats sales, and we have to cater to that. This means having a scaleable 100 percent uptime solution and a robust disaster recovery plan in place.” Despite the enormity of the operation he is supporting, Neville’s IT team still only consists of 26 members of staff in what he describes as a tight knit company: “Generally here everybody works hard and it’s a good group. Everybody here is in the same building, and we’re all in a very ‘on top of each other’ environment.” This, he says, makes the process of asking Ryanair’s management for funding for IT projects relatively easy: “You go in, you put your case together and it’s a yes or no. It’s as simple as that. You don’t have to go to America or someplace else for approval. Realistically, you just put your case together and if it makes sense, we do it.” It’s just such a no frills approach that has made Ryanair the aviation giant that it is today. But if Neville has anything to do with it, the airline certainly won’t be cutting corners when it comes to technology.
Ryanair’s controversial CEO Michael O’ Leary never shies from publicity
Cheap Thrills Ryanair is Europe’s largest budget fare airline with 32 bases and over 950 low fare routes across 25 countries, connecting 151 destinations. By the end of 2009, Ryanair will operate a fleet of 200 new Boeing 737-800 aircraft with firm orders for a further 102 new aircraft, which will be delivered over the next three years. Ryanair currently employs a team of more than 5000 people and expects to carry approximately 50 million passengers this year alone.
1995 Ryanair overtakes Aer Lingus and British Airways to become the largest passenger airline on the Dublin-London route (the biggest international scheduled route in Europe). It buys four more Boeing 737s from Transavia bringing the fleet to 11 aircraft. Traffic for the year exceeds two million for the first time. Passengers: 2.26 million
2005 Five new bases are launched, at Liverpool John Lennon Airport, Shannon in the West of Ireland, Pisa, Nottingham East Midlands and Cork, giving the carrier a total of 15 bases throughout Europe. Passengers: 30.9million
2008
2000 In January, Ryanair launches Europe’s largest booking website – www.ryanair.com. Within three months the site is taking over 50,000 bookings a week. Passengers: 7 million
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The EU Commission’s Charleroi case, which claimed Ryanair’s low cost agreement at the airport was funded through a subsidy or state aid, is dropped. The airline announces half- year profits that are 47 percent down on 2007’s interim profits due to soaring fuel costs. Traffic, however ,grows by 19 percent. Passengers: 50.9 million
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ASK THE EXPERT
A global meeting place Cathy Ham, VP Global Portfolio & Marketing at BT Conferencing, on why conferencing solutions can bring the right people together at the right time no matter where they are located in the world.
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onferencing solutions help people to get their work done without the need to travel as much. Travel costs for face-to-face (F2F) meetings are a major avoidable cost, but only if the alternatives are easy to use, reliable and offer a concrete financial saving. With the right partner, audio, web and video conferencing meet all of these criteria. Now, more and more organisations – of all sizes and across all sectors – are discovering the business benefits that conferencing solutions can deliver. Over our years in the conferencing business, we have developed a ‘business benefits’ survey tool to demonstrate the time and cost savings our customers are realising by using our services. This also gives us an insight into the kind of savings all companies could be making. For example, for an organisation with 10,000 people, the typical travel cost for a F2F meeting is around €114. Conferencing typically replaces 52 percent of these meetings, yielding a €1.3 million P&L saving. Once you add in the avoidance of unproductive travel time, this can extend the overall savings to almost €2 million.
Other benefits Using conferencing solutions to reduce F2F meetings doesn’t just deliver financial savings. Even in today’s economic environment, sustainability is still a key consideration. Travelling only when it’s essential means we produce less CO2. For the average business traveller, conferencing solutions can typically save around three tonnes of CO2 per year. Collaboration tools allow you to bring the right people together at the right time, no matter where they are based. They can collaborate instantly, just as if they were sat next to each other, working together on global projects across multiple time zones – without leaving their desks, or even their homes. Such business agility and flexibility drives innovation, customer service and cost efficient business operations. When people do need to travel, conferencing solutions help them stay in touch easily and effectively. Anyone can join an audio conference call
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We feel it’s important to help our customers create a real culture of collaboration. Because if your employees aren’t using their conferencing accounts, you won’t see the savings you expect. So our teams work with your business to help set up adoption programmes, training, helpdesks and proactive service monitoring: to make the difference between success and failure of widespread adoption. So what does the future hold for conferencing solutions? We believe the next five years will see the further Cathy Ham is the General Manager Obstacles to adoption shrinking of global geographof Global Portfolio and Marketing In today’s business culture, ical and cultural boundaries, at BT Conferencing. Ham has held the position for almost two years working together usually involves with virtual meetings over and her portfolio of responsibilities include governance, the video unit, meetings and their associated telepresence and other forms and audio and web (collaboration). travel. As human beings, we are of unified collaboration beShe has over 20 years’ experience in the telecommunications most comfortable working with coming commonplace. The industry across a number of disciplines ranging from sales people we can see and shake global economy will recover through to legal. hands with. Using a conferencing and return to growth, but service to hold meetings and work with the advantage of adremotely can seem like an alien vanced conferencing soluconcept. To get widespread adoption, people need to tions, this doesn’t have to be at the expense of the see the benefits for themselves; less travelling and less environment. impact on their personal time; easier project management; faster decision making; relief from complex diary and travel arrangements. from virtually anywhere in the world for the cost of a local phone call. Add an internet connection and they can talk and share documents or slides in much the same way as they would in person. We all know that travelling to meetings doesn’t just confine itself to working hours. So for the individual, a more flexible working policy means that work/life balance is easier to achieve. And if people are happier in their working lives, you see better employee retention rates and a more motivated workforce.
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UNIFIED COMMUNICATIONS
TOMORROW’S COMMUNICATIONS LANDSCAPE
Lavanya Palani Batcha of Frost & Sullivan paints a picture of the future of uniďŹ ed communications technology.
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he unified communications landscape is dynamic and continuously developing. Market participants such as vendors endeavour to grow their product and service offerings, depending on the current or anticipated state of the market. Pure hardware vendors are now looking to diversify into adding soft ware-based products into their portfolio, thereby bringing forth a more comprehensive unified communications solution. It is imperative that the enterprise end user understands, identifies and makes decisions pertaining to trends that could shape the enterprise communications scenario in the future. Elaborated below are three significant developing trends to look out for in the coming years. Service-Oriented Architecture: Today unified communications is widely understood to encapsulate voice, video, and data applications via a range of devices such as desktop PC, desk phone, mobile device and the like. However, there is an increasing momentum towards enhanced ser-
vice offerings such as Service-Oriented Architecture (SOA), which can bring additional benefits to an enterprise that has already implemented unified communications. Solutions based on SOA, facilitated applications such as real-time identification/tracking embedded within the unified communications platform have promising potential in industry verticals such as hospitality, aviation, and healthcare amongst others. It is anticipated that as this avenue develops further in the future, there would be myriad enterprise-centric business processes that can be integrated via SOA and unified communications. Interoperability: The world of unified communications involves a plethora of devices, applications, solutions and services, with the majority being built on closed, proprietary architectures that deny any interoperability between OEMs. Th is presents a challenge, especially in the case of an enterprise with multiple locations possessing proprietary communications products from a host of OEMs at each of these sites. The networking and unification of these divergent products in order to streamline communications within the enterprise can be a daunting and cumbersome task, not to mention the existing hindrance of proprietary products and solutions. Adding to the complexity, if the said enterprise were to look at adopting unified communications, they would be left with no further option other than to undertake a com-
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plete forklift operation. Th is would essentially involve discarding all legacy proprietary products thereby sinking significant initial capital investment on the equipment. Therefore, as greater numbers of enterprises display interest in the unified communications solution, the need for fundamental interoperability between products from different vendors is of the essence. Given the current prominence of collaborative environments in the unified communications arena, interoperability becomes especially relevant. Such a scenario has prompted several
business processes to be handled by skilled third-party service providers. Services-based models also serve to reduce the capital expenditure required on hardware and equipment. Unified communications is no exception. Vendors and system integrators are looking at various business models that would enable them to deploy hosted or managed UC services such as IP telephony, conferencing and collaboration and so on. The Soft ware-as-a-Service (SaaS) model for unified communications has been quietly emerging into the forefront. Although the services-based model is suitable for all manner of enterprises, the most significant market could potentially be Small and Medium Enterprises (SMEs). Besides the cost savings involved, the SME customer can look forward alliances and partnerships amongst unified communications market to experiencing at least a partial implementation of unified communicaparticipants, even amongst traditional rivals. Vendors such as Microtions within the enterprise. The infrastructure required for soft and IBM have been major unified communications on-premise unified communications would entail having a competitors: However, there have been announcements sizeable number of skilled support and maintenance staff, regarding these vendors working towards interoperwhich may not be feasible, especially for an SME. In the ability of their unified communications solutions. One case of a service-based model, the service provider saves significant and positive development towards achieving the enterprise from the hassle of support and maintenance. interoperability is the growing importance of Session An example of the SaaS-based model is that of the Cisco Initiation Protocol (SIP) as a widely accepted standard WebEx Connect platform that provides the capabilities for for multimedia communications. Th is can help towards audio and video conferencing, presence integration and a semblance of interoperability, if devices and solutions messaging. With additional support for document and are built based on the SIP standard. However, the indusLavanya Palani Batcha is Senior Research Analyst task management, this platform serves as a collaborative try is witnessing differences in terms of SIP implemenfor the Information unified communications tool. tation by vendors. Th is could pose even more problems and Communication
“Although the services-based model is suitable for all manner of enterprises, the most significant market could potentially be SMEs”
with several third party solutions being available. To counter such a problem, vendors would need to develop highly specific interoperability solutions.
Technology Practice in South Asia and Middle East at Frost & Sullivan. For feedback or enquiries email: tanu.chopra@frost.com
Hosted and managed unified communications services: The hosted and managed services model has been slowly gaining traction. Enterprises have started to lay more emphasis vis-à-vis focusing on their core competencies and leaving the routine
In conclusion: Despite setbacks about the adoption of unified communications due to recent economic trends, the future looks promising with significant potential for this market to grow steadily. These key technological trends have the power to shape the market landscape and further augment it, by simplifying existing solutions and ensuring that the needs of enterprise end users are served.
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NEXT BIG THING
The next generation of networks Edgar Aker shares his views on why future networks need a systematic mix of planning, automation and sustainable energy factors.
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overnments worldwide are planning new investments in greener infrastructure, including fibre, to lay the foundations for stronger economies. With next generation networks (NGNs), there’s only one way to go and that’s faster. Internet users making do with 4MB/s DSL downstream, and 100kB/s upstream on current ‘broadband’ networks have yet to experience the buzz of a 100MB/s symmetrical signal on a NGN. The unspoken weakness of DSL is that too much emphasis is placed on downstream. Upstream is essential for a growing number of applications linked to Web 2.0, videoconferencing, tele-working through VPN connection, multimedia interactivity and high-value content applications such as online gaming. NGNs based on fibre open the way to symmetrical bandwidth with up and down streams easily up to 1GB/s. Having symmetrical upstream and downstream enables numerous services from eLearning, eHealth, eEntertainment, all substantial improvements from current web-based services ingrained in business and consumer processes. Fibre Infrastructure build-out, the next big thing, requires serious levels of fi nance and investment. Most of Europe’s FTTH projects are driven by new operators, municipalities and utility companies; supported, actively or passively, by governments and local authorities. The UK government has NGN fi rmly on the agenda and is one of the first European governments with a plan for activity and funding. But then, perhaps it should. Japan is some 10 years ahead of Europe, the US some four years, according to analyst Heavy Reading in a recent report ‘FTTH maturity’. Of the current 240 NGN projects, all are in European mainland countries.
in the UK, efforts being made to smoothen regulatory issues, and a green field approach to underdeveloped parts of cities and rural areas, are encouraging, summarised in the ‘Digital Britain’ report by Lord Carter. Now is the right time to focus on the cost metrics of passive infrastructures. The challenge is that no two NGN projects are the same, as local city/municipality conditions vary considerably. Amsterdam, a Draka showcase with its canals and soft soil, Paris with its miles-long sewers, and a total greenfield site in the desert of Qatar, create radically different deployment challenges. Hands-on experience of installations in major cities benefits all partners in a project consortium, with a high degree of stan-
expertise, covers all local environment access issues (aerial, direct buried, micro-duct or sewer system) to design, plan and put into place fibre networks. Add to this, a full bill of material, fi nal network registration and ongoing maintenance. Th is approach considers the multiple cost parameters and metrics, tuned to meet local site conditions. Removing the guesswork from NGN build-out results in a high level of fi nancial accountability to accommodate investor concerns.
Sustainable factors Draka addresses both public and industry concerns for sustainable development, exemplified by bend-friendly and high per-
“UK efforts being made to smoothen regulatory issues, green field approaches to underdeveloped parts of cities and rural areas, are encouraging. Now is the time to focus on the cost metrics of passive infrastructures” dardisation, predictability and deployment practices. Draka researchers see NGN materials infrastructure expenditure accounting for 15 to 20 percent of a total FTTH project. Our methodology manages CAPEX and OPEX, reducing the total cost of operations throughout the passive value chain. By re-engineering, we ensure the most cost effective fibre delivery per consumer.
Passive approach
Investors get the best deal
Draka’s business is building passive network infrastructures using advanced fibre optics. The groundswell of enthusiasm
Draka’s combination of smart soft ware, connectivity, cabling and logistics
Edgar Aker is Director of Marketing and Products Management at and is responsible for product management and innovation for cable and FTTH solutions in telecommunication. He has held various positions within Draka in areas like energy cables for low voltage applications and data communication in the market segment Industry.
formance fibres and the miniaturisation of fibre infrastructure components that help reduce carbon footprint and energy costs. BendBrightXS fibre, complying to new ITU recognised standards, is re-shaping the deployment process for next generation networks while stimulating trends that allow higher fibre density in tighter spaces. Ease of handling, a significant factor in facilitating optical network rollouts, reduces energy consumption, material costs and project man-hours.
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SOCIAL NETWORKING
The missing link
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What do Barack Obama, Sir Richard Branson and Bill Gates have in common? They are all members of the world’s fastest growing club, LinkedIn. Diana Milne meets European MD Kevin Eyres and finds out why a new member joins the networking website every second.
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hen the most powerful man on the planet joins your social network, you know you’ve made it big. For the founders of LinkedIn, signing up President Barack Obama to their vast global membership was another chapter in a success story that has continued unbroken since the launch of the website in 2003. Even in the early days, it quickly become clear that LinkedIn was destined for great things. The original five LinkedIn pioneers launched it from co-founder Reid Hoffman’s living room with 350 of their contacts. Within just one month it had 4500 members and by the end of the year 81,000 had signed up – half of which came from outside the US. Today a new member joins the website every second and it gains a million new members every two weeks. But it’s the pedigree of those members that is at the core of the website’s value as Kevin Eyres, LinkedIn’s European MD, tells me at the company’s offices in London: “Typically the people on the site are affluent higher educated professionals whose average age is 40 and income is €80,000. Around 80 percent of them are university educated and they are the world’s decision-makers.”
stress that it is by no means the site’s raison d’etre. Indeed, he says that a closer examination of user behaviour reveals that recruitment “doesn’t even come close to being dominant”. He says the biggest reason why people use LinkedIn is for knowledge gathering. Members of the site have access to a huge skills and knowledge base that they can call on to solve business dilemmas – a tool LinkedIn’s team regularly uses to help devise its own business strategy: “The biggest use of LinkedIn is really around how to get knowledge and information. For instance, we’re looking for knowledge and information about expanding into other countries. We’re trying to find some insight into how some of the different markets work. One of the ways we have found information is by posting some questions on the site or contacting some members of the site who are outside our immediate network that have expertise in a particular area. I have such a diverse network that I know I’ll find people who have the answers.”
A political animal The fact that LinkedIn provides instant access to an audience of the world’s top business people means that it has even become a political tool. Eyres describes how both President Obama and the Prime Minister of Holland, Jan Peter Balkenende, have used the site to canvass public opinion on their reform proposals using the LinkedIn Answers tool, which provides a forum for political candidates and campaigns to communicate with high level audiences: “The Prime Minister of Holland and Barack Obama are using it to engage with their audience. It’s amazing. Obama is using it to ask people in the US about, for instance, healthcare reform, asking them what they think about the healthcare plan. It’s on the White House website with links to LinkedIn.” The use of LinkedIn to canvass popular opinion means that it is also emerging as a popular tool for research firms. Several of the world’s largest re-
Talent recruitment This elite membership, which includes Bill Gates, Hillary Clinton and Sir Richard Branson, has made the site hugely attractive to job hunters and recruiters alike. Over 40 percent of Fortune 100 companies pay to use the site to recruit talent from amongst its members. This, says Eyres, is behind the rise in LinkedIn membership across Europe despite the recession. In countries experiencing some of the worst economic turbulence, activity has been greatest, with membership up 60 percent in Spain and 40 percent in the UK, since the start of the recession. “Our members are the movers and shakers of industry,” says Eyres. “There are a lot of companies that are looking for these types of people in order to help them navigate through times like this. Even in times when hiring is down from what it was in previous years, we see that people still need to hire the right people. And the more people that are looking for LinkedIn members to employ them, the more people are joining LinkedIn.” However, while talent searching may have emerged as one of the most high profile LinkedIn activities during the recession, Eyres is keen to
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host of high profile angel investors, including Peter Thiel, co-founder of PayPal, and Marc Andreessen, co-founder of Netscape. Describing the attraction of the company to investors, Eyres says: “It’s the one user every second statistic, the revenue lines and the fact that we are growing so much. It’s also that we have such a balanced business model that is not dependent on any one revenue stream like many other internet companies. We’ve been around a long time. We have a long history of success, not just from a membership standpoint but also from a commercial standpoint too.”
Competitive edge
search companies have partnered with the site, including Forrester Research, for which LinkedIn has been contracted to carry out the firm’s online Business Data Services surveys in 2009. Media content providers too are taking a slice of the LinkedIn pie, with CNBC and the New York Times having signed agreements to provide online content to LinkedIn members.
The bottom line LinkedIn’s three main lines of revenue are premium subscriptions, corporate subscriptions and advertising. As it is a private company, LinkedIn does not disclose its revenue, but Eyres says advertising is growing at a rapid pace as companies come to understand the value of being able to reach their exact target audience – a feat rarely achieved in print advertising. Indeed, he claims many companies are abandoning traditional print advertising routes for the more instant gratification that LinkedIn offers: “One of the reasons for that is the rich targeting you have on LinkedIn. The old saying in advertising is that everybody knows that 50 percent of advertising is wasted. The problem is you have no idea which 50 percent that is. With LinkedIn, you can cut down that wastage and have a very targeted experience.” Giving the example of how this has worked for airlines, he says: “Air France and British Airways are two big advertisers that we have. They use the site to advertise their business class airfares, which you wouldn’t want to advertise to a mass audience. They advertise that to the types of individuals, based on company size and title, they believe would have a higher propensity to buy these tickets. CXOs and people in the finance industry typically would be buying those fares, so they can advertise to them directly on LinkedIn.” LinkedIn’s money-making potential has attracted investment from the likes of Sequoia Capital, Bain Capital Ventures, Goldman Sachs, The McGraw-Hill Companies and SAP Ventures, as well as a
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LinkedIn may have been around a long time, but social networking sites that have followed in its wake are snapping at its heels, particularly Facebook, which is seen as its potential competition in the recruitment sector. Eyres does not believe, however, that LinkedIn currently faces any serious competition. “We definitely see ourselves as the leader. When you’re at 46 million and growing at one member a second, there’s a certain amount of scale that’s a real challenge to overtake. That said, we’re not sitting here saying that we don’t have anything to do now. We’re continually innovating. It would be really challenging for another company even to build all the features and functions that we have on the site.” He goes on to clarify that LinkedIn’s edge is not its technology, but its members – an advantage that money can’t necessarily buy: “Features are not what really make the site in the end,” says Eyres. “It’s those 46 million members, 80 percent of which are university educated, and it’s the fact that we have executives from every Fortune 100 company on LinkedIn.” Currently the vast majority of LinkedIn members work in technology or banking – with those sectors accounting for 30 percent of LinkedIn’s total European membership. The predominance of technology professionals, says Eyres, is a by-product of the fact that these people are generally early adopters of technology such as social networking sites. He goes on to say that the strength of the IT jobs market is also driving traffic to the site: “If we look at IT professionals, typically they are the first movers when it comes to technology. But also if you look at technology, that’s where a lot of the jobs are as well, and this cuts across every industry.” Meanwhile, banking and finance professionals rely on the site as a valuable source of information to draw upon when making investment decisions: “People find great value in knowledge. People in banking and finance need to make decisions pretty quickly across a broad set of subjects and they use LinkedIn to find the experts they need with which to discuss, for instance, investment opportunities or if they are evaluating a new sector.” This thirst for knowledge is currently driving increasing numbers of professionals from the renewable energy sector to LinkedIn. In France alone, there has been a 55 percent increase in members from the environment and renewable energy sector and Eyres believes this will be a huge growth area for the site in the future: “If you look at our fastest growing areas, that’s where green energy comes into play. These people are looking to solve some really tough prob-
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Kevin Eyres is focused on developing, leading and delivering the LinkedIn’s strategy and growth initiatives in Europe. Prior to joining LinkedIn, he was European Managing Director at SideStep, General Manager of AltaVista International, prior to its acquisition by Overture, and a Director at Shopping.com. Eyres started his career as an engineer at Compaq Computers, where he spent 10 years leading development teams. He holds a BS in Mathematics and Computer Science from the University of Texas in San Antonio and has six patents.
lems that are not local; they are global. And how do you do that? By finding like-minded people, wherever they are.”
The language of success While LinkedIn is very much a global online community, the company has been keen not to neglect non-English speaking professionals, so has launched French, German and Spanish language platforms for the site – all of which have been immediate successes: French sign-ups to LinkedIn increased by 200 percent after the introduction of the platform in November last year, and within two months of the Spanish launch 200,000 new members had signed up. “Language-specific sites have been very successful for us,” says Eyres. “We see engagement levels increase after people switch to their local language. Communication is much more effective and natural for people in their native language.” These innovations are typical of LinkedIn’s adaptive approach to business; last year also saw the launch of the LinkedIn Intelligent Applications platform, which enables companies to develop professional applications for LinkedIn members. Applications now available to members including Amazon, Box.net, Google, Tripit and WordPress. It’s no surprise then, given LinkedIn’s forward-thinking approach to business, to hear that it’s a great place to work. Describing the missionary zeal of the LinkedIn team, Eyres says: “All the people who come to LinkedIn are passionate about what they do, whether it be sales, marketing, or product engineering or operations. And we are changing the way people work. It’s a place where you dedicate a lot of your time and your effort and your thoughts because it’s a challenging environment. It’s a very collaborative culture, with people who are genuinely dedicated to the overall mission of the company.” He goes on to say that the quality of the talent LinkedIn has attracted is testimony to this, with the likes of Google’s
former Head of Operations Lloyd Taylor, former Google executive Dipchand Nishar and Patrick Crane, Yahoo’s VP of Marketing, among its recent senior appointments: “If we’re able to attract high quality professionals like that then they absolutely understand the potential of LinkedIn and they want to be part of that. It’s an unbelievable opportunity that people see.” To put this opportunity into perspective, if LinkedIn’s numbers are correct, then by the end of our 25-minute interview another 1500 members will have signed up to its network. It’s success on a scale that is difficult to grasp. n
EXECUTIVE INTERVIEW
implemented. Users are increasingly working from outside head offices, from small remote offices when travelling and from home. At the same time, applications and storage are being centralised. Thirdly, organisations are outsourcing applications to SaaS vendors where the application is hosted somewhere across the internet. These three trends are moving the user
“WAN optimisation brings together multiple technologies with two aims – to deliver content faster between servers and users and to reduce the overall WAN bandwidth required for that data transfer”
Optimising your business CXO speaks to Nigel Hawthorn about the tangible benefits of WAN optimisation. How can WAN optimisation enable organisations to improve productivity and reduce bandwidth costs? Nigel Hawthorn. WAN optimisation brings together multiple technologies with two aims – to deliver content faster between servers and users and to reduce the overall WAN bandwidth required for that data transfer. Users who receive faster response are more productive, new applications and communication techniques can be implemented, centralisation and virtualisation of storage and services can be achieved without degrading access for remote users and even travelling users can have access to the same applications as those in the headquarters. And how can it help to control unauthorised network traffic and improve security? NH. Security and performance are two sides of the same coin. Ensuring users are effective at work, they provide two parts of application delivery networking (AND). As both techniques are usually implemented at the LAN/WAN
and data farther apart, WAN optimisation, in effect, brings them back together by reducing the latency/distance, improving protocols and caching data or data strings closer to the user.
What future trends do you predict for this increasingly important business function? NH. Vendors need to continue to strengthen their offering for the smallest office – a single user with their laptop and agents need to be considered for every smaller platform such as the iPhone. In addition, security and WAN optimisation need to be seen together as one solution by both vendors and the end users – this may mean getting networking and security people in the IT department to cooperate closely together. Vendors need to provide Nigel Hawthorn, VP of Marketing for ever-richer visibility into the EMEA at Blue Coat Sytems, has over 25 years experience in computers, real data across the network security and networking technologies. He writes articles, has presented at and those vendors who are security, e-commerce and networking yet to deliver functionality to forums in over 50 countries and contributed to a number of computing optimise rich-media streams books on protocols and security. He has worked for Blue Coat Systems for and SaaS need to include that over 10 years. in product plans.
gateway, customers are increasingly demanding that they be offered together. Any unauthorised traffic removed from the network makes bandwidth available for business critical traffic, and the knowledge that web security systems have about users and content type can be used by WAN optimisation appliances to ensure prioritisation based on multiple parameters. The days of simple, fi rstgeneration WAN optimisation devices that accelerate everything, providing faster spam and faster malware, seem to be coming to an end. What has driven the need for better WAN optimisation in business today? NH. There are some IT mega-trends that demand WAN optimisation to be
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BRAND LEADERSHIP
CHILD’S P L AY Since 1932 Lego has entertained generations of children and was run as a tightly knit family firm. But when the company came close to collapse it took an outsider to save it from financial ruin. Diana Milne meets the company’s CEO and saviour Jørgen Vig Knudstorp.
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espite having been responsible for his company’s dramatic reversal of fortune aged just 34, Lego CEO Jørgen Vig Knudstorp is disarmingly modest. “I don’t need to brag,” he says. “I’m not the kind of CEO that boasts about how well we’ve done because I’ve learnt that it’s other people who do the majority of the work to get there anyway.” It’s not the kind of admission you’d expect from the head of one of Europe’s biggest toy makers. But then Knundstorp is not your typical CEO. He came to the role in 2004 with no previous CEO experience, having graduated with a PhD in business in 1998. At the time his appointment was
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greeted with scepticism by the press and Lego employees alike. Indeed, Knudstorp says that even he doubted his own credentials: “Six years after graduating I became CEO of one of the biggest companies in Denmark. Since I felt I was slightly underqualified for the job, I took a humble approach to the team, the organisation and the customers. I said to them ‘Look, I’m not going to pretend I have all the answers, so why don’t you help me out’. And that, in fact, has become a trademark of the way I run the business.” By 2008 that lowkey approach, combined with Knudstorp’s sharp business acumen, had more than made up for his lack of management experience and produced results, which soon silenced his critics.
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Reversal of fortune At the time Knudstorp took up the role, Lego was in the midst of the biggest crisis in its history and close to complete collapse. The previous CEO, Kjeld Kirk Kristiansen, who is also the owner of the company, relinquished his post and took a gamble by employing a young, gifted business graduate in the hope that he would see a light at the end of the tunnel where others had failed. Describing the company he inherited, Knudstorp says: “In 2003 we pretty much lost 30 percent of our turnover in just one year. The decline continued in 2004 with another fall of 10 percent. So one year into the job, the company had lost 40 percent of its sales. And of course we were producing record high losses and cash flows were negative. My job was to look at how to stop the bleeding, how to stabilise sales and how to cut costs dramatically to deal with the new reality of selling 40 percent less than we did two years earlier. On top of that the US dollar had declined dramatically in value, which is a key currency for us. We had too much capacity, it was sitting in the wrong countries, our products weren’t sharp enough and the retailers were very unhappy.” Knudstorp set about creating a seven-year strategy for the company called Shared Vision, to restructure and stabilise the business, boost sales and reduce debt. “To describe what we did we use the slogan, ‘We changed everything but the brand’,” says Knudstorp. “We really revamped the business and the product portfolio, and we dramatically increased Lego’s profitability.” By 2008, Knudstorp’s efforts had paid off. Lego grew at 20 percent, and in the first half of this year it had increased its sales by 23 percent over the previous year, achieving profit of €124 million. Lego’s achievements are all the more impressive given the tough global economic conditions and the fact that the toy market is currently suffering heavy losses. Knudstorp believes that the fact that Lego’s own financial crisis preceded the credit crunch meant that it was in a far better condition to weather the storm than many of its competitors: “I think we were extremely lucky to get our financial crisis at a time when it was possible to go through restructuring. We restructured the debt and sold off assets such as businesses and properties. And of course at that time we sold [properties] at the top of the market. It would have been a lot harder to sell commercial properties today. So I think we were fortunate that we got that crisis and it sharpened our senses of how to operate the business.” He goes on to say that the long-term decline of the world toy market means that Lego and its competitors are not hit as hard by the downturn as companies in other industries: “The toy market over the last 10 years has been flat to declining by one or two percent. And we’re talking about an IMF forecast for the world economy this year to decline by 1.3 percent. In that sense we can say to the world economy, ‘Welcome to our world’, because we are used to operating in a declining industry.”
Sentimental value Where Lego differs from many of its competitors in a declining market however, is in the strength of its brand. The Lego Group has existed for 77 years, since Ole Kirk Kristiansen started his wooden toy business in 1932. Although the toys have evolved considerably – in particular recently to embrace robotics and computer technology – the iconic Lego bricks are still enjoyed by generations of children around the world. This continuity, in terms of Lego’s products and brand values, gives it an even greater advantage in times of economic uncertainty, says Knudstorp: “A brand like Lego is very iconic, but also nostalgic and well established and it’s something that the consumers understand. They also understand the play value – the number of play
Happy days Being the CEO of Lego may be hard work, but according to Knudstorp the joys of running Europe’s favourite toy maker far outweigh the downsides: “Lego is one of those brands where you tell people what you do and instantaneously most of them say to me, ‘Wow you must be so happy.’ They smile when they hear about the brand and they share the experiences they’ve had with Lego in their childhood or with their children. And it’s great for me, because truth be told it’s not always fun. Sometimes it’s just plain hard work and there are a lot of issues to address on a daily basis. But it makes me happy to hear people say ‘wow you’re so lucky’. And I think yes I actually am and I cannot think of any other job I would dream of having. In this day and age we all want a job we can be proud of where we’re not manufacturing something we feel bad about and that has a bad environmental impact or is making people ill. I truly feel that the more we sell, the more we do for the world, because we teach children how to think creatively so that they all believe they have opportunities in life, that they can all invent something. And we teach them how to think in a very structured mathematical fashion. So I’m very happy in my job.”
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hours associated with the toy – is very high. And I think that in times of crisis we hark back to something we know has a lasting value.” Knudstorp’s original strategy of changing everything about the company but the Lego brand itself reflects the fact that its traditional product lines have retained their popularity despite the introduction of many new product lines, including the Power Miners, Bionicle and Racers ranges. Indeed, during the first half of this year it was the classic product lines, such as Lego City and Lego Star Wars, that remained the best-sellers, says Knudstorp. “These two product lines represent two very classic patterns of play,” he explains. “Lego City is all about the real world and your role in it. You can pretend to be a hero such as a policeman or a fireman and it’s a familiar environment where you create your own towns and so on. That is an evergreen of children’s and especially boy’s, play. Star Wars is what I would describe as a modern day fairy tale. It is so iconic in the way it portrays the conflict between good and evil. There’s an immense number of fantastic characters in it and Darth Vader in particular is a classic modern character.” He goes on to say, however, that the company is keen for its toys not to glorify violence or warfare: “The Lego of my childhood was the one that appeared to be more naive and containing less violence and conflict. Today we’re definitely trying to break some barriers in how far we’re willing to go in terms of the characters being evil and having weaponry. We still have a view that we don’t want to glorify warfare and we don’t make any war toys.” Striking a balance between making its products relevant to the modern child and retaining the look, feel and simplicity of Lego’s traditional toys has been an important part of Lego’s business strategy, says Knudstorp. It has achieved great success in this area through its collaboration with Warner Bros. on the launch of the Lego Star Wars video games, which, says Knudstorp, are currently the best selling video games globally. This foray into the digital world, was done with trepidation by Lego, according to Knudstorp, who says the company was concerned that its traditional product portfolio could be put at risk by the move: “I have to admit that we had our fears that the video games could cannibalise the physical play experience,” says Knudstorp. In the event, however, the video games have boosted physical
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toy product sales and vice versa: “With boys of that age there’s a strong synergy between the gaming experience we offer and the physical play experienced. We have learned that just as children still want to read books and not just watch movies they still want to have that physical Lego building experience that cannot be replaced by digital play.”
Growth strategy As well as diversifying its product portfolio, a major cornerstone of Lego’s Shared Vision strategy has been to re-examine its core markets and consequently re-think the location of its production facilities. In terms of its global markets, although the North American and Central and Eastern European markets recorded the strongest growth in the first half of 2008, it still experienced its strongest demand from Continental Europe. The European markets are where it hopes to achieve stronger growth, including Southern Europe, the UK and Ireland. “We have invested a lot in strengthening our operation, our retailer relationships and our marketing in those markets and that seems to be paying off very strongly,” says Knudstorp. “Now I think it’s a matter of us catching up to a more natural share of these markets where we have, for various reasons, been under-penetrated in the last 10 to 15 years.” The US, however, is the place where Lego most hopes to grow its market share, and in the last three to four years, it has succeeded in doubling the size of its business there: “I think the big creature we have in our minds is the US market just because that is the world’s biggest toy market and Lego has a very strong brand in the US. We believe that from here onwards we will aim for a growth of at least seven to 10 percent a year.” With these strategies in mind Lego re-evaluated its manufacturing footprint four years ago and set up new production facilities in Mexico, the Czech Republic and Hungary, close to the markets it was targeting. To cut costs, last year it phased out an existing outsourcing agreement with the manufacturing firm Flextronics and decided to focus instead on internal production, at its Mexican and Hungarian facilities. The sweeping changes enacted by Knudstorp are all the more impressive given the fact he came to Lego, an organisation that had been exclusively fam-
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Toy story Knudstorp describes how his childhood memories of playing with Lego helped to inspire his career: “As a child I had a big Lego collection. My dad was an engineer with Shell Oil and he was a very structured and systematic person and my mother was a kindergarten teacher who was very creative and emphasised all my creative skills. They both loved Lego; my father liked it because it suited the mindset of an engineer and involved constructing stuff in a very systematic fashion; my mother liked it because it offered the freedom of creative expression. This combination of systematics and creativity still inspires me today. I truly believe it’s the foundation of problem solving that on the one hand you have the hard skills of science and maths and logic but on the other hand you also have the soft skills of story telling, role playing, creativity and critical thinking. I really think that is what Lego is all about.”
ily-run for 75 years, as an outsider. The previous CEO was the grandson of and microchips and computers when that emerged. But we’re not going to Lego founder Ole Kirk Kristiansen and had been in place for 25 years. Luckily, miss out on digitalisation. I’m committed to bringing this business into the says Knudstorp, he supported the changes that were necessary to ensure the 21st century by globalising it and bringing in digital technologies.” Lego heritage could continue: “I was fortunate enough to have an extremely And judging by the high-prosupportive and patient owner, which was quite amazing because he had been file achievements of this low-key the CEO for 25 years before that and it was his business. A lot of people imagCEO so far, Lego’s future is in very ined it (the Shared Vision strategy) was a revolution against the way that he safe hands. had been running the business. But the truth is it could not have happened without his very direct support. This was also the case in terms of long-term employees who know him and would not have followed my proposals unless they knew that he was supporting them. So in fact it has not been a case of contradiction and fighting each other. It’s been a matter of actually supporting each other along the journey.” But despite having successfully turned his company from an outdated and loss-making business into a profitable global toy maker, Knudstorp says this journey is by no means over. In a typical show of modesty he Lego has featured in video games and says he is still some way off from tackling the even has its own dedicated amusement company’s two biggest challenges: globalisation parks, and now it is hitting the silver and digitalisation: “If I’m a little bit blunt, I’d say screen. The Lego movie is being made by we are a traditional toy manufacturer with a Warner Bros. and will be a mix of live strong base in Europe that’s really starting to action and animation. The script is being drive its exports to the US. That would hurt written by Dan and Kevin Hageman, who some feelings in the company but that’s the wrote the forthcoming Hotel truth. I’m talking about how little we sell in Asia Transylvania feature. Lego joins the likes or South America and about expanding in the of Transformers and GI Joe as the latest US. That seems a little late for a lot of companies toy to be the star of its own film. Other to start thinking about. And I’m talking about toys believed to be heading to the silver the fact that we are just starting to become a screen include He-Man and the Masters player in the digital space, or on the internet. of the Universe, Monopoly, Candyland, This company was founded on wooden toys Battleship, Stretch Armstrong, Viewthen moved to plastics after the Second World Master and Max Steel. War. I think we missed out a bit on transistors
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HOSPITALITY
TAKEAWAY TECHNOLOGY Domino’s Pizza has left no stone unturned in its battle to conquer the European online fast food market. CXO meets its IT Director JANE KIMBERLIN, the brains behind the newly launched Domino’s iPhone application and online pizza tracker service.
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here’s nothing new about pizza delivery. But thanks to an aggressive technology and marketing strategy, Domino’s Pizza has taken the concept to a new level. No longer content to provide telephone and online ordering facilities, Domino’s now allows customers to order their pizza over their iPhones and even track how long it will be before the food is delivered. The brains behind this takeaway technology is Jane Kimberlin, Domino’s Pizza’s UK IT Director. Speaking on the eve of the 10th anniversary of Domino’s’ online launch, she describes how strong demand is from customers ordering pizzas from its website: “Online ordering has been increasing over the last four years from 10 percent, 15 percent, 20 percent then 25 percent. We had a mega week two weeks ago, which broke every single record so far, at 34 percent. Demand is growing all the time and it’s obviously helped by broadband which means greater use of the website. Word of mouth, but also the whole digital marketing arena, are very important.”
Online ordering
“We had a look at our customers’ technology and saw that 85 percent of our customers use Windows, the next percentage up use Mac, then around 4.2 percent are on the iPhone, so we thought we must do something for them”
Although the majority of customers still order their pizzas by telephone, Kimberlin says she predicts that proportion will eventually drop in favour of online ordering instead. In the meantime the company has launched a bid to target even more customers with its iPhone applications. Kimberlin describes the thinking behind the launch of the technology: “We had a look at our customers’ technology and saw that 85 percent of our customers use Windows, the next percentage up use Mac, then around 4.2 percent are on the iPhone, so we thought we must do something for them. It’s taken off very well indeed. We’re delighted with the numbers – we’ve had thousands of orders through already on the URL.” She goes on to say that the application was designed to match as far as possible other iPhone applications in terms of functionality and appearance: “You go straight into a website that has been enhanced for the iPhone and it deliberately looks very iPhoney. It’s very intuitive to use and very advanced. It has all the functionality of our normal site – the deals are there and you can still customise your pizza.” Despite having made pizza ordering a much more technically advanced process, Kimberlin says the company is keen for this not to impact on the job of Domino’s’ frontline staff. So it has designed the system so that all orders appear the same on the in-store system, regardless of what channel they came through: “The back office side of our stores is the point of sale system and all orders simply integrate into that regardless of whether they are iPhone orders, or whatever. All orders go straight through to the point of sale system and appear there. Our staff are fantastic and good customer service is about making pizzas and delivering them. We don’t want them to be distracted into dealing with technology.” It’s a long way from the online ordering system that was first launched 10 years ago when orders were delivered to the various stores by fax. But, says Kimberlin, there is still
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room for improvement in the way the system is run: “IT is constantly evolving at Domino’s Pizza. We invest in it all the time. Every time we have a record event on the website we go back and look at where the pinch points were, whether we had the right levels of connectivity, if the right firewalls and servers were in place and if we had the right pipes to the internet.”
Behind the scenes Kimberlin is also involved in the IT that goes into running Domino’s as a business and says there are various major projects in the pipeline, including the possible introduction of cloud computing and new CRM technology. Regarding the latter, she says: “I think that is certainly within our arena. We know where you live and we know all about you and your eating habits. But CRM is more about how good your customer experience is and what we can do to make that better.” This increased amount of customer data, which is highly valuable to Domino’s when putting together its marketing strategies, means it runs a large and complex data storage system: “We have a massive data warehouse for every single imaginable statistic that we can measure. We’re always adding to and
High flier When she’s not deploying new technology at Domino’s Pizza, there’s nothing Jane Kimberlin likes more than to take to the skies with her pilot’s license. “I probably fly about once a fortnight, generally locally around the area, maybe just to a little airfield. I do it for fun in the evenings. Sometimes I say to my colleagues ‘Let’s go for a quick trip’. But for longer trips I’ll go with a fellow pilot and just a small overnight bag. It’s a great way to unwind because you have to 100 percent concentrate when you’re flying. Nothing can get into your thought process to interfere with that.” The active CIO recently organised a charity challenge to coincide with her 50th birthday – organising for 50 people to ride 50 miles each to raise money for Macmillan Cancer Support. To find out more log onto: www.justgiving.com/ bike50miles.
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enhancing that system.” One of the enhancements the team has made is to ensure the data is available to the managers of its 570 stores – wherever they are in the UK: “We’re a franchised system and most of our franchisees have more than one store. You can’t be in two places at the same time so what we have is a facility which allows them to look at all sorts of information in real time on their Blackberry or PDA or whatever mobile device they have. It’s a simple URL link from wherever they are. So if you are a franchisee for 10 stores for example, you can see how many orders you’ve had that day, whether that is up or down versus the previous week and even your service staff ’s out of the door times. And it’s refreshed regularly so minute by minute the information is updated.” Kimberlin says Domino’s is keen to explore the possible benefits of cloud computing for the organisation, however she says the company, though normally ahead of the pack when it comes to technology, is taking a more cautious approach to this particular branch of IT: “We won’t be an early adopter in this arena but it’s more about looking at what benefits there will be and how they will be delivered. We will be looking at it from a potential disaster point of view, and in terms of cost of ownership. Everybody’s talking about it so let’s have a look at what it can do.” She goes on to say that her team is also looking into the possible adoption of VoIP within the Domino’s headquarters however, VoIP within the stores themselves is at least two years off. Where the team will be focussing serious efforts however will be in the area of social media, which the company is already capitalising on heavily to market its products: “The whole social media and the mobile arena in particular are two of the areas that we’re very focussed on. It’s really all about looking at our customer profi le and where they are. Some of our stores individually, for example, have a Facebook page. We also take advantage of things like Google Ad words and SEO opportunities. We don’t want to just be about selling people pizza, we want to be part of their lifestyle.” Th is wish to connect with customers has extended to getting them involved in tracking the pizza making process. Domino’s in the UK has recently launched Pizza Tracker – an application which has been available in the US since January 2008. It allows online customers to track exactly what stage the pizza making process is at and how close the food is from delivery. Kimberlin admits she could not have predicted how high demand for the application would be in the UK: “We were inspired by the US on this one, because when the application fi rst came out we just thought ‘this is a bit sad actually. Jane Kimberlin Who’s going to sit and watch the tracker for 20 minutes?’. But we’ve had amazing success from it.” She goes on to reveal that on average 34 percent of customers that order pizzas online use the pizza tracker facility. She says this is no surprise given the number of customers that would phone the stores to fi nd out what time their pizza would be deliv-
Everything you ever wanted to know about pizza… Pizza is a €23 billion per year industry. Domino’s delivered 400 million pizzas last year – that’s a pizza (and a slice) for every man, woman and child in the United States. Domino’s World’s Fastest Pizza Maker Dennis Tran makes three large pizzas in just 46.4 seconds. Domino’s drivers cover nine million miles each week in the US alone. (That’s 37 trips to the moon every week!) About Domino’s pizza The Domino’s brand was founded in the US in 1960 by Tom Monaghan. Since then, that business has grown into a global network of over 8700 stores in more than 60 countries, employing around 180,000 staff and involving over 2000 franchisees. DPG is the master franchisee of Domino’s Pizza in the UK and Ireland. Since the business was purchased from DPII in 1993, it has developed to become the leading UK home delivery pizza brand. Since the first store opened in the UK in 1985 and in Ireland in 1991, the group has expanded to 583 stores (as at 27 September 2009) in the UK and Ireland. Of these stores, 456 are located in England, 45 in Scotland, 22 in Wales, 14 in Northern Ireland, 45 in Ireland and one mobile unit. The group’s total annual system sales for the 52 weeks ended 28 December 2008 amounted to €392.8 million, representing growth of 18.4 percent over prior year sales. The Group’s operating profits from continuing operations increased from €20.5 million to €25.6 million over the same period.
ered prior to Pizza Tracker being launched: “I spoke to my colleagues in the US and they said people use it more for feedback and assurance. They were surprised themselves by how well it has taken off.” Domino’s is not the only European pizza delivery company that is investing in online and social media technology to grow market share but Kimberlin says that as the leader in the field, Domino’s still remains ahead of the pack: “One or two of our competitors do online sales and we monitor that carefully. What we believe is that we have a far better product than them because we use fresh dough, fresh cheese and fresh sauce. We stole the march on this technology and it’s hard for others to catch up now. We feel we offer an all-round better experience.” And despite working in an environment where she is surrounded by pizza every day, Kimberlin says she still regularly indulges in a slice or two: “At Domino’s we’re obsessed with pizza. It’s absolutely what we think about the whole time. I do love pizza. It’s unlike chocolate where if you have the chance to eat as much as you want, you do eventually stop. With pizza it never feels like that. Pizza is part of my balanced diet.”
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HEAD TO HEAD
Getting your processes under control We sit down with two experts in the field of business process management (BPM) to get their views on implementing and optimising a chosen solution. What advice would you offer an organisation looking to roll out a BPM solution? Should it be introduced step by step and how should staff be assisted with the transition? Jesse Shiah. Organisations should think big when they start the selection process of rolling out a BPM solution. The first thing to recognise is that achieving process excellence with BPM is not a technology issue but most importantly a people and culture transition and transformation challenge. However, the right BPMS could help to ease this challenge. Unlike many enterprise applications that are for a targeted group of users, a BPM solution shall and will touch everyone in the organisation and become an indispensible part of how they work daily. A BPM solution that can help organisations leverage their existing assets and people’s existing skill sets (such as Visio and Microsoft Office tools) for BPM can greatly facilitate user buy-in and reduce risk in roll out. A metadata-based, model-driven BPMS that aligns with SOA and turns ‘process’ into an enabling technology for business users is key to truly align Business/IT and achieve sustainable BPM success.
eration, sales volumes, products per customer, customer satisfaction metrics and general business performance measures. This allows you to determine the return on investment in BPM over time. Any good BPM solution should provide business performance dashboards and KPI measurement to enable a closer focus on business improvement, identifying bottlenecks and potential process improvement opportunities in real time. Once the flexibility and power of BPM becomes evident, usually half way through the first project, it is vital to maintain governance of project scope and change requests. If you have chosen a BPM solution that is designed to support iterative process design, development and deployment it is less important to get everything absolutely right first time. Fast iterations with incremental change are more effective than painstaking analysis of every possibility within a business process up-front. Organisations will always be surprised by what they find when they have basic control and visibility of processes in production. JS. One of the most commonly seen challenges managers face is that successful BPM initiatives require bringing together people of different disciplines, such as business process analysts, subject matter experts, and IT, to
“What has become evident in the last 12 months is the increased interest in BPM technologies, even from organisations who have tried small deployments of BPM and who are now back in the market looking for mature, enterprise-class BPM” John Everhard
John Everhard. With real case studies showing the high levels of ROI associated with BPM, it is now time to consider BPM as an enabling technology. This change in thinking should drive the adoption of BPM across the organisation in a continuous pursuit of positive results such as reduced operational costs, increased sales, and improved customer retention. This approach doesn’t mean you have to map and model all of your business processes up front; John Everhard, European rather, it means think big, start small and grow Technical Director of BPM adoption incrementally. First, we need an efPegasystems, has more fective BPM leader, with the vision and passion than 30 years’ experience for change, charisma and good persuasion skills. in the IT industry and has Then create a small team made up of business, worked for large analysis and IT staff who effectively drive the inicommercial organisations tial projects to successful implementation. in the energy and Training in the chosen BPM technology is essenfinancial services markets, tial and, after the first couple of successful projects, as well as a number of the organisation should create a centre of excelsoftware companies and lence that becomes the enabler for wider adoption consultancies in Europe of BPM solutions across the organisation. and North America. He specialised in applying What are the main challenges managers face technology to improve when introducing BPM and governing it in the design, build and order to achieve the highest ROI possible? deployment of software. JE. The first step is to ensure you have some realistic measures of the current situation, cost of op-
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work together in an end-to-end, collaborative manner that is very different from the traditional waterfall, hands-off approach. Further, the nature of BPM will inevitably incur iterative improvement cycles from process discovery to deployment and thereafter. A BPMS that can facilitate the multidisciplined team to quickly adapt the process implementation changes from user interface tweaking to back-end integration point reconfigurations is key to shorten the implementation and change management cycle that will lead to the highest ROI. A metadata-based, model-driven BPMS can best facilitate that goal. Has BPM adoption been affected by the recession – has it forced organisations to look at shaking up their processes and slash costs? JS. Based on our observation, we have not seen BPM adoption being dampened by the recession. As a matter of fact, we have seen many organisations actually deeming BPM an imperative initiative during this down economy to help them derive differentiated competitiveness such as saving costs through automation efficiency, gaining better insight (e.g. together with BI) into operations to pin-point improvements needed, making better and timely business decisions, integrating with and serving partners and customers more effectively, etcetera. As organisations look to do more with less, they are looking to invest in innovation to improve their processes and operations. As identified by leading an-
“As organisations look to do more with less, they are looking to invest in innovation to improve their processes and operations” Jesse Shiah alysts, BPM adoption is one of the most significant investments organisations are making during this time to remain competitive. Organisations also striving to tap into previously unattained business agility values are turning to BPM for the solution.
Can you give an example of where you recently introduced BPM for a customer and the difference it made to their operations? JE. BAA (British Airport Authority) analysed their IT needs and decided to deploy an Airport Collaborative Decision Making (A-CDM) solution to gain control of the aircraft turn-arounds at Heathrow. They had 480,000 aircraft movements in 2008 so needed a solution to provide better real-time information to allow joined-up decision making across the organisations involved in the turn-around process. In response, Pegasystems’ PRPC BPM suite was seen as providing an agile, fast development solution to enable their future vision of A-CDM. The first iteration took just 12 weeks and forms one of the core components of BAA’s Total Airport Management programme. The BPM solution feeds a live operational dashboard, providing a central view of what is happening to aircraft from initial descent into Heathrow to leaving Heathrow’s controlled airspace. This allows involved organisations to input and download information according to service level agreements and to take action as soon as they fall behind pre-agreed goals, before deadlines are exceeded. EUROCONTROL predicts if 50 major airports saved one minute per taxi time per aircraft, a solution such as BAA has deployed would save 145,000 tonnes of fuel annually and 475,000 tonnes of CO2 – a massive ROI. JS. With AgilePoint and SharePoint, SLG (a global logistics service provider), was able to expose its underlying supporting IT applications to the business process layer to empower its project managers and business stake holders to make changes directly to processes and collaborate through SharePoint. The result is an unrestricted ability to respond to changes on demand instead of involving weeks of IT coding as was required in the past. The result is that SLG is now able to respond to business requirement changes five to 10 times faster and cheaper. EquaSiis leverages AgilePoint and SharePoint to deliver world class business and IT services sourcing, and procurement and management capabilities to Fortune 500 companies through software and services. AgilePoint’s true model-driven architecture delivers process-based enabling technologies for SharePoint. The result is significantly reduced time and cost required to create and maintain SharePoint based complex workflows and dynamic composite business applications by up to five times. n
Jesse Shiah is the co-founder, President and CEO of AgilePoint (formerly Ascentn). Shiah has over 20 years of combined technical and business experience in the software industry with emphasis in strategising the direction of emerging software companies for growth. Prior to founding Ascentn, Shiah held management positions at various institutions and startups.
JE. Organisations deploying BPM broadly across their organisations and who are mature in the use of this technology seem to have weathered the financial crisis more effectively than those who are yet to deploy BPM or who have only deployed it piecemeal. There seems to have been less ‘shaking up and slashing’ in these organisations and more fine tuning or rational decision making. What has become evident in the last 12 months is the increased interest in BPM technologies, even from organisations who have tried small deployments of BPM and who are now back in the market looking for mature, enterprise-class BPM. The speed of decision making when considering a new BPM investment has slowed, obviously all investments are under greater scrutiny and proof of ROI is definitely at the forefront of most BPM selections
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now. Some organisations who find themselves in full fire-fighting mode to secure against the financial and compliance demands they face are struggling to give sufficient executive time to make decisions on technology purchases.
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way to reduce carbon emissions. One of the frustrations that many executives have with initiatives related to IT is that huge upfront investments are required, and these investments are justified based on projected future returns Schneider Electric’s Neil Rasmussen outlines how that are difficult to measure and often unreaorganisations can make the right ‘green’ decisions. lised. Fortunately, many of the opportunities related to IT energy savings actually cost very little or are even free, and the savings can be measured almost immediately. While many high-impact, low-cost energy improvement opportunities are available during the planning of a new data centre, existing data centres typically also have shocking inefficiency of energy use. Executives need to set the right tone or targets regarding efficiency improvements, but in general will need to rely on the skills of their staff to implement specific strategies to optimise the efficiency of IT operations. However, there are three important policies that executives can and should implement to drive reductions in energy use of IT. First, a policy should be established that IT decisions must explicitly include the cost of energy in all total cost analysis. When energy costs are properly included, many decisions such as server retirement, IT hardware selection/ purchasing, and virtualisation become more obvious or more urgent. Second, policies he typical server is responsible one area where organisations can take shortof server standardisation should be implefor roughly 2.5 tons of CO2 per term actions that generate immediate financial mented. Th is standardisation will facilitate year, which means every two returns. Organisations typically waste energy ongoing virtualisation programmes, as well servers have approximately the for IT in four different ways: as improve the planning, same environmental impact design, and efficiency of as the average car. This is an interesting fact, • IT resources online that power and cooling systems. but today it is very difficult to incorporate this should be retired Th ird, this requires all data concept into IT decision making. How can we • IT resources that are grossly centres to report the efficienencourage green IT decisions? One of the most underutilised cy of the power and cooling effective ways to drive change in organisations • IT hardware that was not infrastructure, using the inis to express the problem in financial terms. selected based on its energy dustry standard PUE or DCiE When we consider that an average server is reefficiency metrics, and establish an sponsible for an electrical energy cost of about • Power and cooling systems ongoing programme of con€1500 per year, and over half this energy cost that are consuming more tinuous improvement. One is typically wasted, the environmental problem power than the IT equipment of the great problems with IT transforms into a financial opportunity. itself and are improperly conenergy use is that it is generThere are many aspects to ‘green IT’, figured, sized, or operated ally invisible. Making energy Neil Rasmussen is the Senior VP of including data centre water consumption, visible in the IT decision Innovation for APC by Schneider embedded carbon, equipment disposal and When we consider that processes, as well as visible Electric. His current research is focused on next generation high energy use. Over time, regulations and techIT energy use is a substantial in the day-to-day operations efficiency data centres. He holds 17 patents related to data centre nology shifts will address these problems. For portion of the carbon footof the data centre, is the fi rst architecture and has published most of these problems, it is difficult for a single print of many organisations, step executives should take in over 50 papers on that subject. He received his BS and MS degrees in organisation to justify working on them in a the improvement of IT energy preparing their organisations electrical engineering from MIT. meaningful way. Energy use, however, is the efficiency becomes a profitable for a greener IT future.
Green is clean
T
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ENERGY
Christian Egal, CEO of EDF Energy Renewables, tells Huw Thomas that the forecast for wind energy is extremely good.
W
hen EDF Energy and EDF Energy Nouvelles announced their partnership to form EDF Energy Renewables in June 2008 this underlined a growing consensus that the industry needs to get serious about developing alternative power sources. Furthermore, the new company’s establishment in the UK reflects the country’s massive potential as a generator of wind energy. As an island nation, the surrounding seas offer access to one of the most abundant supplies of reliable wind anywhere in the world. When we meet up with CEO Christian Egal in EDF’s central London office, the UK’s suitability is something he is extremely keen to stress. “Renewable energy is growing everywhere in the world. But in this country the mix is different,” he says. “Wind energy has had huge growth for five years, but what is specific in the UK is that Great Britain is an island, so we can take advantage of this location with all the renewable energy linked to the sea. Offshore wind is definitely the main renewables potential in the UK, as well as wave and tidal energies, which are also very promising. But those are still at the latest development phase.”
Plans for UK wind energy can only be described as ambitious. There is currently about 8GW of installed or planned capacity in place. The UK government’s strategic energy assessment recently reported that British seas could eventually supply a further 25GW of power, enough to serve the needs of all the country’s homes. But while there exist tremendous possibilities, actually realising them will require a great degree of effort. “It’s a huge challenge,” Egal agrees. “Nobody has ever built a wind farm 100 kilometres off the coast in the North Sea. It will be difficult, but what is absolutely fantastic in this business is that everybody is very confident in the capability of the supply chain and the players to deliver.” Obviously, the costs associated with such a huge project present difficulties of their own. Installing turbines that far off the coast,
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even in the comparatively shallow North Sea, is a far more logistically trying operation than siting them onshore. Farm sites are picked for their exposure to wind, which means they must be built in often very difficult conditions. Building offshore takes twice as long and costs twice as much as a similar project on land. But according to Egal, the UK Crown Estate’s plans are helping to mitigate this problem by targeting huge capacity. This encourages all the major players to get involved and creates significant economies of scale. “If you were to put one turbine in the North Sea, it would never happen,” Egal says. “If you want to put 500 or 1000 wind turbines there, that is much more achievable.” Building the wind farms is far from the only challenge. Getting the power they generate to where it is needed also requires some new thinking. “One of the other challenges is the grid,” Egal continues. “Connecting it needs a large scale approach rather than an individual approach for a single wind farm. Maybe in the long-term perspective, it will be a European approach because if we build a wind farm for the UK in the North Sea, it could also be connected to Sweden or Denmark. Maybe we’ll see in the next few decades a power grid all over Europe, based on offshore wind farms located all over the seas.” This vision of an integrated European power infrastructure is one that crops up regularly in talks with those in the industry. Given the speed and efficiency that normally characterises major pan-European projects, you would be forgiven for thinking such a future remains a long way off. While Egal concedes that it remains a huge undertaking, his confidence that it is achievable is infectious. As far as he is concerned, renewable energy, and specifically wind, is an idea whose time has come. “It’s very exciting,” he says. “Wind energy is the most dynamic industry all over the world, and even in this very tricky period it is still growing.”
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Counting the cost While there is no argument that Europe desperately needs new sources of power if it is to remain successful, critics of renewable energy contend that it is simply not cost-effective without massive government subsidies. So can renewables ever offer value for money? “It’s a complex approach,” Egal admits. “Renewable energy all across the world is still supported by public subsidy. The schemes that the countries select are different. The Renewables Obligation Certification (ROC) mechanism is specific in the UK, but in every country there are mechanisms that make renewable investment possible. Because of the current energy market there is no possibility of making a renewable asset profitable. We are not far away, not at all. For example, last year, when the market price was not particularly high, it was at the level where it was much higher than the cost of renewable energy. But in order for an operator to decide on an investment, they need a certain level of visibility on the long term. So all renewable energies are incentivised by public schemes, which make the investment possible. The principle of renewable energy is that it starts from public and government willingness, worldwide European and country willingness to do it, and each country provides to the operators the appropriate scheme to make it happen. So is the mechanism proposed to the operator in the UK enough to be profitable? Yes. If it was no, there wouldn’t be any capacity, so it is profitable. Of course, there are some projects that are more profitable than others, and it’s down to a professional approach to make the difference.” While this makes a certain amount of sense, it doesn’t answer the question of whether renewable energy will ever be able to stand on its own two feet. The current system allows the power companies to stay in the black, but only on the back of government and consumer support. Will renewable energy ever be able to compete on a level playing field? “I would say, yes,” replies Egal. “The ROC mechanism provides some additional revenues to renewable energy up to a certain level of achievement. If the global target is reached, the ROC mechanism will stop. Currently the target is to achieve nine percent of power from renewables. The actual value is four percent. So the ROC mechanism is there to incentivise the utilities to deliver some renewable energy up to certain level of achievement. When that target is reached, the public support will stop. It’s logical.” It is only natural that renewable energy is initially going to cost more than traditional sources of power. While coal and gas have a massive installed base, wind and the like are effectively starting from scratch. If we are serious about our commitment to getting more of our energy from renewable sources, these shortterm costs are something that we will just have to bear. In any case, as traditional sources such as oil and gas start to dwindle and become harder to access, the market may make renewable energy considerably more competitive. Unfortunately the current economic climate is particularly unfriendly. Sources of funding are tight and in many areas there seems little appetite for any investment that isn’t going to quickly bring big returns. Nonetheless, Egal is clear that EDF Energy Renewables remains on track to hit its targets. “It does have some impact, but more on the short-term period,” he says. “We have to deliver a gigawatt by 2012, so we have to be very attentive to the capability to invest in this wind farm in this difficult period. If we speak about the next phase to deliver even by 2015 or 2020, it’s another story. That will require a huge amount of money, but we can hope that it will be after the crisis
that we are facing now. I am not saying it will be easy; it will cost billions and billions of euros to invest in these facilities. EDF as a whole has some other projects as well, so it is challenging.”
Further alternatives Though EDF Energy Renewables’ principle focus is on wind power, due to its comparative maturity and the UK’s geographical suitability, it is also exploring other potential avenues. “We are looking at wave and tidal technologies, which are not as mature as wind energy, even offshore,” says Egal. “We rely on the R&D department within EDF. We are looking at wave technologies as well. We are very attentive and we are following feedback on this work. Our business is to invest in modern technologies with good profitability, so it could happen in the next two or three years.” Solar also remains in contention. Though the UK isn’t known for its cloudless skies, solar energy’s success in the not particularly sunny Germany demonstrates that, as technology improves and becomes less expensive, it does have a part to play in Europe’s renewable future. But from a UK perspective, it is wind that is going to provide the big gains. Wind is one of the most well-established renewable energy sources and has developed rapidly over the past few decades. “Wind technologies are improving every year,” Egal confirms. “It is amazing because we now have some turbines that are 160 metres in diameter that generate 6MW. If you look at a wind turbine only 20 years ago, they were only 15 or so metres in diameter and generated only 50 KW. Who would’ve imagined 10 years ago that we could build and install some 6MW wind turbine? As an example, EDF Energy Nouvelles, part of EDF Energy Group, has stakes with other partners in a windfarm of 30MW capacity with just six wind turbines. It is based 30km offshore and each wind turbine has a rotor diameter of 126 metres.” On the whole though, Egal seems optimistic about the potential for wind and other renewable energy, both in the UK and across the world. “When we look at the overall capacity we have 120,000MW installed all over the world,” he says. “Last year, for example, we installed more wind energy than gas or coal. Wind energy has developed more in European countries and the US than in developing countries, but if you look at the possibility of wind farms in China, for example, there is no limit.” That is not to say we should expect to see a major uptake of renewable energy in the developing world all that soon. Egal sees it as a responsibility of those in more affluent nations to keep working on the problem until it can become affordable for everybody. “I think the fair approach has been taken by the European countries but renewables remain more expensive than coal, gas and so on,” he says. “European countries and the US are paying to make these technologies as profitable as the other technologies in the near future. Can we really ask the developing countries to pay for these technologies? I don't think so, and I think we recognise that and that we have to pay this premium. Climate change, which is the basis of these developments, has given us huge responsibilities across Europe, so I think it is very fair approach for us to pay for the first stages of the development and allow others to take advantage of these developments when it is more financially viable. In terms of the possibility to implement wind energy in these countries, it could happen very quickly. It’s just about timing.”
“We are looking at wave and tidal technologies, which are not as mature as wind energy, even offshore”
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There’s an app for that Stephan Van Herck, VP at Adobe Systems, says now is the time to embrace the new generation of enterprise apps.
I
t’s a common phenomenon with new technology: the public enthusiastically embraces the latest advances, while corporations wait years to see if a new technology proves successful. But with the mass adoption of Web 2.0 technology and clear benefits, can the corporate sector afford to lag behind the times? Digital devices like the iPhone and iPod and web applications such as YouTube and Facebook have won over hundreds of millions of enthusiastic users worldwide, most of whom began using the devices and applications with no training. In a few simple clicks, people are accessing immersive services, uploading and editing rich content, or initiating instant interactions with people anywhere. Using traditional enterprise applications to provide the same functionality in a corporate setting can be far more complex, requiring lengthy development cycles and discussions about rollout schedules, training, and overcoming resistance to adoption. Fortunately, the gap between the richness and interactivity people experience using popular consumer applications, and what they experience at work is narrowing due to overwhelming employee and customer demand for consumer-style applications in the workplace. In response, IT teams are looking to replace complicated, text-driven application interfaces with much simpler, graphically-rich user interfaces built on enterprise rich internet applications (RIAs). Not only do the visually engaging interfaces boost employee productivity but they also reduce training costs and accelerate adoption because the soft ware is more approachable and intuitive to use.
and other factors on the line – corporations sacrificed ease of use to get much needed capabilities. For employees, customers, and corporate shareholders alike, times are changing. New technologies can now combine the strengths of web and desktop applications into a single, easily managed application offering a more immersive, expressive user interface to support critical business applications. And while the changes might seem purely ‘cosmetic’ they deliver tangible returns, boosting employee productivity, accelerating application adoption, strengthening customer service, and directly impacting an organisation’s bottom line. The result is that many IT teams are bringing a new design sense to enterprise applications, resulting in business applications that are more compelling and a lot easier to use. Drag-and-drop functions, rich graphics, support for multiple content types, and other elements are becoming increasingly common in enterprise applications. The advantages are readily apparent. For example, by leveraging dynamic, online dashboards, managers at all levels can quickly evaluate sales, employee performance, production schedules, and other areas for better decision-making. Also, improving the usability of customer self-service applications can stop people from calling support centres for routine requests, saving employee time and ultimately the business saves money.
User-centric design Putting function before form It’s no secret that traditional enterprise applications have generally put function before finesse, even at the cost of usability. Because function is essential in business – with product development, revenues, customer satisfaction,
Some of the fi rst uses for RIAs in the enterprise focused on data visualisation and decision support. Major providers of business intelligence soft ware offer customers visually driven dashboards that make it easy to aggregate, view, and manipulate on a single
interface large amounts of data from core operational systems. Information can be pulled from one or many enterprise systems and presented in dynamic interfaces that require managers to do little more than drag-
“For employees, customers, and corporate shareholders alike, times are changing” and-drop data from one area of the screen to another and point and click to run analyses and generate reports. Today, enterprise RIAs are being developed for a range of applications, from corporate training to human resources to customer sales and support activities. For corporations, the benefits extend beyond boosting employee productivity and increasing customer satisfaction. Payback periods drop, while savings accrue from better decision-making, reduced training costs, and other factors. No longer relegated to entertainment or popular consumer applications, rich, dynamic interfaces and immersive experiences are making their way into sales, fi nance, service, and other enterprise-class applications that are integral to a company’s success. The impacts are evident on employees and customers who will fi nd the experience easier and often more satisfying. But furthermore, I believe it will impact positively on the company’s bottom line and it is for this reason that we should embrace the new era of enterprise applications.
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Engineered workforce management Ben Zifkin on the science of managing your people.
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here are few disciplines that can both generate hard cost savings and increase revenue for your organisation. Engineered workforce management, however, is one of them. Industries that place a heavy emphasis on demanddriven scheduling (retail, healthcare, financial services and others) are increasingly relying on quantitative analysis to manage their workforce. Gone are the days of managers scheduling their people based on ‘gut feel’. Those subjective, intuition-based methods have been replaced by detailed measurements, terabytes of data and advanced soft ware. The end goal is quite simple: create an accurate forecast, workload and schedule to ensure that you have the right people staffed at the right time. Overstaffing means that you are burning labour dollars. Understaffing leads to a drop in customer service, which inevitably results in decreased sales. The good news is that your organisation most likely has all the components required to achieve this goal. The bad news is that each of these components are typically owned by different groups within your company without much visibility into how their piece affects the others.
Holistic view The key is to develop a holistic strategy that pulls these pieces of the puzzle together. If we look at a very basic model, you can collect transactional data from a retail POS system, patient care system or bank teller till. You can then put that information together with facility access information or traffic counters and
you would have wonderful historical informaorganisation. Identify drivers for workload tion as the input for a forecasting algorithm. If demand. Then implement legislated, union or you know who will be coming into your facilemployee-agreed scheduling rules. ity, when they will be coming and what they Simulate. Transform the theoretical into will be doing based on that algorithm, you can reality by running computerised models. then multiply those figures The outcome of adopting against your labour standards this approach is that you have (measurement of how long it a clear and direct link to cause takes to do a task or a portion and effect. For example, if a of a task) to determine how store was running a promotion many resources will be needed where the cashiers are to give throughout the day. a coupon at the end of every The final stage would transaction, that step would be to use this scheduling inalmost certainly modify the formation to validate how it labour standard. That labour would manifest itself in the standard change may affect real world. You can do this the workload and schedule. Ben Zifkin is a co-founder of by utilising queue modelling That schedule modification Axsium, a global business and technology consulting or traffic simulation soft ware would then have an impact on firm dedicated to workforce management. As Axsium’s to determine how long your the number of people waiting partner in charge of international clients are waiting in line or in a queue. The ability to make operations, Zifkin has established a reputation for delivering quality how many patients would this link in a simulation ensolutions to many of the largest and most complex organisations be queued up in the waiting vironment is a very attractive throughout the world. room. The first step to achievproposition to many organisaing these results is to set up your engineered tions. What is even more attractive is that these workforce management platform. initiatives are highly visible programmes that Optimise your processes. Develop a send a clear message to employees and sharelabour standards framework that is granular holders that the company is taking significant enough to provide meaningful data but not too steps to shore up its operations. granular that your organisation is paralysed However, the main selling point is the unby numbers. Then accurately measure all critibelievably compelling business case. Hard cost cal processes. Compare your standards against savings by reducing overstaffi ng and increased industry standards. Finally, re-engineer prorevenue by enhancing the customer expericesses accordingly. ence will always be the reason why world-class Effectively deploy your workforce. First, organisations see an engineered workforce as a fi ne-tune a forecasting model for your unique critical piece to their future success.
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THE GAME-
CHANGING POTENTIAL OF HR
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How efficiently your human resources department manages the impact of the economic recession could decide the fate of your firm in these tough times. Rebecca Goozee takes at look at what’s happening in the top performing HR organisations and the role HR is playing in keeping employees motivated and ensuring talent stays put.
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hether or not the economic recession is behind us, there is no doubt that many companies are still experiencing the full effects of a damaged economy in every function of the firm, including human resources. While tackling the challenges of a recession, the HR department is also charged with ensuring that employees stay inspired and motivated, even in today’s tough times. And while some aren’t doing so well, others are rising to the top, as demonstrated by the companies on this year’s Fortune 100 Best Companies to Work For list. So just how and what are these companies doing differently? According to Fortune, culture continues to be the most important aspect of what makes a company great. And topping the list was NetApp, the San Francisco-based data storage and management company that has been steadily rising on the list for the past six years running, and continues to grow revenues while boosting employee morale. NetApp’s SVP of Human Resources, Gwen McDonald, believes that HR will continue to play a pivotal role in ensuring that employees stay motivated and productive during the downturn. “We continue to focus on effective communications so our employees understand what’s going on with the business and what we still need from them in terms of driving our business forward,” says McDonald. Keeping employees engaged and communicating with them keeps them motivated, suggests McDonald, who has been working on a number of different ways to ensure that employees feel valued at NetApp. First of all is the quarterly meeting that is facilitated by CEO Dan Warmenhoven and COO Tom Georgens, which gives an overview of accomplishments the quarter before and focuses on priorities for the upcoming quarter. “We have also been creative in looking at social media,” explains McDonald. “We have in place what we call NetApp Live, which is an opportunity for employees to ask questions and for us to fi nd out what’s on their minds. We also have video on demand where various leaders talk about business opportunities and address key areas for employees. Also, our intranet keeps top of mind on critical areas, from business to HR and marketing. We’ve found various levels of communication that keep our employees engaged and we continue to focus on how effective we are at communicating.” While historically NetApp has seen double-digit growth in terms of both revenue and its number of employees, the economic situation has meant that, from an HR perspective, it has been possible to stop and
look at the company’s transformation. “Th is pause has allowed us to step back and look at some of the areas we need to improve to ensure that our HR organisation can continue to play a role in helping with business and change readiness,” explains McDonald.
Changing priorities Nick Mutton, Executive Vice President of HR for Four Seasons Hotels and Resorts, maintains that programmes that recognise the best employees in both customer service positions and “heart of the house” positions are a mainstay of employee morale. “We also recognise the special efforts of those employees who go out of their way to resolve guest or fellow employee issues,” Mutton says of the hospitality giant. “At a time of slower promotion opportunities, we encourage our employees and managers to cross-train in different positions to expand their skills and adaptability.”
“This pause has allowed us to step
back and look at some of the areas we need to improve to ensure that our HR organisation can continue to play a role in helping with business” Gwen McDonald
For Judith Edge, Corporate Vice President of Human Resources at FedEx, the recession highlights the business benefits that the function can bring to the business. She believes that HR should be a strategic partner, proactively collaborating with different business units and operations. “We work closely with legal, fi nance and other teams so that we are able to analyse data, spot trends, identify risks and opportunities and then help develop action plans to address those opportunities,” explains Edge. “We also work to ensure that HR priorities are aligned with key business strategic objectives, whether that’s recruiting, performance management or employee relations.” Edge goes on to explain that the economic crisis has created new priorities in human resources at FedEx. She sees much more emphasis now on performance management and on technology to deliver training or information. “There’s more emphasis on the leadership pipeline because even though we have this economic crisis, we still have a large generation of baby boomers who will eventually retire.
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performance management at the organisation. “We want something that provides leadership with a visible dashboard that those leaders can look at and monitor on a monthly basis to see how their objectives are cascading down into the organisation and how those employees that have input into the accomplishment of strategic objectives are contributing and progressing towards completing those deliverables.” Mutton agrees that new priorities have emerged during the downturn, and admits that Four Seasons is focusing on learning and training, despite a reduction in training being among the seven most popular actions companies are taking in this recession. “We aim to be a learning organisation,” he says. “We continue to make training priorities top of our list and are constantly reviewing our programmes to find efficiencies to ensure they are relevant, job-specific and create measurable outcomes.” Mutton goes on to explain the importance of e-learning at the company, pointing out how effective and relatively inexpensive the programme has proven to be. “We are also continuing our middle and senior management learning programmes in anticipation of our continued and rapid growth,” he adds. At NetApp, McDonald has also been reviewing training and is looking at different methods of delivering training, given how critical the function is, particularly in tough times. “We’ve looked at how we should continue to deliver training, but we’re also trying to balance out costs and our ability to stay within budget. We’ve seen a drastic reduction in face-to-face classroom training and we’ve spent more time looking at e-learning and web-based learning. Employees absolutely need to continue improving their skills, particularly around project management and cross-functional boundaries; leadership, for example, is key for us to sustain but we’re simply looking at alternative delivery models.”
Top of the pile You’ve topped Fortune’s 100 Best Companies to Work For list. What does this mean to you as a company? Judith Edge
They may have delayed retirement for a year or two, but eventually they will be leaving the job market and we still have a high focus on growth, especially internationally, so I do believe that those new priorities have been highlighted by the current economic situation,” she says. Going on to explain how the company is working on the value of leadership and performance management as priorities, Edge reveals where the company is looking to step up. “We’re pushing the visibility of executive leadership teams and we’re increasing recognition for employees and ensuring an open channel with them,” says Edge. “It’s not that we didn’t have that before, it’s just that we have recognised the importance of having these things in place now more than ever before.” Edge goes on to say that she sees many companies struggling with performance management tools that are perceived to be effective at distinguishing performance across an array of different levels. FedEx has had a performance system in place for a number of years and is currently undertaking a full review of it to see if there is a better way to structure
Judith Edge, Corporate Vice President of Human Resources at FedEx: “It really is our report card because a lot of the selection is based on an anonymous survey, so it’s a real affirmation that our leadership team is delivering and it’s a signal to us that we’re continuing to do the right things, even though it’s a difficult economic time.” Gwen McDonald, SVP of HR at NetApp: “It’s reinforced the reputation of the company. We believe that we have a company that is unique and that our culture is our critical differentiator and being number one is a validation and a confirmation that our employees have a great experience.” Nick Mutton, Executive Vice President of HR at Four Seasons: “We are honored by this kind of recognition. It validates our efforts and we are thrilled to have achieved this status in many countries around the world.”
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Leadership Over at FedEx, Edge considers there to be two main training categories: critical training such as leadership development, and continuous training that is important but that is not necessarily critical, such as presentation skills. In terms of the former category, Edge is keen to continue delivering it, and while not in the exact vehicle she would like, she has been utilising technology so employees can have access to training online, which is a lot more economical than traditional classroom learning: “I do think it’s important to maintain programmes like leadership development, and as such we have maintained two of our critical programmes, Purple Pipeline and Excel. The first is a development programme for high-potential managers who we want to develop and move up in the organisation, and the second is targeted at those at the vice president level who are looking for promotion and to move up in the organisation. So we have taken action to use different delivery methods for our important training, but we have managed to maintain what we would call our critical or essential training.” What impact does this focus on training have on employees? Edge believes that employees appreciate the continued focus on leadership development. “During these tough times we’re asking people to do a lot more, so when you recognise an employee for a special programme like Purple Pipeline or Excel, it’s flattering to be nominated for that because only a limited number can go into those programmes and it’s a way for us to recognise top talent while continuing to develop their leadership.” Edge goes on to explain about the online system at FedEx called SkillSoft, which delivers 2000 different training courses that are open to all employees from home or at work, allowing them to continue developing their skills. “Employees become more marketable and are always able to continue developing their careers at FedEx, so I think those things have gone over in a very positive way,” adds Edge.
Challenges Beyond training, there are a number of challenges that the economic crisis has highlighted – including tough decisions regarding a reduction in the workforce. With the unemployment count going up daily in the US, this is an especially tough challenge, particularly when you consider that how companies handle this tricky situation will also reflect back on them. Last December at FedEx, Edge had to reduce the number of personnel and the number of work hours at FedEx Express and FedEx Freight networks in a number of locations. By streamlining information technology systems and making pay reductions, it was possible to minimise the further impact to employees across the enterprise. But in March, FedEx was forced to take another employee action. While it impacted less than one percent of the workforce, it was still a tough decision. “We’ve been able to ensure highly competitive severance packages, outplacement services and opportunities to apply for other positions at FedEx and I think by taking those actions, we’ve been able to preserve our culture while addressing the challenging issues that face so many different companies today,” says Edge. NetApp also faced an employee reduction earlier this year: on February about six percent of the global workforce was cut. McDonald cites the global economic crisis as the driver behind evaluating several areas in the company that were not performing adequately. “We looked at bal-
Top 10: Best Companies to Work For Even in the current recession, some companies are going out of their way to please employees. As Google slips to number four, 2009 sees a new number one.
1. NetApp 2. Edward Jones 3. Boston Consulting Group 4. Google 5. Wegmans Food Market 6. Cisco Systems 7. Genentech 8. Methodist Hospital System 9. Goldman Sachs 10. Nugget Market
ance in terms of how we continue to look at cost and the move to lower cost areas like India,” she explains. “The second area we are looking at is around emerging markets and how fast you get into those markets given their solvency, which is vital given the current situation.” Recruitment has also been an issue, as companies are unable to recruit as they normally would, suggests Edge. She reveals that while FedEx is committed to reducing costs, they are not willing to compromise on service and so the organisation is still working to ensure FedEx’s position in the long term with expansion plans. “FedEx Express just improved its international domestic services into Mexico and in China we began operations at our new €100 million Asia-Pacific hub,” says Edge. “There’s still growth going on and I’m sure that’s true of many companies out there, I just don’t think it’s as intense as it was.” As the strategic partner in the business dealing with all other arms of the company, the HR function will always be under pressure to ensure that the fi rm as a whole is working to the best of its ability, and keeping employees motivated and giving them opportunities will always be a big part of how well the firm is working. It is critical that HR is visible with employees. With a high degree of influence over key decisions made in the company, it is also integral that HR heads take a leadership role in driving performance management through the organisation, particularly given the current state of the economy.
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with IT implementations. Companies don’t need to buy the software or the infrastructure – all they need is a web browser to access the software remotely, and to pay a subscription fee to use the software. Smart companies don’t commit to a single deployment model but combine the different delivery models and employ a hybrid HR model, designed to perfectly match their HR, IT and business needs. In fact, hybrid HR is an exercise of arranging a balance between:
HR goes hybrid Luc Bossaert of NorthgateArinso discusses creating an agile HR service delivery organisation able to deal with the volatile business environment.
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n 2010 we will witness many car manufacturers launching hybrid models. Around the same time, we expect HR to go hybrid, with smart HR delivery models combining in-house and outsourced HR solutions to deliver hard and fast business results. Following the current economic climate, many companies have become more open to various forms of outsourcing, including HR outsourcing. IT outsourcing is probably the most popular form of outsourcing today, but we believe that 10 years from now HR outsourcing will reach the popularity levels of IT outsourcing. It will be a common practice for many global companies. Agility and flexibility HR outsourcing offers a number of key advantages that are very attractive to companies today. It allows companies to focus on their core business and leave some of the non-core operations such as payroll, workforce administration and maintaining HR/IT systems to specialist providers. By creating synergies and economies of scale, providers such as NorthgateArinso can offer a rich set of HR services globally that are delivered at a lower cost and a consistent quality. As a result, companies only have to deal with one provider for all things HR. HR outsourcing offers a flexible cost base where a company only pays on a per-employee basis, effectively turning the fixed costs of running HR operations (CAPEX) into a
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variable cost (OPEX). Finally, HR outsourcing allows HR professionals to leave a lot of the administrative burden to specialists, so they can focus on strategic HR, including acquiring and nurturing talent, measuring and improving performance, and managing and developing the workforce.
Conceiving hybrid HR Hybrid HR is all about combining every available delivery option to provide HR services in as cost-effective and as standardised a way as possible: • OnPremise – traditionally companies decided to buy software licences, procured a server, then installed and maintained the software themselves, running exclusively for one company. Control and personalisation are its most important advantages. • Business process outsourcing – in this model, companies shift the responsibilities for transactional HR processes to an external service provider. This frees up HR staff to concentrate on more strategic tasks and allows the company to focus on the core business – without having to think about IT maintenance or HR administration • OnDemand – also known as Software-as-aService (SaaS) or cloud computing, this model delivers functionality from a central, shared infrastructure, without the hassle associated
• • • •
Local expertise versus global excellence Delivering faster versus operating cheaper Standard backbone versus flexible integration Great functionality versus great looks
• In-house versus outsourced At NorthgateArinso our answer to this balancing act is euHReka, a global HR, payroll and talent management platform. It enables organisations to organise staff pay and develop their multi-country workforce as best suits their business. Based on the SAP human capital management (HCM) technology, euHReka leads to better cost control, increased efficiency, superior functionality and richer employee interaction. Each month euHReka produces the payslips for more than one million employees in 50 countries and 24 languages and as such helps HR leaders tap many of the opportunities offered by Hybrid HR.
Luc Bossaert is President HR Business Development at NorthgateArinso with global responsibility for business development, marketing and alliances. In this position, he assists clients in the pursuit of a more effective and efficient human resource function, by designing, building and operating comprehensive HR service delivery models such as dedicated shared services centres and business process outsourcing.
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The money-maker Shortly after the announcement that his investment firm Berkshire Hathaway was to purchase the Texas-based Burlington Northern Sante Fe railway for €22 billion, CNBC television interviewed Warren Buffet about his investment. Here he reveals why he is putting his faith in the rail network and his views on the future of the US economy. What is it about the future of the railways which makes investment in this area so attractive? Is it because they move goods in such a cost effective way? Warren Buffett. They do it in a cost effective way and an extraordinarily environmentally friendly way. Burlington Northern Sante Fe (BNSF) last year moved on average a ton of goods for 470 miles on one gallon of diesel. This releases far fewer pollutants into the atmosphere and saves enormously on energy consumption. And it diminishes highways congestion. Railways, last year, delivered more than 40 percent more than trucks. I basically believe that this country will prosper and there will be more people moving more goods 20 or 30 years from now and the railways will benefit. It’s a bet on the country basically. How are Berkshire Hathaway’s myriad of businesses doing now compared to six months ago? WB. Fortunately two big businesses, insurance and utility, aren’t really affected that much by the recession. But most of our businesses are still feeling severe effects from the recession. They are not going down. The situation has stabilised and there’s not the fear that was prevalent eight or 10 months ago. But business has not
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bounced very much. I don’t know when but it will. We wouldn’t be putting out the equivalent of €22 billion unless I felt there’s a lot of good years ahead for America. America’s best years lie ahead. There’s no question about that. You’re somebody who feels very safe with having a big load of cash on the books at all times to protect you against anything. Where does putting out this much cash leave you? WB. Cash makes me comfortable. Of the €10 billion in cash required we’ll borrow €5 billion from the banks and pay it back promptly. We’ll use €13 billion of our own cash. After doing it we will be left with over €13 billion of consolidated cash. We’ll have a lot of cash around straight through this. But we’ll borrow €5 billion, which we’ll pay back in three annual instalments.
“Berkshire has huge exposure to any sort of catastrophic losses” Does that mean your deal making is done for a while? WB. We won’t be making any more US$34 billion deals but no it doesn’t mean we’re out of business. But it does mean that we won’t be making any more huge deals for a while. You can borrow money from the bank pretty easily. But do you have a feel for whether it’s getting easier for small businesses to do things? WB. No. The banks I’m familiar with are actually looking for loans. I was talking to one very large bank. They would like to see more loans but a recession tends to dampen the demand for loans. If you make a mortgage on a house that you used to make for US$500,000 because of the diminished value of the house you’re probably only lending US$300,000. The dollar value alone does go down in a recession. But money is falling. So where a loan makes sense you get it. Obviously Berkshire has huge exposure to any sort of catastrophic losses. We have not seen any catastrophic losses for insurers or any big storms that have hit over the last several years. What’s your feeling on how likely we are to face those kinds of storms again? WB. You never know. We’re still a big writer of insurance but we’ve reduced maximum exposure to earthquakes and wind storms by probably more than 50 percent over the last couple of years. We’ll keep it low because) we don’t like the prices, and I just felt, in terms of risk exposures, I wanted to be doing things in other arenas. Therefore I took down the risk in the CAT area and revved up a little bit in terms of making investments including this recent one. I try to balance out risks, physical risks with financial risks. Your US$34 billion deal is the largest Berkshire Hathaway has ever completed. A day after David Carr of the New York Times says:‘Business news isn’t all that interesting anymore’. What do you think about the future of business and business news?
WB. Our system has just gotten started. We’ve had around a couple of hundred years of progress but we have not exhausted our potential in this country. America is about business. You do not need to worry about CNBC 10 or 20 years from now. Business will always be important to the American public. You’re somebody who has big stakes in media companies like the Washington Post, and you own a newspaper, The Buffalo News. What do you think about the future of newspapers? WB. Newspapers have a terrible future. We own The Buffalo News and we hope to be the last man standing. If you saw the newspaper circulation figures that have just been published it was just a dramatic decrease. The truth is that fewer people are going to be reading newspapers. A year or two years from now they are going to continue to get information. Everybody loves to get news. But the indispensability of the paper has been diminished. I probably read the Philadelphia Inquirer and the Omaha Herald. But [to get sports scores] now I click on at night and look at the box score. It has changed. Do you think capitalism is permanently damaged by the coming era of high taxation?
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The man himself Warren Buffett is the CEO and primary shareholder of Berkshire Hathaway, as well as being world’s most successful investor. In 2008 he was named the world’s richest man by Forbes with a personal fortune of around €41 billion. In 2009 he was ranked as the second richest man in the US with a net worth of around €26 billion. Often referred to as the Sage of Omaha, Buffett’s words are followed closely by the worldwide investment community. Since the start of the financial crisis he has made substantial investments in Goldman Sachs and General Electric. He is known for his frugality and generosity, having pledged to give away around 85 percent of his fortune to the Gates Foundation.
WB. I ran money in the 1960s when the top personal capital earned income tax rate was 70 percent. I ran money when the capital gains tax was 70 percent and I ran money when the capital gains tax was 39.6 percent and I never saw anybody lose interest in making money. Certainly it didn’t affect me. My partners paid a lot higher tax in the past and the economy has doing just fine. We had great gains in jobs in the 1950s and 1960s with tax rates far higher than they are now. The corporate tax was 52 percent and still the American businesses prospered. In this country you have to have some balance between expenses and income and right now we have this huge gap one way or another. It has to be diminished. This country has done extremely well with lower tax rates and higher tax rates. Our system works, it unleashes human potential. We can take higher taxes. When we spoke a few weeks ago, you mentioned that you had seen some turns in the real estate market. Is that still the case? WB. Residential real estate has improved. It levelled out in most areas. What really is helping is residential real estate. Frankly we haven’t been building many houses but we keep forming households and that stops any excess inventory. In places like California we’ve seen a stabilisation in the lower to
medium end. For the high end that’s not true. But for most housing in the low to medium price range I think there’s no question that it has stabilised. That’s very important. Commercial real estate, however, is another story. Manufacturing in the US is staggering and foreign competition is hurting it badly. What’s your prescription for getting American manufacturing back on track? Do you agree that what the country needs is a 10 year infrastructure revitalisation programme? WB. I agree on the infrastructure. I thought more of the stimulus funds should have gone towards that. This country will solve its problems. We’re not so good at avoiding problems but we’re pretty good at solving problems. In the early 1980s we thought Germany and Japan would be eating our lunch and we’d all be working at McDonald’s and cutting hair to keep busy. We’ve added tens of millions of jobs. We do come up with things. You can’t predict whether we’ll have a software industry or a great aircraft industry but those things come along. The situation right now is that 12 percent of our GDP goes to export and 35 years ago only five percent was. So we’re making things the world wants. Historically we’ve been very good at that and I think we’ll be good at it in the future.
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The dangers of bad leadership Toni Lynn Chinoy of the Harlan Evans consultancy group describes the perils of picking bad leaders in a downturn.
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istory has shown us that our best military leaders seem to emerge during times of war. In prolonged periods of peace it is easier for poor leadership to survive, and sometimes thrive. Under the pressure of real conflict, the weak leaders reveal themselves and are pushed aside in the urgency of responding to real threats. Will we see the same phenomenon in our business leaders over the course of this downturn? During the good times, many average or even below average leaders were elevated beyond their capacity for good leadership. Often they achieved their positions through finesse, political maneuvering or bullying rather than substance, integrity or business acumen. Many of our truly talented, high-potential leaders were also elevated without the seasoning and experience they need to weather our current situation. Few were taught how to effectively push back, say “no” or exert other strong leadership characteristics. Those who did were punished. Being positive, collaborative, and doing “whatever it takes” became the recognised skill set to get ahead. The pressure for profit and growth became intense. Quality and customer service suffered as our leaders looked for more and more ways to take money out of the system. Greed, short-term thinking and arrogance reigned while common sense, good decision skills (the ability to weigh consequences) and long-term thinking atrophied. This is not an isolated issue. We cannot blame our economic mess on one industry or a handful of leaders. The problems that started the dominoes falling abide in all of our businesses, our schools and our families. It is a way of thinking, and yes, it is a leadership issue. Think about the people you know, whether they are family, peers, subordinates, or your boss. How good are they at being completely honest, regardless of the personal cost? How good are they at making the decision that improves the long-term viability of the organisation, family, or business unit as opposed to making everyone happy or doing everything possible to make each week, month or quarterly numbers look good? How focused are they on winning versus doing what’s right? What risks are they willing to take if it makes them more vulnerable in the short-term?
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How about you? Not only do we need to turn around a bad situation, but we need to do so with few of our leaders fully prepared to do what it takes.
have done. If it all becomes too overwhelming, ask for help, and stick to the following three rules:
The slippery slope
1. Lead with confidence: if you are feeling insecure, slow down, regroup, and find yourself before you act. 2. Seek clarity: open yourself to whatever messages or help is available. Be curious whenever you don’t know what the right answer is. 3. Trust that you will have what you need when you need it: if you can’t see it, look harder. It will be there.
Our leaders are smart and possibly better educated than ever before. They are also capable of being vain and arrogant about their abilities. Once a person achieves positional power, they are often compelled to believe that they deserve it and to hang on to that power regardless of their real capacity to lead. Hubris may be our biggest single issue. As unprepared leaders react to bad times, they often try to force their own agenda even when they don’t really know what to do. They drag themselves and the organisation through their inept decision-making as long as they are allowed to do so. They attempt to fake it (even to themselves), but while the lengthening economic downturn offers some cover, eventually it becomes apparent that they simply are not skilled enough to bend reality. The longer they remain in power without intervention, the farther down the slope the organisation will slide. They may bluster or talk tough, but they are frequently risk averse. The problem is that they are unformed and untested and often not open or curious enough to learn.
The economic downturn is painful evidence of our ability to be fooled and controlled by people who have not been properly equipped for their roles. Our current situation was partially created by a whole culture of leadership that allowed itself to get deeper and deeper into a mess that was obviously going out of control. We will come out of this. Our choice is to learn the lessons revealed by the situation and get ready for the next cycle. The military plays war games. Perhaps our businesses, after we survive this crisis, should learn to do the same to determine who is and who is not ready to lead.
How should we respond?
Toni Lynn Chinoy is the founder of Harlan Evans, Inc., a consulting firm specialising in leadership development at an individual and group level. Website: www.harlanevans.com
If we accept that we might be leadership “challenged” in the midst of the most intense economic downturn in many of our professional lives, what can we do? The most important thing that all of us can do is to stay real. If you know that you are in over your head, acknowledge it (at least to yourself). There is no shame in being ill prepared for crisis. To pretend and to force your will when you are unsure is the worst way of handling the situation. You may need a different kind of preparation than is currently taught in most of our leadership development training. There are fundamentals that underpin leadership, just like the basics of holding a golf club properly, knowing how to stand, and following through on your swing, underpin good golfing. Until you truly understand those basics, you may not understand how to fix your leadership issues, made evident by hard times. One never completely masters leadership. It is an ongoing process that might be compared to climbing a circular staircase. You may constantly feel as if you have passed this particular view before, but you are looking at it from a different level each time. Economic downturn may force you to advance faster than you might otherwise
Summary
“Once a person achieves positional power, they are often compelled to believe that they deserve it and to hang on to that power regardless of their real capacity to lead. Hubris may be our biggest single issue”
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BOOK REVIEW 136
On the shelf This issue we cast our eye over the factors behind the collapse of a European economy, the best speeches of all time, and get business lessons from a US hip hop superstar. The 100: Insight and Lessons From 100 of the Greatest Speeches Ever Delivered By Simon Maier and Jeremy Kourdi
An insightful guide to the greatest speeches ever delivered, The 100 addresses the important subject of communications by showcasing the best communicators of all time by explaining what they did, what happened as a result and why they succeeded. Barack Obama, Jack Welch, Aung San Suu Kyi, Socrates and Charles Dickens are just some of the great communicators featured in this book. CXO SAYS: A useful insight into becoming a skilled orator for today’s age, and more than that, the individual profi les featured in The 100 provides thorough analysis into how the world’s greatest influencers communicate.
The 50th Law By 50 Cent and Robert Greene
Part strategic manual and part rags-to-riches memoir, The 50th Law is a unique project combining 50 Cent and author Robert Greene who deem to offer indispensable advice on how to win in business and in life. The book shows how power and success can be yours if you overcome your fears and features 50 Cent’s incredible life story with practical business lessons and wisdom from history’s most remarkable figures, including Catherine the Great, Confucius and Napoleon. CXO SAYS: A sequel to Greene’s successful 48 Laws of Power, The 50th Law is a fantastic follow-up and an interesting mix of self-help and historical analysis. A thoroughly remarkable perspective from which to view both business and life.
Why Iceland? How One of the World’s Smallest Countries Became the Meltdown’s Biggest Casualty By Ásgeir Jónsson Even 12 months on from the breakdown of Iceland’s economy the scale of this tiny nation’s downfall is still hard to comprehend. Th is is a country with a population of just 300,000 that up until the 1980s was heavily reliant upon the cod fishing industry. However, by the end of the century it has transformed itself into a major player in world fi nance, building an international banking empire worth 12 times its GDP. Ásgeir Jónsson examines the country’s implosion in painstaking detail and where it all went wrong and the pivotal role the UK played. CXO SAYS: A well-written and in-depth account of the chain of events leading to Iceland’s collapse from an expert behind the scenes in Iceland. This is a real lesson in how to not run a nation’s economy.
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CITY GUIDE 138
Abu Dhabi Time: +3hrs GMT | Currency: UAE dirham | Language: Arabic | Population: 1.3 million
Although in the past it had been left in the shadow of its brasher and glitzier neighbour Dubai, oil-rich Abu Dhabi, the capital of the UAE, is now stepping into the limelight and fast establishing itself as one of the world’s most exciting cities.
Abu AbuDhabi Dhabisand beach dunes
About
Sheikh Zayed Grand Mosque
Getting around
Just a few decades ago this island The international airport, which Tourist advice city with its modern metropolis was has undergone a €4.5 billion expanThis being a Muslim country, there are five calls to prayer nothing more than a dusty desert and sion and redevelopment plan, is loeach day. They are Fajr at dawn, Thuher in the middle of a hub for fi shing and pearl diving. cated 26km east of the city centre. If the day, Asr at mid-afternoon, Maghrib at sunset and Today, visitors are treated to a pleasant you haven’t rented a car for your stay, a Isha at nightfall. mix of the azure waters of the Arabian taxi is the best way to get around. The Gulf combined with the lush green ubiquitous white and gold taxis with Be warned that in summer the city can get unbearably boulevards and glass-fronted developgreen signs on top won’t cost more hot, with temperatures rising to 40 degrees Celsius and ments. A series of massive investment than AED10 (€1.80) for a short trip. more. Sandstorms can reduce visibility to a few metres. projects promise to establish Abu Because these taxis are considered a Dhabi as one of the architectural wonbit basic, there are also silver taxis of Abu Dhabi has over 20 parks and gardens and more than ders of the world. Tourism is a critical a higher standard with educated and 400km of coastline, of which 10km are public beaches. part of the government’s ambitious trained drivers, although this will be plans, with a target of three million reflected in the higher fare. Tipping visitors by 2015. And with the leaderfor taxi rides is not expected in Abu ship’s much-touted 2030 vision for the city, the future promises to be Dhabi but is still appreciated. Be aware that the drivers of the white and nothing less than spectacular. gold taxis will sometimes try and negotiate a fare beforehand, rather than
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CITY GUIDE 139
Eat
Emirates Palace
Sleep
w? Did you kno on ti a The transl bi a h D of Abu e th f o is ‘land e’ ll ze ga
Emirates Palace 5 Star This iconic Abu Dhabi landmark is the ultimate in luxury and style. It boasts 130 rooms and 92 suites, 15 food outlets and seven-star service. Guests can also make use of the 1.3km stretch of private beach, two swimming pools, shops, a spa, a huge marina and beautifully landscaped grounds.
Al Fanar Rotating Restaurant For great views and total indulgence this restaurant – located on the roof of the Le Méridien Hotel – is the place to eat. As the name suggests, this place slowly spins 360 degrees, offering diners stunning views of the city below. For that extra special experience, go along at sunset. Once you’ve stopped gawping at the views, the international menu offers beautifully presented food that could be hung in an art gallery. More importantly, it’s foo delicious too. The buffet comes highly recommended, as does de the Friday brunch. S Sofra T This popular restaurant is located in sumptuous surroundings a at the Shangri-La Hotel. Sofra, which offers up local and international dishes, is a great place for vegetarians, especially in with its extensive buffet options. Indeed, buffet dinner here is wi a real r treat with a mouth-watering selection of international cuisine on offer. For a truly romantic experience, book a seat on cu the terrace.
Al Raha Beach Hotel 5 Star This is Abu Dhabi’s first boutique resort overlooking the Arabian Gulf. As well as its luxurious surroundings, this hotel has a selection of dining outlets, a health club and spa, squash courts and watersports. Al Raha is popular with the locals who stay there for weekend breaks. Mafraq Hotel 4 star If you fancy staying out of the city then this is your best option. Built in 1966 and conveniently located 10 minutes from Abu Dhabi International Airport and 20 minutes from the city centre, this hotel features 120 rooms and four suites in relaxed, landscaped surroundings.
Souvenirs on sale in the souk
See use the meter. Built on a grid system running from a central ‘T’, the city is easy to navigate if you prefer to ditch the car and use your feet.
Relax Its perpetual sun and clear blue skies make Abu Dhabi a sunseeker’s nirvana, while the waters of the Arabian Gulf are the perfect antidote for the sweltering heat. The UAE has some amazing scenery and the best way to experience it is as a passenger in 4WD off-road vehicle as you navigate sand dunes and wadis. Speak to your hotel about arranging a trip. If you are feeling energetic then visit Zayed Sports City where you can partake in ice skating, bumper cars, video games and more. Afterwards take a relaxing stroll through the lush greenery Sheikh Khalifa Park or head to a souk to pick up a bargain – anything from jewellery to spices.
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A must-see attraction and one of Abu Dhabi’s most iconic structures is the new Sheikh Zayed Grand Mosque which can hold up to 10,000 worshippers. Th is huge building also holds the record for the world’s largest dome, carpet and chandelier. Abu Dhabi put itself on the sporting map by landing this November’s fi nal race on the Formula One Calendar at the brand new Yas Marina Circuit. Next year’s race is scheduled for around the same time and is one event in the Middle East not to be missed. Other sights on your itinerary should include the Abu Dhabi International Marine Sports Club and the Emirates Palace – the most expensive hotel ever built.
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THE KNOWLEDGE 140
THE HIGH LIFE This issue we bring you the lowdown on the best first class air travel facilities on offer.
>>> Emirates Airline With seven course meals served on bone china tableware on tables laid with fine linen and flowers, Emirates First Class passengers soon forget they are on board a plane. An advanced hand-held controller allows passengers to personalise every aspect of their experience and those in the A380 can enjoy the comfort of a fully flat bed complete with massage facilities. When First Class passengers land, Emirates’ fleet of complimentary chauffeur-driven cars are on hand to take them to their next destination.
<<< Lufthansa For those who need to work on a flight, Lufthansa’s First Class cabins are ideal. The two-metre long flat beds are equipped with a laptop connection and personal monitor as well as plenty of storage space. Each First Class seat also has a socket that fits most plugs. Wine lovers can enjoy an extensive selection from Lufthansa’s Vinothek Discoveries menu and on long haul flights from Germany, Japan, India, China and Singapore, chefs create meals on request for passengers.
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<<< British Airways British Airways’ First Class cabins have been designed with country house hotel luxury in mind. Passengers are provided with hand made spa products by the British chemist and perfumer Harris and flat beds are decked out in Egyptian cotton bed linen and velvet cushions. The menu has been created by some of the world’s finest chefs and a bistro selection is also available. There are over 200 in-flight entertainment channels on offer, including an extensive movie library.
>>> Air France If you crave privacy on board your flight then fly with Air France’s First Class service La Premiere. The cabins comprise of only four to eight seats and recent renovations have added 50 percent more personal space for passengers. Each passenger has a 10.4-inch interactive video screen and an auto massage feature on their bed. The seats transform into two-metre long beds and passengers are provided with pillows and duvets.
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CAR REVIEW q7:21oct
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HOT WHEELS 142
Mean machine Lotus sets pulses racing and heads turning with a beefed-up version of its high-octane Exige model.
T
he name Lotus Exige Scura doesn’t exactly roll off the tongue, but who cares about a name when a two-seater sports car looks this good – and menacing. Low in weight and delivering a top speed of 240km/h (0100km/h whizzes by in 4.1 seconds thanks to ‘launch control’), Lotus say the Scura “needs to be driven by a serious driver”. The carbon fibre bodywork is coated in matt black because scura translates as ‘dark’ in Italian. Indeed, the Scura is meant “to evoke the desire to indulge your dark side”, according to the car’s designers. Continuing the colour theme into the interior, carbon fibre is used extensively to compliment the exterior and reduce weight. The seats and centre console are crafted from carbon fibre and the handbrake and gear knob have a special anodised treatment which leaves the metal with an anthracite colour finish. Overall, this is a car devoid of creature comforts but blessed with great performance and handling. The downside is that just 35 examples of the Scura will be produced worldwide. If you do manage to get your lucky hands on one, expect to pay around €53,100.
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Approximately 50 percent of new drug development fails in the late stages of phase ||| – while the cost of getting a drug to market continues to rise. NGP features inerviews with pharmaceutical experts from the discovery, technology, business, outsourcing and manufacturing sectors. It is committed to providing information for every step of the pharmaceutical development path. Available for: EU, US
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Technology for today’s executive <<< HTC Hero The smartphone market is becoming an increasingly competitive sector and HTC is the latest manufacturer looking to offer a credible alternative to Apple’s ubiquitous iPhone with its newest model – the Hero. Aesthetically the HTC Hero will divide opinion with its all-white casing and protruding lip at the base of the handset. However, it does have a bright and responsive 3.5-inch touchscreen display. Connectivity is covered by Wi-Fi, Bluetooth 2.0. GPS and HSDPA. A 3.5mm audio jack is a welcome addition for audiophiles while social networking addicts will be pleased to see Facebook and Twitter integration. Sim-free, the Hero will set you back around €400.
Desirability rating: aaa
>>> Acer Ferrari One Many people will dismiss this premium netbook out of distaste for its scarlet-coloured Ferrari shell and mock carbon fibre around the keyboard, not to mention the bizarre tyre-like grips adorning the underside of the device. Th is, however, is one of the best performing netbooks on the market at the moment thanks to the new microprocessor from AMD – the Athlon X2. Being a netbook, it is devoid of an optical drive but it does have a 11.6-inch LED widescreen display. It also boasts a 2GB g RAM not too shoddy 250GB hard drive and a huge and responsive keyboard. It also ships pre-loaded with Windows 7. Th is really is the Ferrari of netbooks. Yours for €450.
Desirability rating: aaaa <<< Panasonic HDC-TM10 With most mobile phones now boasting the ability to shoot video everyone, it seems, is fi lming 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 fi lm 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 and priced around €400. It sports 8GB of built-in flash memory but if you slot in a 32GB SDHC card this will 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: aaaa >>> Sony XEL-1 OLED HD TV First, let’s get two stomach-churning facts out of the way: this Sony TV has a distinctly puny 11inch screen and costs a whopping €3000. Done. Once you’ve recovered from open wallet surgery and positioned yourself about two feet away from your new purchase, you will be left open-jawed by the XEL-1’s picture quality. Using OLED technology, it is capable of emitting light without using any kind of backlight. It’s supermodel thin at 3mm and has no loss in viewing quality from any angle. It also has an integrated digital tuner, a USB slot and two HDMI inputs for connecting Bluray players and HD consoles. OK, it’s ridiculously expensive for a tiny TV that will be no substitute for the plasma in your lounge, but OLED really is the future in television. Possibly a screen best suited to your bathroom or cloakroom perhaps?
Desirability rating: aaaa
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