February 15 2006 by Sreekanth Sastry

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From The Editor

Deal of a Lifetime The trick lies in getting more of what you want in an ethical and fair way.

A tale I once heard, involves one of the biggest telecom companies in the country. After a vendor representative had finished with a high pressure pitch about a storage solution, he slid a blank sheet of paper across the table and asked the CIO to name his price. The CIO, true to his company’s form, drew a circle on the sheet of paper and slid it back. Last heard the ‘poor’ vendor rep was busy implementing the solution for free and trying to win some ground by referring to it as a ‘proof-of-concept’ center! As you know, even in dreams (and thankfully for the sanity of vendor representatives) few negotiations are so one-sided. Somewhere between the best case and the worst case scenarios lies the settlement range — the area where you and the vendor both feel good about the deal. Negotiation has to be one of humankind’s oldest skills — two flint axes equals an elk hide isn’t that bad a deal when you consider it. It’s something that all of us indulge in at all levels and in practically all situations whether it’s house leases or hiring people or even outsourcing datacenter management. A CIO I was speaking with the other day referred to the art of cutting a deal as being a process and not an event. The trick lies in getting more of what you want in an ethical way, he said. His five-way system of dealing with vendors is to “be prepared, be inquisitive, be Achieving common vigilant, be cool, and be fair.” ground and creating an Right from the beginning he likes to segregate atmosphere of partnership his needs into three categories: Those that he’d is more important than like to have, others that he must have and those squeezing a vendor dry. that would be nice to have. He envisions multiple scenarios and tries to figure how he ought to react to them. He then takes a magnifying glass to all proposals and project parameters, specifically looking through the fine print and for anything omitted (he once offered to word the proposal himself). Questioning the vendors isn’t something he shies away from, but he’s quick to add that he also pays attention and listens carefully to their replies. Fun. That’s how he describes the deal-making process. And, what makes it more so is keeping cool and focused and not getting sidetracked by disagreements or disappointment. Finally, he stays alive to being honest and fair, without taking extra advantage. Achieving common ground and creating an atmosphere of partnership is more important than squeezing the vendor dry, he feels. A few days ago I used his system to get a great deal on my house lease, so I can vouch for it. Does this system make sense to you? Let me know.

Vijay Ramachandran, Editor vijay_r@cio.in

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content FEBRUARY 15 2006‑ | ‑Vol/1‑ | ‑issUE/7

P hoToS by Sr I VaTSa Shand Ilya & FoToCorP.

Stephen Hsu, Sanjay Sharma and Anil Khopkar put together fantastic bargains for their organizations.

Vendor Management

Business Alignment

COVER sTORy |

ThE BusInEss Of IT Is BusInEss | 26 Six keys to lasting alignment with your business partners.

GREAT BARGAIns | 30

Driving a hard bargain separates a great CIO from a good one. It combines business acumen, technological know-how, communication skills, and the ability to manage expectations.

CoVEr: ImagIn g by b InESh SrEEdharan

3 0

By Rahul neel Mani and Gunjan Trivedi

Column by susan Cramm

IT Work IT’s hARDEsT PuzzLE | 22 Getting people to use a new system correctly is much harder than getting it up and running. And much more important. Column by Michael schrage

Executive Expectations VIEW fROM ThE TOP | 44 Habil Khorakiwala, Chairman, Wockhardt, seized the competition's market share, created a new corner in a crowded business, and is scouting new horizons backed by an IT setup that plugs gaps in the company’s customer management strategy. Interview by Gunjan Trivedi

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more » Vol/1 | ISSUE/7

content

Essential Technology | 62 Human Resources | Strategic HR Integration

By Galen Gruman Under Development | Time at Light Speed By Christopher Lindquist Pundit | Smart Services Bundle By Eric Knorr

From the Editor | 4 Deal of a Lifetime | The trick lies in getting more

of what you want in an ethical and fair way. By Vijay Ramachandran

Inbox | 14

4 54

4 Govern Capital Gain | 58 As the world’s fifth-most populated city, New Delhi plans to live up to its responsibility of simplifying interactions between its populace and the government by re-inventing itself as an e-city. Prakash Kumar, Secretary IT, Delhi is scripting this change and finds himself creating new avenues of access.

NOW ONLINE For more opinions, features, analyses and updates, log on to our companion website and discover content designed to help you and your organization deploy IT strategically. Go to www.cio.in

c o.in

2 6

Interview by Rahul Neel Mani

Netting Evaders | 54 In a country of over 100 crore citizens, only four crore Indians pay taxes. The IT department is mining its data to bring more people into its net and meet its target of Rs 176,812 crore in collections for 2005-06. Feature by Balaji Narasimhan

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advisory board

Ma nagement

President N. Bringi Dev

COO Louis D’Mello Editoria l Editor Vijay Ramachandran

Bureau Head-North Rahul Neel Mani

Anil Nadkarni

Advertiser Index

Borland

Canon

Cisco

Cubic Computing

Head IT, Thomas Cook, a_nadkarni@cio.in Arindam Bose Head IT, LG Electronics India, a_bose@cio.in Arun Gupta Director – Philips Global Infrastructure Services

Special Correspondents T. Radhakrishna Balaji Narasimhan

Senior Correspondent Gunjan Trivedi

COPY EDITOR Sunil Shah

Arvind Tawde VP & CIO, Mahindra & Mahindra, a_tawde@cio.in Ashish Kumar Chauhan Advisor, Reliance Industries Ltd, a_chauhan@cio.in

Dell

18,19

Dlink

34,35

www.C IO.IN Editorial Director-Online R. Giridhar

M. D. Agarwal Chief Manager – IT, BPCL, md_agarwal@cio.in

D es ign & Production Mani Mulki

Creative Director Jayan K Narayanan

Designers Binesh Sreedharan Vikas Kapoor

VP - IS, Godrej Consumer Products Ltd, m_mulki@cio.in

Unnikrishnan A.V.

Photography Srivatsa Shandilya

Production T.K. Karunakaran Mar keting a nd Sales

General Manager, Sales Naveen Chand Singh brand Manager Alok Anand

Marketing Siddharth Singh

Bangalore Mahantesh Godi

Santosh Malleswara Ashish Kumar

Delhi Sudhir Argula

Nitin Walia

2,3

Manish Choksi VP - IT, Asian Paints, m_choksi@cio.in

Anil V.K. Jinan K. Vijayan

Hewlett Packard

Hitachi

Neel Ratan Executive Director – Business Solutions, Pricewaterhouse Coopers, n_ratan@cio.in Rajesh Uppal General Manager – IT, Maruti Udyog, r_uppal@cio.in

IBM India

Interface Connectronics

11,68

Prof. R.T.Krishnan Professor, IIM-Bangalore, r_krishnan@cio.in

Microsoft

S. B. Patankar Director - IS, Bombay Stock Exchange, sb_patankar@cio.in

Polycom

Seagate

Sun

Wipro Infotech

6,7

Xerox

S. Gopalakrishnan COO & Head Technology, Infosys Technologies

s_gopalakrishnan @cio.in

Mumbai Rupesh Sreedharan

Nagesh Pai

Japan Tomoko Fujikawa

USA Larry Arthur

Jo Ben-Atar

S. R. Balasubramanian Sr. VP, ISG Novasoft, sr_balasubra manian@cio.in Prof. S Sadagopan Director, IIIT - Bangalore. s_sadagopan@cio.in

Singapore Michael Mullaney UK Shane Hannam

Sanjay Sharma Corporate Head Technology Officer, IDBI, s_sharma@cio.in Dr. Sridhar Mitta Managing Director & CTO, e4e Labs, s_mitta@cio.in

All rights reserved. No part of this publication may be reproduced by any means without prior written permission from the publisher. Address requests for customized reprints to IDG Media Private Limited, 10th Floor, Vayudooth Chambers, 15–16, Mahatma Gandhi Road, Bangalore 560 001, India. IDG Media Private Limited is an IDG (International Data Group) company.

Printed and Published by N Bringi Dev on behalf of IDG Media Private Limited, 10th Floor, Vayudooth Chambers, 15–16, Mahatma Gandhi Road, Bangalore 560 001, India. Editor: Vijay Ramachandran. Printed at Rajhans Enterprises, No. 134, 4th Main Road, Industrial Town, Rajajinagar, Bangalore 560 044, India

Sunil Gujral Former VP - Technologies, Wipro Spectramind

s_gujral@cio.in Unni Krishnan T.M CTO, Shopper’s Stop Ltd, u_krishnan@cio.in V. Balakrishnan CIO, Polaris Software Ltd., v_balakrishnan@cio.in

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reader feedback

The January 15 issue of CIO contains a good mix of articles that clearly brings out the fact that the CIO of today and of tomorrow has to posses superhuman abilities. CIOs have to be completely savvy of security matters and about government regulations — not only those of the country which they operate in, but also those of other nations like the US. Then, they have to be diplomats as well as skilled psychologists as they attempt to get users to do what they don’t want to do and to understand what users do not comprehend. Simultaneously, they have to be master project managers in order to skillfully orchestrate technology, people and processes, and to ensure that IT projects are ready when business needs them. Finally, they have to be technology and business-services experts if they are to redefine IT systems and develop new ones so that service-oriented architecture can usher in an era of loosely-coupled service nirvana. I guess this is what makes the CIO’s job one of the most exciting in any company, especially in the BFSI sector. Desikachari Venugopal Head of IT, Bank Muscat SAOG

e-governance rules I am extremely glad to see CIO give IT in the government sector its due importance. It is perhaps one of the largest 14

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users of IT both in terms of numbers and the sheer impact it has on people. A number of wonderful initiatives in e-governance have been on the horizon for quite awhile now. Some of them have made a substantial impact on citizens by improving quality of life and reducing corruption. The Ministry of Communications and IT, Government of India, is at the forefront of this reform. Please keep up the good work by creating public awareness of such initiatives. Zia saquib Executive Director, C-DAC

Fresh perspective The first thing that strikes one about CIO is the freshness of the publication. It’s wide with glossy white pages, which give it an elegant look. The content is very interesting — especially Essential Technology, which provides noteworthy perspective. The magazine seems to have an abundance of advertisers, which maybe good for revenues, although it may eventually become challenging to have editorial content that is more appealing than the ads on an adjacent page. abir basak, Head - Tech. Infrastructure, Aviva Life

give me Tech I am delighted that CIO is back in India. I used to read the magazine when it was published here some years ago. In fact, in 2000, What Do You Think? We welcome your feedback on our articles, apart from your thoughts and suggestions. Write in to editor@cio.in. Letters may be edited for length or clarity.

editor@c o.in

“The cIOs of today and of tomorrow have to posses superhuman abilities. They have to be diplomats and skilled psychologists.” I received a Top Five CIO award by CIO for Business Process Improvement. I must say, though, that the current format is more impressive and informative and contains a greater range of topics. I enjoy the technology section the most. Keep it up. sharaD saxena Head - Corporate Technology Group ICICI Bank

good Mix I have been going through CIO over the last few months. It makes for good reading with the topics its covers and the pertinent CIO and CEO viewpoints on recent issues. I particularly liked the cover story profiling the execution of WNS Global Services’ business continuity plan (Dec. 15). Trendlines provide an interesting flavor to recent issues and uses of technology. Articles on HR issues affecting CIOs add a lot of value. Overall, I’d give it a thumbs-up. I hope you continue this mix of articles. r. p p. DuMasia GM - IT, The Great Eastern Shipping Company

The column Share Power to Gain Control by Susan Cramm (Jan. 15) was precise, compact and educative. I expect many more similar columns in the future. lT col. a. raVikuMar lT. Fouress Enggineering India

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new

hot

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Retain Workers by Training Them S t a f f M a n a g e m e n t IT workers who don’t feel they’re getting the training from their employers needed to do their jobs are more likely to be looking for new jobs, according to a survey by The Computing Technology Industry Association Inc. (CompTIA), an information technology industry trade association in OakbrookTerrace, Illinois. “If their employer isn’t supporting them at all in their training, 56 percent [of 462 IT workers surveyed] said they were just going to look for employment elsewhere, and only 33 percent or so said that they were going to stay put,” said June Keszeg, IT pro programmer at CompTIA. “[By contrast], 66 percent of employees who are reimbursed 100 percent for their training by their companies said they’re not looking for new jobs. ” CompTIA undertook the survey to better identify how IT professionals are being trained, including issues such as who pays for that training, what workers expect of their employers and what they are trying to achieve personally and professionally, said Neill Hopkins, vice president of skills development at CompTIA.

“The survey highlighted that a lot of the IT professionals pay for their own training,” he said. “Clearly, employers don’t seem to have good career paths planned for IT professionals. And a lot of these IT professionals are furthering their training to advance their careers in order to find other jobs. They’re job hopping.” Hopkins said many IT professionals want to further their careers through training. The survey also indicates that employers don’t have a clear understanding of the IT roles within their organizations. “Those that do will gladly pay for their IT professionals to get trained. [They] understand that IT is an absolutely critical part of their business success,” Hopkins said. “Those that don’t will probably go through a high turnover in IT staff [with the] understanding that IT is a necessary evil rather than a critical asset. I think those that get it will be the bigger companies, whereas the small-to-medium[size] businesses still don’t quite fathom that IT is actually as important as having a CPA on their staff.” —By Linda Rosencrance, Computerworld

BlackBerry for the Oscars MOBILE

C O M P U T I NG

Il lustrat ion UNNIKRISHNAN AV

When phones began ringing and e-mail pinging with the happy news of this year’s Oscar nominations, it’s a good bet that thanks to their BlackBerrys, the agents at Creative Artists Agency (CAA) were among the first to get the scoop. The 200 agents who work for the powerhouse talent agency (which represents Steven Spielberg and Tom Cruise) are the power BlackBerry users in

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Tinseltown. CAA CIO Michael Keithley stewards 22 Microsoft Exchange servers that store over 4 terabytes of e-mail full of the latest megadeal details. CAA’s agents spend plenty of time away from their glittery Beverly Hills offices, so keeping in touch is essential. Each agent may receive over 100 calls a day as they try to get better deals for their nominated clients. So Keithley’s team designed an application for the BlackBerry

that automates the phone sheets maintained by the agents’ assistants (the assistants log the calls in a spreadsheet), giving agents access to their phone messages. Meanwhile, a simple command gives the agent immediate answers to queries from CAA’s databases about past deals, movies, talent history, etc, information they need to return calls. If the caller is on the A list. — By Gunjan Bagla

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RevIew Douglas Rushkoff, author of Get Back in the Box: Innovation from the Inside Out Out, says that too many companies have been seduced by charlatans hyping ‘outside the box’ thinking as the elixir for their competitive ills. By straying from their core competencies, these companies have gotten away from what led them to become successful enterprises in the first place. Rushkoff, a writer and new media consultant, thinks that a company should focus on what it does best to ensure its long-

BOOk

term success. This is simple and sound advice, which makes his premise compelling. He backs up his thesis with examples of companies that reinvented themselves with disastrous results. One example Rushkoff offers of a company that strayed from its box unsuccessfully and later returned to it is Details magazine. Details was launched in 1982, targeting men who frequent urban clubs. Promoted by publisher Condé Nast, the magazine reached 500,000

subscriptions. In the 1990s, Details attempted to expand its readership among men generally. It invested in crosspromotions with Miller Lite and de-emphasized its content. The magazine floundered for years. Then Details returned to its original vision as a cultural journal for clubgoers. Circulation has rebounded and the magazine has won awards. Other examples seem off the mark, raising the question — which Rushkoff doesn’t answer — of where the line is between an

innovative idea that plays to one’s strengths and one that is outside both the proverbial box and one’s capabilities to execute it. The book is marred by Rushkoff’s tendency to insert himself into his narratives. But his self-promotion is forgivable. One might even see it as an example of him taking his own advice: Find what you’re best at and stick to it.

—By Ben Worthen

What Makes Loyal techies M a n a g e M e n t R e P O R t IT employees are more loyal to their companies than they were three years ago, according to a study by Walker Information. It aslo showed that the dedication of workers in corporate IS departments has increased significantly. Walker’s biennial Report on Loyalty in the Workplace surveyed over 2,500 IT workers from a variety of industries about their experiences in and attitudes toward their jobs. The study defines ‘truly loyal’ staffers as those who said they were committed to their companies and planned on staying for at least two years. The number of truly loyal employees within corporate IS departments jumped nearly 30 percent since 2003, when Walker published its previous survey. Meanwhile, the number of truly loyal workers in the IT industry as a whole jumped 17 percent (the collective total for all industries rose by a meager 4 percent). At the same time, the number of corporate IS workers who feel trapped in their jobs has fallen by one-third. Only 21 percent said they’re not particularly committed to their companies but feel they have no option but staying, compared to 33 percent three years ago. Chris Woolard, a Walker consultant, attributes the change in attitudes to several factors, including the stabilization of the industry after the dotcom bust and an increase in offshoring and outsourcing. He

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observes that jobs that were prone to turnover are now being handled by contractors, while those workers who have managed to retain their jobs are glad they haven’t been outsourced. The top drivers of employee loyalty, the study found, haven’t changed since the earlier study. They include how much care and concern employers show toward their employees, not only in their career development, but also in helping them balance their work and family lives. Fair workplace policies, day-to-day satisfaction and reinforcement from managers, along with compensation also play a big role. The most loyal employees also have a positive view of their company’s products and reputation. Woolard concludes that IT departments have simply become better places to work.

The number of ‘truly loyal’ workers in the IT industry jumped 17% while the collective total for all industries rose by 4%.

— By �l �acco

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tRendLIneS

Do What You’re Good at, and Success Will Follow

Get Back in the Box: Innovation from the Inside Out By Douglas Rushkoff Harper Collins, 2005, Rs 788

Several community wireless and networking specialists have just completed a free, downloadable book designed to instruct people in remote corners of the world on how to build their own Internet connections using wireless gear. While the book itself is noteworthy in that it offers a resource that could have a strong impact on the livelihood of people in remote areas, equally interesting is the way in which it is being distributed. The book, called Wireless Networking in the Developing World, was written by eight volunteers, including Rob Flickenger, a community wireless activist, author and developer as well as Sebastian Büttrich and Tomas Krag, co-founders of the nonprofit organization Wire.Less.dk. Krag, who instructs people around the globe on how to use wireless technology to set up networks, came up with the idea for people who might not be able to be taught in person by an expert. Krag admits that this isn’t the first book on the subject. In fact, one of the authors, Flickenger, has written a book for the publisher O’Reilly Media Inc. on building such wireless networks. “But there are two issues,” said Krag. “One is, it’s not free. But more importantly, it’s hard to get even if you can pay for the book.” Wireless Networking in the Developing World is free for anyone to download and print from its Web site, http://wndw.net/. That means that people in remote areas can travel to a nearby city where the book could be downloaded and printed at an Internet cafe. In addition, in an unusual twist among books that are free to download, the authors are allowing others to sell the book for a profit. That means that an enterprising person could print out copies of the book and sell them, perhaps in towns without Internet access. Krag is hoping to develop ways to encourage small businesses to sell copies of the book. He’d

Illustrat ion UNNIKRISHNAN AV

WIRELESS

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like to develop a page of the website where small businesses could register as an organization selling printed copies of the books. The response to the book since it was introduced has been surprising. Already, 3,500 copies have been downloaded. One person in Cambodia has started printing out copies and will distribute them for free. A friend of Krag’s in India has offered to translate the book into Hindi. Krag and his co-authors hope to have the book translated into Spanish, Arabic, Hindi, French and Russian. The translations could be a challenge to manage going forward because Krag plans to regularly update the book. Every six to nine months the authors hope to re-release a new version of the book. There are several reasons why wireless technology is an ideal tool for boosting communications in remote areas, Krag said. It’s far cheaper than running cables. More significantly, however, wireless can be used to build networks incrementally, as the operator earns more profits. For example, Krag worked with an entrepreneur in Ghana who initially rented a modem bank to serve customers for a year and a half, until he had enough money to fly to New York where he bought a few wireless routers to serve customers directly. After he earned a bit more money, he flew back to New York to buy some more routers, slowly building out his network as he could afford to. The networks are often used in ways that can have a significant impact on the people who live in the area. In Tanzania, a group Krag has helped train is using wireless to build centers in remote villages that will be linked to an existing center that teaches local people agricultural skills. That way the villagers don’t have to travel so far for the education. —By Linda Rosencrance, Computerworld

t r e n d li n e s

Downloadable Book on wireless networking

Olympian Security s e curi t y Champions on the snow and ice aren’t the only ones who have trained intensely for the Olympic Winter Games in Torino. A team of 1,200 IT professionals has also been going through rigorous training exercises to make sure that viruses and hacker attacks won’t threaten systems that control everything from access to the games to the electronic scoreboards that monitor the events. Security is a perennial issue at the Olympics. This year, the challenge “will be overseeing infrastructure at locations that are spread out between the town of Torino and the mountains,” says Kathy McNeill, MD of IT for the United States Olympic Committee (USOC). According to Yan Noblot, IT security manager for the Olympics at Atos Origin, top IT risks at this year’s games include the potential for denial-of-service attacks and any kind of assault on the integrity of the data sent to the press and the public. “You can imagine if someone changed the results on the scoreboard; it would not be pretty,” he says. Atos Origin has put in place an identity management system for athletes, journalists and Olympic staff. It has also created hundreds of virtual LANs, so that internal systems are segmented from each other. The Winter Games present unique logistical challenges. For one, says Claude Philipps, Atos Origin’s program director for the games, IT teams need to be prepared to reach the high mountain venues, even if a storm dumps several feet of snow or fallen trees block high mountain roads.“No matter what the conditions, we have to be there,” he says. “The athletes will be counting on us.”

— By Susannah Patton REAL CIO WORLD | F E B R U A R Y 1 5 , 2 0 0 6

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t r e n d li n e s

b y L A R R Y P O NE M O N

The Value of Protecting Customer Privacy Companies can maintain consumers’ trust — and keep their business — by safeguarding personal data. Research by the Ponemon Institute finds that public trust in corporations is fragile. In a recent survey, more than 70 percent of respondents said that two data breaches in the same company would be sufficient grounds for them to take their business elsewhere. Another study, which examined consumers’ opinions about the trustworthiness of 14 companies that suffered data security breaches this year, found that trust in these companies dropped significantly after the breaches were reported. Obviously, companies must be sensitive to the impact a security breach can have on their reputation. The cost to a company of losing customers combined with the difficulty of recruiting new ones after a data breach averages Rs 3375 ($75) for every customer record it loses. The news isn’t all bad, however. Most individuals will share a large amount of personal information if they trust a company. During the past three years, the institute has surveyed more than 31,700 consumers about the degree to which they trust the way companies in

Is privacy related to trust?

different industries collect and use their personal information. Respondents were asked to consider how a variety of privacy practices contributed to a company’s trustworthiness, as well as the overall dependability of the company’s products and services. Slightly more than two-thirds of consumers said privacy practices are related to a company’s trustworthiness, although information practices (including privacy) were somewhat less important than a company’s dependability and pricing practices. The institute also surveyed 129 large companies about their privacy practices. Those that consumers said were the most trustworthy tended to have specific privacy practices in place, a way for customers to file complaints or get help resolving privacy issues, a privacy policy that is easy to understand and limits sharing of personal information. That means it’s up to companies to establish responsible information practices that protect personal data and take into account individuals’ privacy preferences.

Best Practices 1]

Keep information private and secure. Ensure that customer information is protected from unauthorized access and use. Have contingency plans in place for protecting that information in the event of a disruption of business or a catastrophic event.

2] Collect only the information you need, and make sure it’s accurate. Collect only what’s necessary for doing business. Companies should review data they collect for accuracy on an ongoing basis.

3] Be consistent. Use the same rules and procedures for collecting, retaining and managing confidential information throughout the enterprise.

Key Privacy Practices The most trusted companies are more likely than the least trusted companies to have:

YES

1. A process for resolving privacy complaints 2. An easy-to-understand policy 3. Limits on data sharing 4. An opt-in (and out) policy for data sharing 5. A branding strategy that includes privacy Ranked by customers in order of importance Source: Ponemon Institute

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The Detective and the Database ENF O R C E M ENT One night in Green Bay, Wisconsin, members of two rival gangs, Florencia-13 and Brown Pride Local 13, crossed paths in an alley. They argued, and a fight broke out. When it was over, a member of the Florencia-13 gang lay wounded, and a 48-year-old bystander was shot in the leg. Witnesses wouldn’t talk much to Detective Dave Eklund, who was assigned the case. But Eklund had a powerful investigative tool on his side: GangNet, a database that tracks information on 350,000 alleged gang members. The system includes individuals’ photos, street names, addresses and known associates, along with gang hand signals and images of their tattoos. One member of the Florencia-13 gang did tell Eklund that the alleged shooter was a member of Brown Pride Local 13. Eklund used GangNet to retrieve photos of 27 of the gang’s supposed members in Green Bay, created a lineup and printed it out. He showed the photos to the victims, as well as to presumed members of Florencia-13. The exercise enabled Eklund to rule out nearly a dozen suspects who were around the alley during the fight. Eklund also contacted the Oxnard police department, which also uses GangNet. Several weeks later, Fernando Juarez, 22, a.k.a. Coco, was arrested and extradited to Wisconsin. Gang violence accounts for a small percentage of crime. According to the FBI, only 6 percent to 7 percent of murders annually in the United States are attributed to gang activity. But gang membership is expanding to small towns, grabbing headlines and public attention. As a result, an increasing number of law enforcement agencies are installing GangNet. First deployed by the state of California nine years ago, the system is now used by 7,500 officers in 11 states (including cities such as Los Angeles, Las Vegas and Minneapolis), as well as by the federal government, according to GangNet vendor SRA International. Each agency maintains its own data, which it can share with users in other jurisdictions (Las Vegas and the state of California have connected their systems). As Eklund discovered in Green Bay, gang members travel across state lines. And so, says Eric Zidenberg, who heads the GangNet program at SRA, integration provides ‘the real advantage’ of the system. “Without GangNet, [this case] would never have been solved,” Eklund says. L AW

—By Allan Holmes

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Michael Schrage

IT’S ALL ABOUT THE EXECUTION

IT’s Hardest Puzzle Getting people to use a new system correctly is much harder than getting it up and running. And much more important.

fter a year’s worth of analysis and argument, a large division of a global telecom company committed itself to a major CRM deployment. This would be a Big Deal. The CRM vendor agreed to make a few non-trivial changes in its software to accommodate the Global Giant — that is, ‘to close the deal’ — and both corporate IT and divisional IT agreed on the specs, the pilot and the implementation. Budget and schedule seemed reasonable. Global Giant’s sales, marketing, customer service and channel management departments, on the other hand, had yet to resolve their implementation concerns. They argued they couldn’t realistically assess the business impact of a major system they’d never used before. They would work out their differences in the rollout. While this didn’t make the vendor, IT or Global Giant’s management committee very happy, there was an undeniable logic to that argument. Having lived though a painful ERP implementation, everyone figured that the CRM implementation couldn’t possibly be as bad. They were wrong. Big time. Not even a year into the rollout, the vice president of sales was asked to resign. The head of channel management quit in frustration. Marketing and customer service — which had previously enjoyed cordial relations — hated each other with a passion. More important, several key customers of the telco, as well as some of its channels (stores and value-added resellers), didn’t like how their business relationships were now being technically mediated and managed. The irony? The CRM technology worked perfectly. IT and its vendor delivered what they had agreed upon and promised, on time and within budget. Virtually every technical milestone had been attained. Virtually every customer-touch and

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Michael Schrage

IT’S ALL ABOUT THE EXECUTION

Implementing a CRM system that is technically successful but fails to generate growth or savings is IT’s version of “the operation was a success, but the patient died.” customer-tracking process that had been selected by sales, marketing, customer service and channel management ran like an ibex on steroids. Unfortunately, no one — except IT — used the CRM the way it was supposed to be used, including the customers and the channels. To the contrary, the telco’s CRM deployment was a festival of perverse consequences. For example, the stores and value-added resellers were supposed to use the new CRM to manage their own inventory and fulfillment requirements independent of the salespeople. This didn’t make the salespeople particularly happy, but it gave them more time and opportunity to sell. However, these channels kept coming to the salespeople to see if they could get better terms than what the CRM was offering. A few of the cleverer and more — ahem — ‘customeroriented’ sales folks figured out how to ‘game’ the CRM so that their channel customers got better price, delivery and credit terms. This unexpected intervention messed up both the logistics budgets and sales forecasts for the telco’s division. Even worse, a couple of the channels that had played by the new CRM “order entry” rules discovered that they got less favorable terms than their competitors. They complained. They were promised compensation for the differences in prices. The result? The first six months of the CRM deployment ended up costing the company more money per unit sale. Even worse, the company’s threats to discipline the salespeople who had gamed the CRM ruined the sales force’s desire to work with the system. The vice president of sales made such a fuss about how his most creative salespeople were being ‘punished’ for their ingenuity that harsh words were exchanged. He was asked to leave. The new CRM provoked customer service’s conflicts with marketing because the customer service reps now had to deal with two data entry and knowledge management systems — the existing one and the new CRM system. Customer service had traditionally helped solve customer problems first and promoted cross-selling and upselling second. In fact, customer service was seen as more of a ‘technical support’ function than a marketing extension. The new CRM system was designed to make it easier for customer service to help marketing line extensions and innovative services. Unfortunately, the service reps now had to juggle logging, recording, and responding to technical and logistics concerns while also responding to prompts for inquiries and upselling from the CRM system. Given that they were evaluated on how many customer calls they could bring to satisfactory resolution per hour, they couldn’t do both well. So they did neither well. Customer satisfaction dropped. 24

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Finally, because the new system sought to serve Web-based online order entry and configuration, the telco’s sales site asked existing customers to fill out a new form and set up new passwords for security and systems integrity purposes. Twenty percent of the existing online customer base declined to do so and went to the phones — which pushed up cost-per-sales and led to abandoned purchasing efforts because of the delays associated with the unexpected surge of inbound calls. Even if the technology performed to spec, who got blamed for customer and channel conflict? Why, the CIO, of course! The CEO, the CFO and the COO raked the poor schmo over the coals for practically every CRM mishap that materialized. Is that grossly unfair? Of course! But the CIO made one of the biggest — and most common — implementation errors that undermine IT’s credibility. He confused implementing systems that work effectively with implementing a system that is used effectively. Implementing a CRM system that is technically successful but fails to generate growth or savings is IT’s version of “the operation was a success, but the patient died.” So what happened? During the pilots, marketing and sales did observe some of the early perverse behaviors that ultimately scaled into money-losing fiascoes. What did they do? They told IT to press on while they dealt with it. Foolish IT! Consider this simple thought experiment: Suppose everybody in the organization was given a free corporate car. Within 90 days, a third of the cars are damaged, involved in accidents, or otherwise create a liability for the firm. Who would be held responsible? The irresponsible individuals who abused their vehicles? Not likely. In most organizations, the likeliest scapegoat would be the people responsible for handing out those ‘free’ corporate cars. That was IT during this CRM implementation. The folks who distribute, champion and install ‘productivity’ tools are frequently held responsible for how those tools are used or abused. Turn the story around: You can be sure IT would grab the credit if the CRM system had transformed the business. The lesson here is simple: Whether CIOs implement ERPs, SCMs or CRMs, only the most naive C-level executive focuses on whether the system actually works. Success will be — and should be — measured by how well that system is used. Don’t think that’s the CIO’s job? Just try implementing a technically excellent system that’s profoundly underutilized, and find out how forgiving your CEO, COO and CFO can be. CIO Michael Schrage is co-director of the MIT Media Lab’s eMarketing Initiative. Send feedback on this column to editor@cio.in

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Susan Cramm

IT-BUSINESS ALIGNMENT

The BusinessofITisBusiness Six keys to lasting alignment with your business partners.

Illust ration UNNIK RISHNAN AV

any IT professionals believe that alignment with the business is all about managing expectations. But the phrase ‘managing expectations’ is ridiculous and should be stricken from CIOs’ lexicons. It conveys false hopes that, through artful maneuvering, delivering less is OK. Nothing but food satisfies hunger, nothing but money pays the rent, and nothing but a ‘yes’ satisfies IT’s business partners. Smart CIOs improve alignment by figuring out how to say yes in a way that works for both the business and IT. Overall, business-IT alignment has progressed during the past five years, due to the institution of executive committees, rigorous priority-setting, active portfolio management, ‘skin in the game’ accountabilities, standardized technology and processes, strategic sourcing and better customer relationship management. In spite of the improvements, alignment continues to top executive surveys as a critical initiative. CIO magazine’s research shows that alignment remains the top management priority for CIOs. At a recent breakfast for CIOs that I facilitated, participants shared stories that highlighted the persistent barriers to alignment. They discussed strategic plans that aren’t actionable, the challenge of working with decentralized business units, project justifications that put form over substance, funding decisions that are designed to keep the peace, constant pressure on non-capital IT costs, the difficulty of staying the course with technology plans, and the leadership gap between CIOs and their direct reports. This discussion highlighted the multi-faceted complexity of the alignment problem, which encompasses the domains of strategy, governance, technology and organizational structure. To tackle alignment, CIOs must first accept the fact that IT’s 26

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Susan Cramm

IT-BUSINESS ALIGNMENT

business counterparts will always want more for less, without delay. CIOs need to learn how to balance the limited supply of IT services with the seemingly infinite demand in a way that is acceptable to the business. This is done through strategy and governance practices that force the business to acknowledge limits and say no to themselves. IT capacity constraints (which are more often people-based than money-based) can be relieved by designing technologies and organizations that ‘flex’ as business volume and project demands ebb and flow. There are six promising concepts to help CIOs face the challenge of improving alignment. I will briefly review them here and will discuss them in more detail in my future columns. 1. Real-world strategy. Business strategy is usually informal, and it changes frequently as new learning occurs. CIOs need an ongoing, participative process for deriving business strategy and weaving IT strategy within it. 2. Embracing value. Investment governance doesn’t really work if IT value is a paperwork exercise. For IT to be viewed as an investment rather than an expense, CIOs have to make value realization practical by incorporating operational measurements in projects. Value must be center stage when CIOs determine the approach for an IT project, manage the scope ,and enforce accountability. 3. Actionable pricing. The ugly baby of IT is the 70 percent of costs that are not really understood and therefore are not really managed. After-the-fact chargebacks based on spreadsheet allocations are neither credible nor useful in influencing future demand and forecasting necessary expenditures. A slimmed-down version of activity-based budgeting is a practical first step in helping CIOs articulate services, consumption and pricing in a way that helps the business act as true consumers. 4. Agile technology. Architecture and infrastructure can hinder alignment efforts. Layered architectures, services and capacity on demand are reducing the cycle time of delivery and therefore expanding the supply of IT. 5. Boundary-less IT IT is too often a delivery bottleneck. CIOs can create virtual capacity by enabling the business’ selfsufficiency and leveraging strategic sourcing. 6. Leaders at all levels. The glue that holds together the strategy, governance, technology and organizational components of alignment is leadership. Surveys indicate that while the leadership cadre at the CIO level is sufficient, there is a gap at the levels below. CIOs need to expand IT’s leadership capabilities by changing their leadership development approach from ‘survival of the fittest’ to ‘development of the fittest.’ In the coming months, I will unpack these concepts by reviewing theory, discussing success stories, and providing suggestions for further study. I invite you to join the discussion by sharing your alignment stories — both good and bad. Together, CIOs can learn how to say yes without regrets. 28

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Reader Q&A Q: Saying no is a way of letting people who don’t understand IT’s capabilities know what is possible and what isn’t, and what is a good use of money and what isn’t. Whenever the sales VP asks me for something, it’s his way of testing the importance of his idea. He knows I will work with him if it’s a good idea. But not everything is a good idea or is a better idea than what we’re already working on. A: It sounds like you have a great relationship with your

sales executive — congratulations! Without strong relationships, the word ‘no’ causes people to dig in on their positions. That’s a difficult reaction to overcome if you hope to get to a solution that works for both parties. People react to (and learn from) questions better than statements. The goal of IT-business alignment is to set up mechanisms so that business executives are able to evaluate the merits and implications of their IT-enabled ideas without IT having to play the heavy.

Q: If business-IT alignment has improved over the past five years, as you say, why were there so many sob stories at the breakfast you attended? Alignment is one of those problems that never goes away, unlike technical issues. Alignment can never be ‘fixed.’ It requires continual work and communication on the part of IT executives and every member of the IT department. A: Alignment has improved, but you are right that it

requires continual work and communication. The CIOs in that breakfast meeting weren’t lamenting this state of affairs; they were discussing alignment with the goal of learning from each other and developing a sense of how to reach the alignment grail.

Q: In addition to the six points you’re writing about, I’d like to see you address the executive committee — a.k.a. the IT management committee, IT-business oversight committee or what have you. What are the best ways to set up this kind of group, who has to be on it (the mustattends versus the nice-to-haves) and what does it need to accomplish?

A: Management committees are essential to effective governance. Real-world strategy requires that an effective senior-level IT council exist. CIO

Susan Cramm is founder and president of Valuedance, an executive coaching firm in San Clemente, Calif. Send feedback on this column to editor@cio.in

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Deal Kings: Stephen Hsu, CFO, Symphony Services;

Sanjay Sharma, CIO, IDBI

Anil Khopkar GM & CIO Bajaj Auto.

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Bargaining for an IT system is akin to fighting a tactical battle. As CIO, you are responsible for making the right moves at the right time to ensure a great deal for your organization. By Rahul Neel MaNi aND GuNjaN TRiveDi

Let’s face it: You’ve probably lost more than a few rounds to your vendors. You’re a great CIO — but savvy buying is your weak backhand. The realization that some of the vendor volleys were aces in disguise does little at budget meets with the CFO. Consolation is that you’re probably not the only one that’s been skinned. “Vendors aren’t going to volunteer discounts. It’s your ability to bargain that wins you a good deal,” says Sanjay Sharma, CIO, IDBI. The ball, however, is back in your court. Management pressure to run systems on squeezed budgets is forcing vendors to play nice. Today companies pay, on an average, 15 to 20 percent less to the same vendor for the same services. Where previously only hardware was discounted, now areas such as systems integration, application development, apps and network management, and on-site support costs are up for bargaining. But great negotiators know that smashing every serve to oblivion will only create a foe out of your vendor. Here’s how you can turn a hard bargain in your favor.

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I D B I

ood bargains are not about negotiating for the lowest price. Cheap won’t guarantee you a bargain unless it fulfills your objectives. You could spend months negotiating with vendors till they offer their products for free, but the incremental costs on hardware could break the bank. When IDBI Bank merged with IDBI, the bank’s requirements grew exponentially and Sanjay Sharma, CIO, IDBI, was faced with a dilemma. Should they continue with the existing infrastructure and plug in more storage space on top of an already gargantuan data bank or should they switch over to an entirely new infrastructure that could be optimized for the next ten years? For a CIO it’s a hard choice. It’s harder in India where nothing is discarded, even pieces of hardware a decade old. It gnaws at CIOs to dump old infrastructure until they’re sure the capital investment has been recovered. And then there’s the CFO to contend with. Sharma, however, was convinced that running on the old infrastructure would cost him at least 25 percent more — mainly in recurring costs — than going to the supermarket and replacing it. “Our operating expenses for IT were skyrocketing, which directly hit our profits,” he says. When it became impractical to continue, IDBI’s management decided to invest in infrastructure and capitalize it over the period of the contract. It decided to take the plunge. “I am sure that if we had continued with the same infrastructure, we would have ended up paying more from a profit and loss perspective. In addition, we would have been stuck with infrastructure that had multiple points of failure,” says Sharma.

Wanted: new Vendor For the first time in its history, IDBI shunned the idea of open bids based on a lowest price. They went to the market for a data center and a disaster recovery (DR) site. They evaluated vendors on an overall total cost of ownership (TCO) over a five-year period. This gave IDBI the benefit of negotiating on the initial cost of hardware, upgrades over the next three years, the cost 32

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of onsite support and an annual maintenance contract for five years. “We clubbed all this under a single Request for Proposal (RFP). The RFP also included the cost of the ‘ecosystem’ that consisted of power consumption, UPS, and air conditioning,” says Sharma. Five vendors responded with letters of interests. Out of the five, two were rejected on technical grounds. The short-listed three were IBM, HP-CMC, and Sun Microsystems-Wipro. IBM would eventually win the bid. IDBI’s decision-making process also included benchmarking the performance of all three against real numbers from real business volumes. This helped IDBI normalize its real time data on all three platforms and compare results. A similar exercise was done for storage. Simultaneously, the vendors were asked to budget for the cost of all other embedded software needed to run the datacenter and DR site. They were asked to offer a figure for an upfront capital investment cost and disclose revenue expenses for the next five years. IDBI planned to lock-in with one vendor for five years and re-negotiation was ruled out until the contract expired. Payment would be made against delivery. The Rs 56-crore deal included building Level3 infrastructure for the datacenter and the disaster recovery sites with fireproof walls, fireproof glass, no single point of failure for UPS, generators, precision A/C and comfort A/C plants, building management system, network operation center and hardware optimized for growth over the next three years, AMC and onsite support for all equipment. IBM was excited about building IDBI’s data center from scratch even if meant offering a low TCO. “It was a deal that allowed us to leverage IBM’s end-toend strength in a true sense,” says Kumar Karpe, Country Manager – Financial Services Sector, IBM India. The deal served IBM on different levels. IDBI became its reference site in the banking sector, an important sell factor for future deals in a cautious industry. More substantially, strong ties between IDBI and IBM would give IBM leverage during a competitive bid for the Sanjay Sharma, CIO, IDBI next deal in five years. There are

The Long-term

Steal

Sometimes bargaining can be like squeezing a lemon. I squeezed

this deal for every drop, but not until it went bitter.

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Cover Story | Vendor Management very few vendor companies in the enterprise computing space that offer a one-stop-shop for equipment, software and services. As a CIO, it is very important to locate vendors who can offer most of your requirements. IBM was one such vendor.

iBM Plugged in IDBI’s common but smart low-TCO approach put the heat on vendors. Each vendor was forced to repeatedly look at their TCO. “They were under pressure to propose not only the lowest initial bid, but also the lowest cost for services and TCO over the next five years,” says Sharma. IDBI kept the pressure on, forcing vendors to offer them discounts in various areas just to remain in the race. “Before opening the bid, we received final discount envelopes from all three contenders. The bid was opened and we looked for the lowest TCO. From here

“Vendors aren’t going to volunteer discounts. It’s your ability to bargain that wins you a good deal.” —Sanjay Sharma, CIO, IDBI

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we bargained further on hardware and services,” says Sharma. Sharma says that their focus on TCO helped IDBI bargain with the vendor to the lowest possible cost. By this time IBM had offered all that it could to IDBI. But Karpe of IBM feels that it was win-win. “We went to the extent where we could win in a true competitive process. Competitive pricing and winning large deals go hand-in-glove. “It was not just a deal; it was a steal for the bank. The deal meant that for five years IDBI could focus exclusively on business growth,” says Sharma.

extra Mile IDBI was a critical deal for IBM, which needed a reference site for a foothold in the industry. “IDBI was pampered. The contract, once signed, was never touched again. It was a thoroughly professional job done in creating the level-3 data center,” he says. Despite the pinch, IBM did not slack on quality. Even the open-ended requirements in the RFP were managed well. IBM went an extra mile and sought expertise from Japan and USA for the project. The server utilization came down to 30 to 40 percent, compared to an average of 90 percent. It was an experiment that worked well for IDBI. “They made a difficult migration work for IDBI,” says Sharma. Throughout the entire deal making process, Sharma kept reiterating that the datacenter had to run with zero failures and that the business had to be taken care of in case of a disaster. “What is a good SLA? One that offers you an ‘all time availability’ and that’s what we asked IBM to provide. I don’t want my people running after vendors trying to ensure uptime and business continuity. It’s the responsibility of the vendor,” Sharma mentions. The deal’s net profit and loss impact was not Rs 56 crore since it was amortized over a period of five years. This way the total expenditure stayed well within the limits of IDBI’s growing business. In absence of the deal, the IDBI’s cost of IT acquisition over the next five years would have been 25 percent higher. “It has given room for expansion and comfort for our business continuity planning. It is absolute value for money. It is a great bargain for all of us including the business users. With weaker and less reliable infrastructure, we would have spent more money in the long run,” says Sharma. Sometimes bargaining can be like squeezing a lemon, Sharma adds. He squeezed this lemon for every drop, but not until it went bitter. A little more, he says, and IBM would have walked away. And that’s what good bargaining’s all about.

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nil Khopkar, GM (MIS) & CIO, Bajaj Auto, has an approach to negotiating that’s born of an annoying roadblock many implementations run into: Quality of workforce. From years of working with the automobile major, watching industry trends up close and learning from peer experience, Khopkar knows that the quality of people a project employs is fundamental and it makes for an important bargaining chip during negotiations with IT vendors. “When it comes to deal negotiations, I bargain for the right people first. Price and the nitty-gritty of the delivery model comes second,” he says. Six months ago, Khopkar re-visited his concept when he negotiated a deal between Bajaj Auto and HP. On the table was a three-year, Rs 10-crore contract for ERP support that would later add consultation for best practices and the development and integration of various applications on the platform. It’s a deal both Bajaj Auto and HP India consider strategic. Bajaj Auto gets world-class support services and solutions and HP takes away a big ticket account to showcase as reference.

no o Cruise

B A J A J A U T O The People

The agreement’s roots go back almost five years, when Bajaj Auto decided to implement an organization-wide ERP. The company zeroed in on SAP and started to deploy in December 2001 with IBM as its implementation partner. The project took a little less than two years to complete and Bajaj Auto went live in April 2003. Post-rollout, however, the automobile giant realized that supporting the SAP deployment would be a major problem. “During that period, large and mature IT service organizations such as HP and TCS weren’t concentrating on domestic markets. IBM was just about starting support services for local customers and had worked out a commercial model that was not feasible from our point of view. We were forced to look at other options,” recalls Khopkar. Bajaj Auto had to resort to second-rung IT service companies to support its SAP deployment. The vendor they chose served well over the next two years as the company streamlined and stabilized its enterprise-wide ERP, Khopkar says. However, by that time, Bajaj Auto had decided to use the ERP deployment as a platform to introduce more business

Deal

HOME AD

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as well as functional improvement initiatives. Their IT vendor wanted out because it couldn’t provide what Bajaj Auto needed. “The IT services company worked on a cost-based model and they deemed taking a cut in costs was better than offering higher services,” says Khopkar. The challenge before Khopkar was to find someone new to provide Bajaj Auto with the resources to further its IT and business roadmap and give them value for money, or do it themselves. Unlike many other manufacturing and automobile majors, Bajaj Auto did not want to set up an affiliated IT company to deploy and manage its IT implementations. “Our core competency is not IT. Hence, we did not pursue it,” says Khopkar. The only other option was to go back to the IT service giants, which, by then, were warming to the idea of taking on service projects in the domestic market.

Stay One Step Ahead of Your Vendors Understand the market and its dynamics. If you can get a handle on the dynamics of the market, you can safeguard yourself from vendor sermons on what to buy. Do your homework on the enterprise IT market before you open negotiations. If you lack the expertise, rope in a consultant. Determine a target price. Even a vendor’s lowest price means nothing if you don’t know how much you are willing to pay. A well-calculated pre-negotiation price will save you time and deflect knocks on your profit and loss statement.

Driving on slas To a scouting vendor, the project, on the face of it, seemed a mere SAP support and maintenance exercise. But Khopkar was looking ahead, something that would help turn negotiations his way later. He wanted his IT service vendor to do more than support ERP and carry out functional and business improvements by ushering the next level of IT initiatives seamlessly. Khopkar also wanted the vendor to offer consulting services, bring in best practices, and carry out development and integration. It was comparatively easy to draw and adhere to the SLAs drawn up for the uptime of IT infrastructure, Khopkar says. It is more difficult, however, to draft SLAs for the kind of application services Bajaj Auto foresaw and to the mapped-out business improvements Khopkar envisioned. Negotiating a ‘best price’ based on this kind of open SLAs would prove to be a red-eye affair. Khopkar drafted a ‘Statement of Work’ based on peer-learning, industry trends and experience. The document, which was referred to religiously at all vendor meetings, was designed to meet the company’s requirements and objectives. It focused on improving functions and effectuating business growth. “One of the key requirements of Bajaj Auto was to decrease cycle-time and help the company come out with its best products at competitive prices,” says Khopkar. Among the SLAs integrated with the document were ones that negotiations would hinge on. One of these stressed on how to optimally leverage man-days offered by the vendor. Khopkar approach was to negotiate for human resources rather than for functional services. Application uptime was also tied in with commercial rewards and penalties, according to operational service-levels. The SLAs that finalized the deal red-lined three factors: Operational maintenance, functional improvements and developing projects that addressed emerging business

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encourage competitive bidding. Allow a play-off between your top-three vendors. You don’t have to reveal exact prices quoted by each vendor, but do let it be known to them separately that their competitors are offering a lower price in a specific area. You’d be doing them a favor. get to know your vendors. The best bargains in the world are of little consequence if your vendor goes belly-up. Research your vendor and his policies before locking yourself in. Don’t honeymoon with your vendor. Some vendors are masters in creating requirements that they profess you will need and that can be fulfilled only by their products. Remember, you don’t need a Rolls-Royce to fetch vegetables. ask for references. Ask your vendors to name a few deals they won or lost. look at their track record, this will help you determine whether they can deliver. Bargain for the long-term. Vendors don’t generally mind losing some money upfront if they can recover their costs and book profits as your relationship with them grows. look at a horizon further than your vendor’s and bargain from that position. stick to the RFP. Don’t be tempted to include new features or products that a vendor is pushing if you were sure you didn’t need it two days ago. Flashing lights always jack up the price. appreciate good work. Vendors are not enemies. An occasional pat on the back for good work will boost your vendor’s enthusiasm to work harder and devote more resources to your project.

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Cover Story | Vendor Management needs. In the process of negotiating a price tag, Khopkar pushed hard on resource deployment. He broke down both support and functional improvement plans, attempting to pin point the use of man power at each stage. Moving around personnel to where it was needed gave him ‘bargaining talk’ and allowed the company to use its IT workforce optimally. “Companies end up employing more people as the number of ERP modules goes up. I figured that deploying additional resources was unavoidable, so I negotiated on what these resources would do when they were not actually involved in maintenance activities,” says Khopkar. He stipulated that additional workforce would participate in mini-application development projects on the same fixed-cost model. The sub-projects would form the building blocks of larger business improvement projects.

“The kind of talent the vendor attracted became critical. I bargained for the right people and even asked for their résumés.” —Anil Khopkar, GM (MIS) & CIO, Bajaj Auto.

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“It was easy to fall in the trap of either a cost-based model, which stresses cost-cutting over delivery-ofservices, or a services-model where the company ends up paying through its nose for higher service levels but leverages deployed resources poorly,” says Khopkar.

Contract on Wheels From experience, Khopkar anticipated a fair amount of work would go into supporting SAP. On the other hand, he knew that the business improvement roadmap that he had envisioned would require attention with all the new projects that were being clubbed under it. This was the sort of opening that he could turn into a bargaining chip. Striking a balance between the two activities, he charted out the profiles of a workforce he wanted from the vendors for the projects. “The kind of talent the vendors attracted and eventually deployed became critical. I already had the required SLAs charted out for maintenance, the development of new projects and the vendor’s onsite and offsite activities. The next natural step was to bargain for right people to fill these functions,” says Khopkar. He spent plenty of time at HP’s Global Delivery India Center evaluating the skill sets and domain expertise HP employees exhibited. Negotiations with the vendors included two specific clauses. First, personnel brought in for Bajaj Auto projects were required to have done four years in technology development or have two years experience in live projects. “I even asked for the résumés of each team member being deployed,” says Khopkar. Second, the vendor had to be sensitive and flexible to the company’s requirements and not shackle down the project to the contract. HP immediately agreed, demonstrating how much Khopkar had got everyone on board. “Though we signed a contract as a SAP consultant, we wanted to extend the partnership with Bajaj Auto to tap emerging opportunities in the organization. While we agreed to administer stringent SLAs for SAP support, we also chose to be flexible and refused to let the contract to pin us down,” says Pallab Talukdar, Director — Marketing and Alliances, Technology Solutions Group, HP India. “We can now use Bajaj Auto as a reference for our prospective international clients. If we can help an enterprise get competitive in India, we can help any enterprise get competitive anywhere else,” says Talukdar. Their understanding has benefited both companies. HP is now integrating a SAP-based Product Lifecycle Management (PLM) package with Bajaj Auto’s current solution. For the next three years, HP also had the opportunity to take on almost all the IT projects at the organization — both minor and major. Khopkar had created a closed circuit with HP and saved the company the bother of locating other vendors for potential CRM and SCM projects.

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ew can drive a harder bargain than a chief financial officer. Stephen Hsu, CFO of Symphony Services, follows a mantra: Keep your vendors honest. He also swears by the Request for Proposal (RFP) process — it’s what maintains integrity and creates optimal cost, he says. “Thanks to RFP, we’re in a place where can identify different players and the technologies they offer. A shortlist represents a step in clarity as we assess the value of technology and its cost — it’s a joint process between IT and finance,” says Hsu. His mantra was the kernel around which the RFP process worked when Symphony Services, an ITeS major, went on a hunt for IT vendors. The company needed to augment its networking and information security infrastructure as it expanded its campus in Bangalore.

record of successfully bringing high-value business processes. Symphony is known to exhibit a combination of core competencies in analytics and software engineering with sound domain knowledge and process expertise. With eight locations worldwide, it offers end-to-end solutions in market analytics, which offer more market accuracy and increases revenue opportunities. It also specializes in spending management, which gives companies an insight into their indirect expenses and in commercial software, which delivers faster time-to-market for commercial software products. High uptime of its IT infrastructure is critical to Symphony’s nature of business. IT enables the organization to service major brands such as Yahoo, Siebel, Oracle and Autodesk among others. Symphony scores an average of 36 major software releases a year in contrast to the industry average of just one. The company processes three billion calls annually and handles client spends of Rs 4,500 crore ($1 billion) through its telecom and IT expense management services. It also collects and mines 14,800 crore point-of-sales scans every week

S Y M P H O N Y The Finance

Gambit

a Catch A CMMI Level 4 company, Symphony Services is an acknowledged ‘high-impact’ outsourcing partner with experience in running large-scale operations and a track

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Cover Story | Vendor Management

Leasing is a valuable tool to finance network investments. It spreads the cost of new technology,

In typical mating call response from 37,000 retail outlets and to the RFP, almost all the major 70,000 households worldwide. enterprise networking vendors Any downtime of Symphony’s generated large amounts systems has huge financial of energy as they exhibited and operational implications for their skills and showcased their its clients. market dominance. This is just the sort of profile that looks good on a testament sheet. To address its skyrocketing The Clincher needs and the increasing Among the big boys in network criticality of its business, infrastructure, Cisco had more Symphony set up delivery reason to want this deal. The centers called Global Operating Bangalore GOC was already Centers (GOCs) equipped with sitting on Cisco systems and Stephen Hsu, CFO, Symphony Services contemporary technologies at there was no way Cisco was Bangalore and 44 other locations going to lose a relationship. around the world. “If Symphony can offer high-end So, when Symphony floated the RFP, Cisco made a services to global customers, it is because it is backed by tactical decision to throw in a sweetener: It offered an the high performance of our GOC infrastructure. Ensuring infrastructure leasing model. It was the sort of valuethat the GOCs sit on a secure, highly scalable and reliable addition that Symphony was looking for and they substructure was a key concern,” recalls Hsu. jumped at it. Hsu floated an RFP among all the major vendors in the Cisco Capital is an operating lease program that finances networking arena to improve the networking, security and infrastructure investments and offers investment protection communication technologies of its GOC in Bangalore. The against technological obsolescence. technologies put on display were very similar, making apple“Leasing is a valuable tool to finance network to-apple comparisons relatively easy. Whoever wanted to investments. It spreads the cost of new technology over sell by the crate, however, would have to differentiate by time, allowing organizations such as ours to better offering value for money. manage cash flow and conserve capital budgets. An “We were looking for a reliable, scalable, secure and extensive analysis of the investment protection offered by manageable end-to-end solution to fulfill our networking Cisco Capital cemented our relationship with Cisco as our requirements, one that would meet present needs and technology partner,” says Hsu. future-proof the company. The selection criteria was Beside cash flow management, Symphony enjoys simple: Technology and financial value,” says Hsu. additional benefits that included reducing the total cost

allowing us to better manage cash flow.

SLA Checklist Points to ponder before you sign an sla. DOn’T Be an OsTRiCH. SlAs are boring, but read yours with suspicion. Make sure it mentions goals, targets and objectives. Be suspicious, ask questions — better now than later. Call On THe geeKs. Bringing technical folk into the loop from the word go will help define needs and priorities. sTanD in yOUR VenDOR’s sHOes. Vendors are apt to promise anything. look at their technical constraints — service 42

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geography and maturity. It will decide what they can and can’t offer. asK FOR THe MOOn. There’s no harm in asking. Define mission critical parts of infrastructure, demand five-nines and then negotiate on metrics and penalties. DeManD RePORTs. Reports are useful to track SlA S compliance. Make your vendor part of the SlA validation process and he’s more likely to take his responsibilities seriously.

sTaRT eaRly. SlA negotiations take time, if they’re done well. Give your vendor as little scope to leave you high and dry. Manage exPeCTaTiOns. Set reasonable performance expectations within the enterprise and negotiate realistic SlAs and associated metrics. PenalTy! SlAs have provisions for penalties — monetary or otherwise. Good SlAs can help hold penalties over your vendor’s head.

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Cover Story | Vendor Management of ownership, ensuring smooth technology migration and mitigating the risk of technological obsolescence. “By choosing Cisco Capital’s leasing program, Symphony Services protected its network from technological obsolescence. We believe that helping our customers preserve capital to invest in other key functional areas makes good business sense in today’s environment. Moreover, it gives us a distinct advantage when negotiating a deal,” says B. Ashok, Senior Vice President – IT Services, Cisco Systems, India and SAARC. Symphony wanted to deploy a Cisco powered network comprising the Catalyst series of high-end LAN switches with integrated firewall and security modules as well as IP telephony technologies for its global operating center. The equipment was worth Rs 5.4 crore and procurement and implementation was spread over two phases — a period of 12 to 18 months. Symphony decided to manage its IT infrastructure with an in-house IT team assisted by a system integration partner. Hsu also took this project to the bargaining table. He negotiated for the Cisco SMARTnet Support program to be clubbed with the infrastructure deal. He won. Under Cisco’s SMARTnet Support umbrella, Symphony gets onsite technical assistance, update administration and advance replacement of failed hardware. “With SMARTnet bundled in, our SLAs with Cisco also offered us a warranty against downtime. Equipment that has failed is repaired or replaced within four hours. This value-add helps us reduce downtime phenomenally while maintaining high levels of infrastructure uptime,” says Hsu.

Pushing the envelope Hsu could teach budget shoppers a thing or two about bargaining. After ensuring a clear capital savings, he continued to negotiate for better value. As discussions went into several rounds, Hsu brought down the price of equipment. “Our prime focus during negotiations was to obtain value for money. I stressed on lower interest rates for the leasing option and healthy discounts on the actual hardware prices,” recalls Hsu. Symphony and Cisco decided to set the technology refresh cycle at three to four years. “With the SymphonyCisco relationship strengthened further by our capital leasing program, we will be in a much better position to offer next-generation technologies at the end of Symphony’s technological obsolescence cycle at phenomenal discounts. We’re talking about a doubledigit discount deal,” says Ashok. The deal left Cisco Rs 5.4 crore (US$ 1.2 million) richer and Symphony got a state-of-the-art networking infrastructure at a reduced total cost of ownership and better cash-flow management. “While negotiating any deal, whether large or small, it is extremely important to remember that the end result of

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“While negotiating any deal, large or small, it is extremely important to remember that successful negotiations leave both parties satisfied.” —Stephen Hsu, CFO, Symphony Services

a successful negotiation is when both parties are satisfied. Both parties may get into heated discussions over business and financial terms, but in the end, the customer needs to walk away from the table feeling that he has received the best value for his dollar and the seller believes that he was compensated fairly,” says Hsu. CiO

Bureau Head North Rahul Neel Mani can be reached at rahul_m@cio.in. Senior Correspondent Gunjan Trivedi can be reached at gunjan_t@cio.in

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Habil Khorakiwala, Chairman, Wockhardt has a remedy to stimulate fast growth in an organization: Use technology to manage customers.

Growth

Tonic BY Gunjan Trivedi

Ask Wockhardt Chairman Habil Khorakiwala and he’ll tell you that organizations can achieve fast growth by using IT to strike a balance between volumes and price and by ministering to their customers. In doing so Wockhardt’s grown from a Rs 3 lakh company to a pharmaceutical house with a global presence.

CIO: How does IT fit into a research-based pharmaceutical and healthcare company?

View from the top is a series of interviews with CEOs and other Clevel executives about the role of IT in their companies and what they expect from their CIOs. coming MAR 1: Neeraj R. S. Kanwar, COO, Apollo Tyres.

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Habil Khorakiwala: IT helps improves the quality of our decisions and end-products and takes us closer to our customers. With the amount of information we deal with and the complexity of business we’re in, IT gives us our competitive advantage. In creating and sustaining a global business model, the whole ballgame is about being two steps ahead of the others, with a higher degree of thoroughness and speed when it comes to implementation. I personally encourage the use of IT in the organization — it is fundamental to all that we do. Let’s take an example of one of the

most complicated activities we tackle — the process of launching a generic product. We have about 100 projects that we need to market. Normally, going from concept to getting final approval for a product takes about three years in a regulated market like the US. This involves around eight to nine functions, with 20-odd people dedicated to each function; the level of complexity involved is pretty high. IT's ability to put in place processes and systems is enormous. IT is used right from the concept level through research to manufacture of Active Pharmaceutical Ingredients (API) and formulations and in meeting regulatory guidelines and patenting requirements for manufacture. Then, we also need to structure documentation to respond to FDA queries adequately and with speed.

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While dealing with a regulatory market, one needs to understand the importance of quality and processes, and reduce failure rates and delays.

Does IT also play a bigger role in R&D? As with biopharmaceuticals, new drug discovery involves numerous complexities. The entire lifecycle takes close to a decade. Enormous information is generated as multiple disciplines become involved. It is essential to capture data and analyze it at every stage. Additionally, if you’re in drug research, you cannot be successful unless you are globally competitive. A drug isn’t worthwhile unless it’s superior to what’s available. We have eight to nine drugs in various stages of discovery and development and our team uses IT extensively here. Patent research is another area. All the disciplines of Wockhardt (pharmaceuticals, drug discovery and biotechnology) require searching for patents. It is far more important not to infringe existing patents than filing our own. We generally file between 30 and 40 patents every year. It is impossible to access and search hundreds of thousands of patents without IT.

What about non-R&D operations? Wockhardt has integrated functions such as planning, procurement, resource management, interfacing the manufacturers and the supply chain, and distribution. As a result, today we have zero working capital. We tightly balance processes and inventories. This gives us enormous strength because we don’t require a lot of cash to grow.

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Wockhardt Chairman Habil Khorakiwala expects IT to: Better customer management Integrate the supply chain Raise the bar on operational efficiency

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View from the Top

We have an online system of product-costing based on actuals. The system computes the actual cost of manufacturing and distribution, and adds a planned marketing cost for each product. Sales and marketing staff can see the profitability of different products. With SAP, it also becomes easier to integrate with the other entities we acquire. In addition, with the Infinity Prescription Information System, we can compute the value of business a doctor gives us. Our field force of 1,200 sends us their daily reports electronically. We have found that globally we receive 85 to 110 percent validation for our products by getting regularly prescribed. This helps us to monitor the performance of both doctors and our people.

Have initiatives such as Infinity contributed to increased market share? Absolutely. For instance, when we entered the Insulin domain, there were already a couple of transnational pharmaceutical giants that made sure new entrants failed. The process I established in Wockhardt of micromanaging customers using IT initiatives like Infinity, meant that in the first year we were able to garner a 22 percent market share for new prescriptions. In less than two years we enjoyed a 31 percent market share. Similarly, we introduced Wepox, a recombinant erythropoietin used to treat anaemia caused by cancer and chronic renal failure, about four years ago. When we entered the market, our competitor almost held the entire market share. Today, we are market leaders. We achieved this using a moderatepricing approach and by aggressively micromanaging customers using IT. Though the price of Wepox has come down by 60 per cent, we’ve increased volumes 10 times. The challenge, however, is to develop skill among our people to interpret and analyze information. While developing an IT solution is challenging and getting it implemented even more so, using the data effectively is 46

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“While developing and implementing IT solutions are challenging, using data effectively is the most difficult task. ”

the most difficult task. We already have competency at the senior level and I’m sure we will develop into an organization that interprets and analyzes data and takes better decisions faster.

Has technology helped leverage global business and acquisition — key growth drivers at Wockhardt? The factors that drive our international business are the quality of management, advanced research, and manufacturing. We replicate similar IT implementations across geographies. In an acquisition, useful aspects should be retained and the rest should be migrated to one’s own levels. Technology helps us to raise the standard both ways.

With acquisitions, SAP takes care of the supply chain. However, we do not replicate marketing-related IT deployments. We only acquire to have market access, so we generally rely on existing systems. Nevertheless, as we approach newer areas in major markets, we are looking at ways of employing IT to better understand customers and respond to the markets more effectively. We are in the process of integrating businesses in these markets with the Indian supply chain.

On a different tack, how do you ensure an alignment of business goals and IT? IT is core to Wockhardt. Advanced R&D and compliance to regulations and standards are crucial for any leading pharmaceutical enterprise. IT gives us a competitive edge, whether in the pharmaceutical market or the healthcare business. Even our hospitals are equipped with the latest IT infrastructure that enables telemedicine and an anywhere, anytime availability of clinical and patient data. At Wockhardt, business goal are supported by IT initiatives. For instance, with the Infinity Prescription Information System we are in a place where we understand a customer’s experience and views, and know exactly what to communicate. I wouldn’t say that we’ve reached the kind of pervasive levels I envisioned, but we’re on a fairly advanced course to make it happen. CIO

Senior Correspondent Gunjan Trivedi can be reached at gunjan_t@cio.in

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Big How to Play with the

Small and midsize companies can use basic technologies and outside service providers to collaborate seamlessly with larger partners. B Y T H O M A S WA I L G U M

Boys 48

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IllUStratIon Unn IK rISH nan aV

Collaboration

it takes two to tango, two to speak truth (said Thoreau) and two to get one in trouble (said Mae West). Here’s another thing two people can do: Run the IT operations for a company with more than 300 employees, revenue of about Rs 292.5 crore ($65 million), and a 175,000-square-foot warehouse that runs three shifts seven days a week and ships more than 20,000 cases of snack food per day to stores such as Wal-Mart and Target. Snak King’s IT director, Brad McClave, who is one of those two people, uses time-tested technologies such as Web-based EDI (Electronic Data Interchange) applications, firewall and antivirus software, and warehouse management systems to get his company’s products onto the shelves of much larger, extremely demanding customers. In conjunction with judiciously chosen IT service providers, these basic technologies have enabled the company to quickly grow to the largest snack food manufacturer on the West Coast — without all of the traditional IT overhead. When it comes to a big staff and expensive systems, McClave says, “I don’t have the time and money to do that.” Vol/1 | ISSUE/7

Reader ROI

How partnerships can help small companies engage with larger ones Which technologies smaller companies have to raise to the levels required by large trading partners Which services smaller companies can outsource

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Collaboration Small companies, and even many midsize companies, can’t afford gargantuan ERP, CRM and supply chain management systems that take large IT staffs many months to install and cost millions. Yet, the established behemoths demand electronic data transfer, purchase orders and invoices, as well as other digital shipping requirements. To do business with the big boys, the deal is simple and clear: “If you don’t cut it, the next person is in. You’re out,” McClave says. But the opportunity is too good to pass up; a small company can quickly become a big one by working with industry giants. If you want to get in the game with the likes of Wal-Mart, Travelocity and Nordstrom, it can be done — with tried-and-true technologies and some help from outside IT services providers.

credit tracking, purchase orders and warehouse product inventory are baseline requirements. If technology fails, the company can’t move a product that has a short shelf life. McClave was recruited by Los Angeles-based Snak King four years ago for his strong ERP and warehouse management chops. “I’m not an IT techie guy,” he says. After senior management had what McClave terms ‘bad experiences’ with the previous IT regime, they brought him in to fix the company’s supply chain management systems and secure everything. The four technology partnerships enable ERP and warehouse management systems, EDI transactions, Web development and security applications (firewalls, antivirus, antispam and power backup). The ERP system from Epicor is at the heart of Snak King’s operations,

The opportunity to do business with the titans is too good to pass up; a small company can quickly become a big one by working with industry giants. It can be done — with tried-andtrue technologies and help from outside IT service providers. Just ask Emily Harrow, who started a cosmetics company two years ago in her parents’ home and now sells her Mixed Emotions line of bath and beauty products on the Home Shopping Network and in several large retailers. She has no IT staff whatsoever and uses a Web-based EDI product to transact with the giant retailers. “It would not have been possible to work with these larger companies without [EDI],” Harrow says. As for the technology’s ease of use: “It doesn’t take a brain surgeon,” she says. EDI, for one, certainly isn’t leading-edge technology, “but it’s low-cost, low-tech, stable and not going anywhere,” says Ken Vollmer, a principal analyst at Forrester Research. As a result, EDI transaction volumes have been increasing by 5 percent to 10 percent every year, Vollmer says, driven in part by smaller companies such as Snak King and Mixed Emotions that are turning their big dreams into realities.

How sMall CoMPanies MP MPanies look Big So, just how does Snak King’s IT duo of McClave and IT Manager Mario Sanchez get the job done? “A bunch of partnerships,” answers McClave. The company relies on four IT vendors or outsourcers, each of which provides critical services. The snack foods industry is cutthroat, and technology-dependent functions such as electronic invoicing, 50

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bringing together EDI, wireless bar-code inventory management and other back-office functions. With the EDI systems, McClave has to deal with both low and medium-volume retailers (convenience and grocery stores) and high-volume retailers (such as Target and Wal-Mart). McClave calls EDI a ‘complicated beast,’ especially since the high-volume retailers adopted the AS2 EDI-over-the-Internet standard in 2002. “It made us have to switch our methods,” McClave says. EDI transactions now have to be faster, more flexible and secure. But due to his partnerships with Epicor and iSoft, he has been able to maintain the relationships with the big trading partners without big technology headaches. For Snak King’s smaller retailers, which make up the majority of its clientele, McClave uses Web-based GroceryEC.com EDI tools from Edict Systems. “[The vendors] handle all the overhead and the hard part of EDI trading relationships that has to be done,” McClave says — by which he means the guts of the technology that enables seamless data interchange that he has neither the staffers nor the inclination to manage. To lock down Snak King’s IT systems, McClave turned to software providers Far West and ServGate. The company’s network infrastructure — Unix servers, Web servers and file servers — is onsite, but a managed firewall solution provides the ‘bridge’ from the outside world into Snak

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Collaboration King’s operations. “I don’t have to deal with configuration and constant updates on it,” McClave says. The same goes for antivirus, antispam and backup power functions. If the company loses power and the mail server goes down, a service partner has front-end mail server capabilities, so “to the world, I never look dark,” he says. Next up is an e-commerce rollout via SnakKing.com that will give salespeople real-time online access to customer data as well as provide a portal so that distributors can access their order and shipment information. McClave won’t go it alone, of course. “There’s no way I can do that in-house. Someone needs to know ERP and the database and write those Web integration tools,” he says. “The only way you can do that and be a small company is that you have to work smarter and harder.” And partner a lot.

PRePa P Ring Pa FoR gReatness Groople may not yet be a household name, but that hasn’t deterred the small, privately held company from laying a solid technology foundation just in case it grows to, say, Google proportions. Groople’s name derives from ‘groups of people,’ and its market focus is to connect travelers — Groople’s clients, which include sporting groups, military

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EDI volumes have increased by 5% to 10% every year, driven in part by smaller companies that are turning their big dreams into reality. organizations and social clubs — with Groople’s partners, which are hotels, cruise ships, airlines and other travel services providers that love group business. The company values this niche market at about Rs 18,000 crore ($4 billion) a year. Until Groople launched its website in 2003, “no one on the Internet had a group-booking utility or storefront for people to do group travel,” claims Scott Larsen, Groople’s IT director and employee number six. “If you went to Travelocity or Expedia, you couldn’t book more than five rooms without getting an agent involved.” Group travel managers couldn’t tap into the vast inventory of services available.

Collaboration For Groople to work, then, all of the heavy lifting — application-level integration with hotel systems and travel sites such as Travelocity — would need to take place via the Groople website. “IT is our business,” Larsen says. “We have to plan more like a large enterprise would, with large generators, redundancy, multiple service providers and a much higher level of network capability.” Groople’s main application was a client-facing interface that hooked into an inventory management system with hotels. Groople staffers knew the online travel industry (most employees had worked in it) and how hotel inventory systems worked. “It was just a matter of building it,” Larsen says — and of ensuring that connections to legacy hotel applications and the newer Web-based systems of the travel companies could in many cases go both ways, so that Groople could see into their systems and they could see into Groople’s. “We’ve had to jump through several technological hoops,” Larsen says.

Yet the infrastructure costs were lower than if Groople had to build everything in-house. “We realized we can’t spend a billion dollars and do this ourselves,” Larsen says. Partnering allowed the company to grow securely and stay in favor with the likes of Travelocity and Cendant. But without having to break the bank.

aUtoMation on tHe CHeaP Wise Foods is no startup. It’s been in business for 80 years and, with sales of about Rs 1,800 crore ($400 million), is the largest regional snack food manufacturer on the East Coast, selling to giant customers such as Wal-Mart, Target and Kroger. The company boasts that its manufacturing facility in Pennsylvania, at 20 acres, is the largest snack food plant under one roof. Neil Bixler, the director of IT, has

Good customer service is a requirement today. And that’s true for companies of every size, every time. Basic IT and thirdparty partners enable companies with constrained resources to emulate the service levels of much larger counterparts. Yet, as with Snak King, the IT staff is lean: Three fulltime IT workers support 50 Groople employees who manage development, marketing, product design and call center operations, as well as a website that has to have 24/7 capability. “To be able to provide what we’re providing and have only 50 employees is huge,” Larsen says. “How we do that is through strategic hosting partnerships and security partnerships — the two major areas for any Web-based company.” Where Groople departs from the typical startup is in having to scale to the service levels of its larger partners. Travelocity, for example, expected five nines of availability — no small feat for a fledgling company. Groople needed to meet Travelocity’s service levels for redundancy, backup power generation, architecture and hardware. “Small companies are usually not trying vto get to that level of service,” Larsen says. “It’s an added level of complexity.” And an added level of cost. Groople designed its systems and negotiated a partnership with third-party security provider TrendMicro that raised Groople’s security level to that of publicly held companies. “It costs a whole lot more to do that, but the results of not doing it for us, from a business perspective, were much higher than the cost of doing it initially,” Larsen says. “One breach or one failure could cost us all of our partners.” 52

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been with the company for 29 years, starting off as a junior programmer and witnessing first-hand the IT department’s roller-coaster evolution. “We have grown and shrunk and grown and shrunk” during a series of acquisitions, sell-offs, centralization strategies and build-outs, Bixler recalls. These changes inevitably led to some strange legacy problems. Scheduling for the 26 potato and 20 corn-related production lines in that huge plant was done manually by three people and took anywhere from three to four hours each time. “This little silo had all the knowledge of how that’s done,” Bixler says. “They had that power and knowledge.” Snack food manufacturing is complex, with stringent timing demands and fast turnover. “The potato chips you eat next Tuesday came out of the manufacturing facility last Thursday,” Bixler says. Orders from distributors and retailers come in on Monday; from there a consolidation of all the orders is generated: How many bags of Puff Cheese Doodles, BBQ and Salt & Vinegar chips must be produced, for example; and how many will go to customers in New York City, Boston and other destinations. With some 260 product variations to factor in, the schedule for the plant had to be determined each day — which production lines, on which shift, will do which jobs. The trio of planners retained all of the tacit knowledge of how to make the schedule work, such as which

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Collaboration particular fryer makes a better kettle chip than the others. “It was all in their heads,” Bixler says. The planners would key the daily schedule into a J.D. Edwards ERP system, but most scheduling was manual. ( J.D. Edwards’ production scheduling offering was cumbersome and unusable, Bixler says.) By the end of 2003, Wise executives decided they needed to automate the planning process. But Bixler’s IT staff of 24 didn’t have the skills or time to build a Web-based solution. Rather than trying to create an in-house Web development shop, he contracted with JRG, a supply chain services provider that offers an ondemand Web-based production scheduling application. With some modifications to the software, Wise went live with the new system in May 2004. Bixler describes it as an easy-to-use, drag-and-drop-based approach with built-in intelligent rules. The system allows the manufacturing plant to schedule and produce more accurately to order. “I call JRG the silo buster,” Bixler says. “The biggest value was that it caused us to break the production silo and get that intelligence into the production scheduling.” Scheduling now takes less than an hour (performed by two of the long-time production schedulers — the third was moved to customer service). Setup and changeover time on the production line has been reduced by 35

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percent, and with more accurate inventory, Wise has reduced its frequency of ‘stales’ — products that are overproduced and go undelivered. Most importantly, Bixler says, customer satisfaction measures have improved by 99.9 percent. Yet, for all the obvious benefits, Bixler says changing over to the new system was ‘a little scary’ because the scheduling system is the heart of Wise Foods’ supply chain. With demanding customers such as Wal-Mart, there’s little margin for error. “We’re selling over Rs 450 lakh ($1 million) a day in snack products,” Bixler says. “If we miss a day, that’s a million dollars.” Good customer service is a requirement today rather than an option. Basic IT and third-party partners make it possible for companies with constrained resources to emulate the service levels of their much larger counterparts. “It makes customers happy when they get exactly what they order,” Bixler says. And that’s true for companies of every size, every time. CIO

Send feedback on this feature to editor@cio.in

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IMAGING UNN IKRISHNAN AV

By Balaji Narasimhan

The Income Tax department is pulling out its latest weapon as it moves in on tax evaders. IT is the new gun and itâ&#x20AC;&#x2122;s being trained both on a larger base of taxpayers and those lurking in the grey area of the law. 54

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e-governance

Using a variety of IT tools, the Income Tax Department is racing forward in its attempt to ensure that tax compliance is the only choice. Rs 6.25 crore. That’s the amount taxmen sheer number of documents that the IT department was inundated with made reconciliation almost tripped across when they raided the house of an ironimpossible and very hit-and-miss. ore exporter in Bangalore a few months ago. It’s the One of the few ways people could get caught was largest stash of money ever recovered by the Income through random searches, but putting together a Tax Department in a single raid. While that should search required tying together relevant information, be enough to make the incident noteworthy, a littlewhich was harder than weaving a carpet with known fact is that the impetus behind the raid came invisible thread. Putting the numbers on a grid gave from the department’s Tax Information Network. the department the ability to track all transactions The network’s benefits are not limited to a above Rs 50,000 and monitor bank accounts in excess single case. Last year, the department of Rs 10 lakh or stock purchases above Rs 1 lakh. conducted 30 major searches in Karnataka alone, compared to ten in the previous year, and seized assets worth over You Can’t Escape the Grid Rs 16 crore. If the department has its way, The way the system works is simplicity itself. other mega-seizures will soon become Under the provisions of AIR (Annual Information commonplace. Return), agencies like banks and investment funds These are only a few instances of the rewards are mandated to file a report on transactions above the department is reaping by replacing a a specified threshold. Then the department uses an 55-year-old manual system, which was intelligent and identity-blind system in tandem with crumbling under its own weight, with the data-mining and AI tools to identify tax evaders. In Tax Information Network, a repository of effect, the tax department can track spending patterns, tax payer information, and allied technology making compliance the only choice. implementations. Laying out and organizing tax filings also enabled The network was launched on July 22, 2005 and the department to pick out pieces of information the rationale behind it is found on a number of levels. and complete the jigsaw puzzle business entities Before the network, members of the IT department create. For example, a partnership’s returns depended only on market intelligence, random can be tallied with the filings of each partner, scrutiny and on ‘search and seizure’ to determine spotlighting large discrepancies. tax evasion. It was difficult to Policing tax payers better is Reader ROI: manually match and tie in high what’s prodding the department value transactions — despite to consolidate information from How to move from a fully manual system to an making it mandatory to submit all of its 36 regional computing IT-enabled one a PAN number. An individual centers to create a single data Using BPR to raise the could file tax returns in Delhi and repository in New Delhi. In many performance bar buy a flat in Bangalore, and the ways, their bottoms-up approach Why a bottom-up approach department would have a hard makes sense: No point bringing works for e-governance projects time connecting the dots. The in a maestro in if there’s nothing Vol/1 | ISSUE/7

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to orchestrate. The department is also on the verge of rolling out an IP-VPN network to connect 745 IT offices in 510 cities. The first phase, covering 170 offices in 60 cities, has just been completed. The second phase, involving the remaining 450 cities, will be completed by end-March 2006. This is expected to do a better job plugging revenue leaks, bumping up the tax base, improving process efficiency and transparency, and enabling speedy reconciliation.

Taxing Problems While most government agencies struggle with getting buy-in from users, members of the IT department welcomed the computerization. IT department officials knew their subordinates didn’t think much of the manual system’s information processing abilities, so they didn’t spend sleepless nights worrying about championing the new system. In any case, hanging on to the manual system would have required hiring at least 1,000 more people according to the department.

However, computerizing the department wasn’t a breeze. As with most e-governance projects, the biggest problems were faced at the grassroots level. V.S. Mathur, Director General of Income-Tax (Systems), says that, “training and enabling people was a difficult task, especially when some states didn’t even have a proper paper-based system in place!” The department is now pursuing a business process reengineering (BPR) exercise, which is expected to improve intelligence gathering and decision-making capabilities. Apart from tracking evaders, there’s another reason why BPR is being driven with such urgency: An increasing number of assesses. In 1990-91, the department had to contend with 74 lakh taxpayers, a number that has shot up to over four crore today. Over the next five years, the department estimates they will manage over 52 terabytes of information, and there’s no way it is going to find anything in that gargantuan haystack of information without the efficient allocation and management of IT resources. More immediately, they

Evolving Since 1981 While the Income Tax Department has only recently computerized on such an aggressive scale, the seeds were sown in 1981 , when the Directorate of Income-tax (Systems) was setup. IT was first used to process challans (bills), and for this purpose, three computer centers were established in 1984 in metropolitan cities using SN-73 systems. By 1989, there were 33 centers in major cities. They used batch processing with dumb terminals for data entry. 56

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In 1993, fresh impetus was provided when a working group presented a comprehensive plan for computerization of the department. Based on this recommendation, several computer centers were set up in Delhi, Mumbai, and Chennai in 1994. These centers boasted RS/6000 servers from IBM. In 1995 , networking and PCs were introduced with leased data circuits being setup in Delhi, Mumbai and Chennai. In order to have a central governing body to

manage the regional centers, a National Computer Centre was established at Delhi in 1996. In 1997, integrated application software was deployed. In the same timeframe, RS/6000 servers were provided at 33 other computer centers. leased lines were used to connect these centers to the national center in Delhi. PCs for officers were provided from 1997 to 1999.

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need to meet their target of Rs 176,812 crore in taxes for 2005-06, so it is imperative that they assemble their data management resources quickly. Creating fire-tracks to trap evaders is only part of the battle. There was an immediate need to hose down other fronts that are increasingly open to attack. An ever-growing amount of tax information being unloaded on the system is creating vast fields of data that could go up in flames — leaving the department without a back-up plan. A business continuity site that’s being set up in Mumbai and a cold disaster recovery site in Chennai will fix this and allow the department to focus its energies into monitoring almost all tax-related matters on a continuous basis. Convincing a hysterical section of citizens that their privacy would not beinvaded was another task. According to Mathur, the system’s aim is to make compliance simpler than evasion, not stalk a citizen’s bank account. As he puts it, the system is designed to ensure that “the citizen visibly feels good in paying taxes.” One of the steps taken in that direction is the new e-TDS feature that was added a few days ago. According to the department, for a one-time registration fee of Rs 50, income tax assessees will be able to verify whether the exchequer has received their payments.

New Patterns With among the highest numbers of citizen interaction, the department requires tremendous co-operation from the government — and the department is getting it. Mathur says, “the government is open-handedly and open-heartedly supporting the department.” He isn’t being euphemistic; the government is paying for IT in the IT department — Rs 1,000 crore of it. With so much support, the department feels obliged to pro-actively implement the network plan, but it can’t do it all. This is why it decided to outsource some of its work to organizations like National Securities Depository Ltd (NSDL), which has been entrusted with the management of the network and three key sub-systems: Electronic Return Acceptance and Consolidation System (ERACS), Online Tax Accounting System (OLTAS) and Central PAN Ledger Generation System (CPLGS). With NSDL acting as a clearinghouse for information, the department is free to roll ahead with its BPR project. The results of the re-engineering will go live on June 30, 2006. Part of this rollout will include a new three-tiered architecture, something that is critical to establish the single centralized database in Delhi. Mathur affirms that “everything is totally in place.”

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What IT Takes It’s hard to be liked when you put on an IT man’s suit and IT breakdowns. Rugged, fail-safe technology makes all the difference, everyday. In four months between August 1, 2005 and November 30, 2005, the IT department added over 19 lakh PAN cards to its systems. More than 7 lakh TANs (a number allotted to companies for the deduction of TDS) were handed out between 2004 and 2005, while simultaneously operating over 760 facilitation centers in 265 cities to receive e-TDS returns. What sort of IT infrastructure does the Income Tax Department use to keep its operations humming? The main centers in Mumbai, Delhi, and Chennai have HP 7410 servers, while the 33 Regional Computer Centers have IBM RS/6000 model F-50/F-40 machines. The network, which is being extended across the country, will soon connect over 745 offices located in 510 cities. The objective of putting this infrastructure together is to provide online services 27 x 7 x 365 days a year. Connecting cities is one thing; connecting the users in these buildings is quite another. Fifteen thousand users have access to TAXNET, the department’s network that is expected to be completed by May 2006. Apart from these servers, the Department has what are called local Building Servers. These typically run oracle over Intel platforms. The software used spans the spectrum. Databases are typically a mix of oracle 7.3.4/8i, oracle Developer 2K (Forms 4.5 & Reports 2.5), Developer 2K 1.1.1 (oracle 8i), and Pl/SQl and SQl*Plus. l l*Plus.

It’s hard to find fault with his confidence considering that the department won the Golden Icon at the Ninth National Conference on e-governance in 2006. Mathur dismisses any chance of failure. What does all this add up to? In two words: Business Intelligence. Once the department’s IT infrastructure is tuned to perfection, it hopes to be able to ask evaders a whole bunch of interesting questions. Union Finance Minister P. Chidambaram recently stated that it was surprising how only about 85,000 people claimed that their salaries are over Rs 10 lakh, since at least 25,000 luxury cars (20 lakh and above) are sold in India annually. More comparisons can yield interesting — and, for evaders, uncomfortable — results. CIO Special Correspondent Balaji Narasimhan can be reached at balaji_n@cio.in

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Evolving New Delhi into an e-city requires reaching out to citizens in more ways than one. Prakash Kumar, Secretary IT, Delhi government, is rounding up support.

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Interview | Prakash Kumar

Despite setbacks, a pessimistic populace, and an obstinate government, Prakash Kumar, Secretary IT, Delhi, is marching New Delhi towards its future as an e-city. Accepting past failure, Kumar crossed over from the government’s camp and stepped into a citizen’s shoes, creating allegiance to the e-city vision across various stakeholder groups. By Rahul Neel MaNi

C I O : In what sense is New Delhi going to be an e-city? Can you give examples of what’s already been done towards this end? PraKash Kumar: Turning Delhi into an e-city where citizens can interact with the government electronically has been one of the chief minister’s long-standing dreams. Barring services which require physical presence, we mean to offer our citizens public services using electronic means. Some of the more basic services include obtaining birth and death certificates, registering for property, applying for a government job, etc. Two years ago, the Delhi government attempted to provide 11 different services online. Unfortunately, it wasn’t very successful mainly because few citizens believed government-related work could be done online. Like e-Seva (Andhra Pradesh’s shared-services initiatives), the Municipal Corporation of Delhi (MCD) has started providing services electronically from 34 centers. We are going to scale this up to 134 centers and, more importantly, bring all services, from various departments, under one umbrella. Before we can achieve this, we need to populate our intranet with data. Without accurate databases, it’s not possible to provide quick services. We started this process of creating databases with the transport department. Today, 93 departments use their websites to share information with citizens. What are your infrastructure requirements to set up these centers?

The beauty of this project is that the government doesn’t have a large financial stake in it. It is driven

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though public-private partnership. The Transport department has offered services using the same model over the last eight years, as have the Sugam Kendras (citizen service centers set up by the MCD). We are responsible for building various application software and ensuring their security. For instance, the Delhi Jal Board (DJB) service, which includes a bill payment application on its website, is undergoing severe third-party testing. We are doing as much as we can at this stage to ensure that the system works smoothly. What roadblocks do you expect to hit and how will you get around them?

One of our biggest challenges is a public lack of access. We only see a 10 to 15 percent PC and Internet penetration in Delhi. We can put up any number of applications on the web, but 85 percent of people can’t access them. To sidestep this problem, we plan to construct an information kiosk in each ward by the end of 2006. We have already procured space for the kiosks and have placed orders for equipment. On another level, a lack of dissemination of information worried us. How could we make it convenient for people who did not have Internet access to learn more about our kiosks and their services? We initiated a call center project to help people understand the uses of the kiosks. Among our more immediate challenges is making a large number of services easily available to people. Initially we plan to get five departments on board. Once we’ve ironed out their problems we will bring on the next five, and so on. We are wary of over-extending ourselves. REAL CIO WORLD | F E B R U A R Y 1 5 , 2 0 0 6

Interview | Prakash Kumar Demand will only come with quality of service. If all proceeds well, we have plans to use these sites to promote public events. Simultaneously, it’s important to create revenue while keeping the services affordable. Vendors who put up infrastructure get paid on a per transaction basis. We’ve seen people don’t mind paying a little extra for good services. The property tax services, for example, are very popular. Soon, we will persuade agencies like the DJB to has offer services. The DJB, which has various applications on its site, does over 60 lakh transactions a year. We see a definite return on investment, if we were to charge Rs 5 per transaction. Today we don’t offer such services, but once we start, the number users will be very high. How is the call center helping the e-city project?

We want the call center to assist the project by tracking the status of requests. The call center can be contacted using a ten-digit toll-free number and by SMS.

Among our biggest challenges is to address the lack of public access. We only see 10 to 15 percent PC and Internet penetration in Delhi. We can put up any number of applications on the Web, but 85 percent of people don’t have access. The call center also serves to manage grievances. Today, every department handles its grievances separately. Also, they do not have a system to track how much time is taken to solve an issue. The call centre is responsible for gathering complaints and recording them on a system — one that has tools to address and escalate the problem. Looking forward, after this exercise, we will prepare a ‘dashboard’ for leaders in the government to watch the status of public problems being solved. It’s similar to what’s been implemented by the 911 services in the US government.

departments so that citizens don’t have to visit each department. The project is at the RFP (Request For Proposal) stage. Fifteen vendors have shown interest and have submitted their proposals. The departments that will benefit are those that handle ration cards, election cards, birth and death registration, and transport. All this will take another couple of years, but the immediate idea is to have a combined database and share it among various departments. How is accountability allocated for these projects?

This is the trickiest part of any e-governance project. The department of IT doesn’t drive these projects; we just facilitate the whole process. Ownership must be taken by respective departments and agencies. The more progressive departments take ownership of both project deployment and change management. The moment we start driving a project, it loses steam. Unless there is buy-in from within, no system can help. From experience, the moment we move out of such a project, it is abandoned. Has the Right to Information Act helped in making e-governance effective?

Delhi was one of the first few states to jump on the bandwagon to have its own Right to Information Act. So far, over 10,000 people have used the Act effectively. Half of these have used it to redress personal grievances. Thirteen percent have sought information on policy matters and the remaining have used it to gather information on community-based issues. All Public Information Officers (representatives from various departments who interface with the public) have been trained to use our applications to help citizens with information. But this system is still not seeing optimal use. IT is a great tool to put information in the public domain. It definitely takes a lot of effort but if at the end of the day citizens receive benefits, it’s worth it. CIO

Will you have a master database of citizens that government departments can share?

A project is underway to build such a database. The idea is to make sure that one change reflects across all 60

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Bureau Head North Rahul Neel Mani can be reached at rahul_m@cio.in

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Essential

technology Illustration by UNNIKRISHNAN AV

From Inception to Implementation — I.T. That Matters

Savvy CIOs can find ROI opportunities in connecting disparate HR systems into a cohesive whole.

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Strategic HRIntegration BY GALEN GRUMAN HUMAN RESOURCES | Call it dealing with the whole person. Disconnected strategic human resources applications — incentive management, employee performance management, workforce scheduling, and training and learning management — offer CIOs an integration opportunity that could bring new benefits to the enterprise. Merge those applications into a closed-loop system, analysts say, and the enterprise can reap the same kinds of rewards with its ‘human capital’ management as it has with its supply chain management. And CIOs could help drive real ROI for the company by approaching HR systems strategically. “If you don’t integrate these systems, the business will still run today,” says Sandra Lee, director of talent management at biotech firm Invitrogen. “But if you don’t start now for the long-term, you’re going to be paying for it a few years down the line.” Past HR-oriented IT efforts focused on operational systems such as payroll, usually with just minor CIO involvement, but analysts and consultants say strategic HR applications have more potential to benefit the enterprise, especially as baby boomers retire during the next decade, creating labor and knowledge shortages. When that happens, business success will ride on making the best use of staff. Compliance requirements such as Sarbanes-Oxley have also caused some organizations to examine HR management as a whole, particularly

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compliance-oriented training, and that has helped raise the profile of the greater strategic HR need, analysts add. With the CIO’s help, HR is also now ready to tackle strategic issues such as performance management, training and succession planning, says Lisa Rowan, program manager for HR management and staffing services at IDC (a sister company to CIO’s publisher). That’s because the HR information systems for employee records, payroll and benefits management are now largely in place or outsourced. “They’re getting to the point where the HR information system is taking care of the administrative burden,” she says, freeing HR executives to tackle strategic issues. CIOs should help champion and lead these efforts, she says, rather than continue the past strategy of letting HR staff fend for themselves, since a strategic HR IT effort could greatly help the entire organization.

Piecing itTogether Today, the various strategic HR applications — often called human capital management applications by vendors — are regularly installed as standalone departmental applications with minimal CIO involvement. “A lot of people put in a bunch of single components and never look at the whole system,” says Larry Carr, a business professor at Babson College, who’s writing a book on management control systems. Linking some or all of these systems can allow more intelligent use of HR applications. For instance, using an integrated human capital management system, a company could assess hiring strategies by tracking new employees’ performances after they are hired or apply incentives methodically and automatically based on ‘soft’ goals such as effective leadership. The only way to accomplish all of this, however, is through integration. Connect the HR technology and process dots, and the opportunities for dramatic breakthroughs in talent management become apparent, says Tom Kraack, managing partner for workforce transformation at Accenture. “For the first time, you can imagine a huge change in the employee equivalent of time to market.”

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The Changing Talent Landscape Why HR is strategic again. In the late 1990s, as the Internet boom placed a premium on finding young, energetic, skilled employees, the HR department became the center of the action. During the boom, HR organizations tried to get a seat at the strategic management table, striving to join as ‘chief people officers.’ But as the economy shrank — along with headcounts and payroll — HR ceased to be considered strategic. That’s changing now as the economy rebounds and a talent shortage looms. US Labor Department reports show continued firming of the job market. And after several years of low turnout, recent talent-management conferences have experienced record attendance, according to IDC analyst Lisa Rowan. During the next five years, fewer people are expected to enter the US workforce than retire from it, which will reduce the labor pool and force companies to work harder to find and retain needed employees. And many of those retirees are baby boomers whose deep industry knowledge will depart with them, since thinned workforces often mean a lack of trained replacements waiting in the wings, says Sandra Lee, director of talent management at biotech firm Invitrogen. This presents an opportunity for strategic HR thinking — and strategic IT involvement in such HR applications. Administrative functions such as payroll and benefits administration have been outsourced or automated, and a new generation of HR leaders have come from business management backgrounds rather than traditional HR — making them ideal partners for the CIO, who likewise is focused on creating business benefit rather than merely administering services.

—G.G

One model for such technology and process integration is supply chain management, which also links disparate activities that affect each other. IBM, for instance, is integrating its internal strategic HR tools along the supply chain model, using a database of roughly 6,000 skills that forms the taxonomy for managing hiring, deployment and staff development. By creating its own taxonomy, IBM ensures that all tools and managers are working from the same assumptions, says Frank Persico, director of learning at IBM. This lets the company know what skills it needs for consulting projects or manufacturing positions so that the recruiting system can screen for those skills, as can internal scheduling tools, says Dan Forno, IBM’s vice president for global operations workforce optimization. It also lets managers identify skill gaps so that they can focus staff development, training, incentives and promotions to coordinate with the skills needed, Persico says.

Other efforts are less encompassing. For example, Symbol Technologies has linked its internal e-learning system with order management, which stops resellers from ordering parts for certain products until they complete required courses for those items, says Josh Bersin, president and founder of the consultancy Bersin & Associates, which helped develop the system.

Integration Challenges If all this unification sounds like an integration project, it is. But the prospect isn’t as scary as some other integration efforts. “The investment is significantly less than ERP. Typically, human capital management apps do not have the number of interfaces, the mission-critical or operational-risk characteristics, nor the number of administrative users characteristic of a broad-based ERP application,” says Accenture’s Kraack. The effort is also much less than that required REAL CIO WORLD | F E B R U A R Y 1 5 , 2 0 0 6

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to deliver operational human resource information systems (HRIS), whose complexity is more like ERP, he adds. Also, “you need to build or buy applications that are oriented to connection with others,” says IBM’s Forno. There is no ready way to tell if an application is connection-oriented, Kraack says, but CIOs can investigate a vendor’s previous delivery of and thinking on connectivity, as well as look for a core data architecture and ease of configuration. Because most human capital management providers offer “siloed applications intended primarily to serve a fairly linear function,” IT may need to rely on a system integrator who has already

Strategic HR applications can benefit the enterprise, especially as baby boomers retire during the next decade. figured out the connectivity approach, he says. Fortunately, the immaturity of some aspects of the human capital management systems market gives enterprises one advantage, says IDC’s Rowan: “Most vendors will support the data model of the client’s choice” rather than impose their own. Kraack says that no vendor has worked out world-class end-to-end functionality across the whole of talent management yet, even though both PeopleSoft and Siebel Systems offer human capital management products within their ERP suites. As such, he advises enterprises to use the ‘best in class’ for each silo and build an integrated capability. Other analysts concur. “The ERP players have a little bit of an advantage of being closer to closing the loop, 64

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but they’re not as far along as I’d like to see them,” says Judy Sweeney, a research director at AMR Research. The lack of strong presence by ERP vendors explains why the HR market still includes dozens of small vendors that specialize in a few application areas — often within specific industries. However, some vendors are beginning to see integration as an opportunity. The learning management providers have taken the lead, Kraack and Bersin say, particularly Plateau Systems, Saba and SumTotal. Performance management provider SuccessFactors has also moved in the integration direction. But by and large, these companies don’t have the resources to develop and maintain a full suite of quality applications, Bersin warns. Still, for some companies, a sub-optimal suite is a better choice than in-house integration efforts. For example, the staffing firm Randstad North America uses the Cornerstone suite to integrate learning management with developmental planning (of which succession planning is a part), since the company has 40 percent annual turnover in its sales force — a little lower than the industry’s average of about 50 percent, says Vince Eugenio, Randstad’s chief learning officer — and needs to manage that churn. Other companies have better components for functions such as performance management, says Eugenio, but “getting the two systems to talk to each other could be a nightmare. I would sacrifice quality to avoid [doing the] integration [myself].” Integration gets harder, he says, the more components you introduce, and thus the more connections you have to maintain. Invitrogen is also using one provider for its system. The company has put in place a performance management system from SuccessFactors that it plans to link to a succession planning tool and a compensation management tool, also from SuccessFactors. Linking the two will alert managers when their salary plans don’t match employees’ performance or fall outside of guidelines for performance levels. This helps ensure that

Fewer than

33%

of companies use any people metrics, such as retention of key staff or staff training, in the compensation plans for their leadership teams. SOURCE: 2005 survey of 320 organizations by IBM Business Consulting Human Capital Practice

employees are treated consistently and fairly, yet lets managers implement exceptions as needed, Lee says. The decision to go with one vendor was a ‘gut call,’ she notes, since Invitrogen has been growing too quickly for the company to take time to do a formal ROI analysis of integrating multiple products versus buying from one vendor. Lee expects that the company’s just-hired HR information systems manager will have to integrate products from other vendors — likely the HRIS, the recruitment management system, or the learning management system — at some point, but “my goal is to minimize the number of integration points.”

CIOs on the Sidelines Strategic HR applications have largely been a backwater, as organizations have mainly

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focused on operational issues such as payroll and benefits administration. The HR profession in recent years has been diminished as such operations have been outsourced or automated, notes Bersin, leading both to fewer HR staff and less reliance by company management on HR for strategic guidance on issues such as how to maximize the workforce’s potential. And because HR has not been considered strategic and has failed to develop the tight relationships with IT that other business units often foster, CIOs typically have not paid attention to HR systems. That in turn has kept strategic HR off the CIO’s agenda. “In HR and learning, IT is less involved. I’m surprised how naive IT can be,” Bersin says of IT’s tendency to make decisions based on existing vendor relationships rather than on assessing actual needs and vendor offerings. “They say, ‘Oh, we’re a PeopleSoft shop? Let’s buy all PeopleSoft stuff,’” Bersin says. Instead, CIOs should take HR technology integration and strategy much more seriously than they have in the past, observers agree. “The medium of management, of planning, of control is IT,” says Babson’s Carr, making it a natural center for strategic initiatives such as integrated human capital management. Even though HR departments have often been left to fend for themselves and CIOs haven’t always understood which applications could make HR more effective, “the CIO can be a real catalyst for change,” says Accenture’s Kraack. “If there’s an effective HR partner, you go there. If not, you go to the business manager — after all, the people who feel the pain are the general managers of the lines of business. Ideally, it’s a holy triangle of the three.” CIO

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Time at Light Speed PHYSICS | One alligator, two alligator, three alligator, four... Such techniques may work for whiling away the seconds when you’re a 6-year-old. But at some point, you need a more accurate means of keeping time. Since 1955, the gold standard for time has been the ‘atomic clock,’ with a second being defined by the General Conference on Weights and Measures in 1967 as “the duration of 9,192,631,770 periods of the radiation corresponding to the transition between the two hyperfine levels of the ground state of the cesium-133 atom.” The accuracy of a cesium clock — better than one second every 30 million years — is what allows for high-speed communications in many networks, as well as spot-on navigation across huge distances, such as those required in space travel and GPS. New atomic clocksmithing technology, however, may soon leapfrog existing methods, allowing for clocks a thousand times more accurate than anything currently available. The United Kingdom’s National Physical Laboratory (NPL) late last fall announced that it had developed a prototype clock that uses optical light frequencies from a laser directed at a single, very cold (near absolute zero) ion of strontium. The result is an ‘ion trap’ clock that could revolutionize timekeeping, perhaps someday making it possible for GPS to track moving objects down to within fractional inches of their actual location (the best that current systems can do is within feet or yards). The introduction of a new standard will take time, of course. Dr. Helen Margolis, principal research scientist at the NPL, says that agreeing upon a new standard could easily take more than a decade. And that process will begin only when a technology is proven to be more stable and reproducible than existing time standards. Currently, she says, a number of competitive technologies are in the research phase. Still, there’s already interest in taking advantage of the new optical clocks. Margolis says the European Space Agency is already taking a look, though commercial versions of such clocks are still five to 15 years away. — Christopher Lindquist REAL CIO WORLD | F E B R U A R Y 1 5 , 2 0 0 6

Il lustrat ion UNNIKRISHNAN AV

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Under Development

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Pundit

essential technology

Smart Services Bundle Rearden Commerce demonstrates the promise of software as a service. BY ERIC KNORR

| If I had any doubts about the momentous shift from packaged software to software as a service, Patrick Grady, CEO of Rearden Commerce, dispelled them. Rearden’s first offering, Employee Business Services (EBS), is a new class of application that couldn’t exist unless it was hosted by the provider.

SOFTWARE

which providers from DHL to OpenTable.com plug in via Web services. EBS is customized to each user by default. First, management must rationalize its policies and procedures for services procurement. Then, a policy or procurement manager uses the EBS interface to enter those company poli-

designed to do. “The moment you simplify the problem a little bit in terms of an on-demand infrastructure, the problem gets a lot more manageable and more scalable,” Alag says. The benefit for customers is theoretically huge. Instead of filling in shipping labels or making phone reservations business users

Employee Business Services draws a circle around a huge area of business spending in which enterprise software has failed to gain traction. Grady first described EBS to me in January, when Rearden was ending five years of stealth mode. He called EBS ‘HailStorm on a Java platform,’ a reference to Microsoft’s failure to evolve Passport into a hosted identity service. HailStorm initially targeted consumers, but EBS goes after business and adds two things that Microsoft never proposed: An on-demand marketplace of business services and a hosted enterprise application to control and analyze the purchase of those services by employees. (These features were hook enough for Rearden to catch several early customers — including Whirlpool and Motorola.) EBS draws a circle around a huge area of business spending in which enterprise software has failed to gain traction — travel, shipping, teleconferencing, and meals and entertainment — and provides a means for ordering those services according to individual preferences and company policy. The backend of Rearden’s platform is a services ‘grid,’ in 66

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cies and workflows for groups of users within the organization. A Java-based, event-driven service- oriented architecture (SOA) then breaks business processes into a set of reusable Web services. According to Grady, much of the effort creating EBS involved isolating a set of 80 common denominator business services attributes as well as creating Services Business Language (SBL), an orchestration language cooked up primarily by Satnam Alag, Rearden’s chief architect, and his team. Alag has an interesting answer as to why Rearden didn’t use Business Process Execution Language (BPEL), which most of the industry seems to have endorsed for Web services orchestration: “BPEL doesn’t really make sense within an on-demand, internal services orchestration.” For one thing, in the contained environment of EBS, he doesn’t have to worry about orchestrating services across a ragtag infrastructure of legacy systems, as BPEL was

fill in Web forms and choose from preferred providers. Grady estimates that the savings in hard costs should run up to 20 percent and that the elimination of manual procedures should save much more. And because Rearden runs one huge instance of EBS with many accounts across a virtualized infrastructure, every time the company adds a service provider, it becomes instantly available to all customers. It’s stunning to see so much of the potential of Web services rolled into one offering: Software as a service, B2B transactions over the Internet, mass customization, a thoroughly componentized application infrastructure and a HailStorm-like paradigm that puts the user first. Rearden may or may not succeed as a business, but it’s already broken more new ground in one place than I’ve seen in a long, long time. CIO Eric Knorr is executive editor at large for InfoWorld. Send feedback on this column to editor@cio.in

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