CIO March 1 2007 by Sreekanth Sastry

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From The Editor

I’ve been getting a ton and more of feedback on last fortnight’s editorial where I

CIO vs. BTO? Should CIOs be morphing into business transformation officers?

discussed the ways and means CIOs have adopted to convince management to invest in IT projects — from building justification models and ‘our neighbor down the road has this’ to ‘not doing this will sink the business and get you in jail’. Quite a few readers seem to agree that involving a business champion to provide a business justification for a project is the way forward. The question then arises: does this make the role of a CIO more of a ‘support function’ than strategic? And, do CIOs then run the risk of being (so to speak) only nominally part of the C-suite? Perhaps a more relevant issue to be debated should be whether CIOs should re-orient themselves as business leaders rather than technology executives? We did just that over the past few issues in the Inbox section. While the jury is still out on that one, the perspectives from members of the CIO Advisory Board have been really interesting. Rajeev Shirodkar, VP-IT of Raymond, feels that a CIO will be seen as CIOs may increasingly an effective business partner only when he find technology skills is able to establish credibility in the eyes of to be a good-to-have his business colleagues. issue rather than a And Arun Gupta, director of Philips must-have one. Electronics, is convinced that the ‘sync’ between IT and business is a two-way street. “It can only happen when both sides are amenable to joint decisions and accept each others’ competencies and strengths,” he feels. Another viewpoint that intrigued me came from the redoubtable Prof. S. Sadagopan, director of IIIT-Bangalore. He thinks that “CIOs should be deep in technology without losing touch with business. A sort of T-model: breadth at the top in terms of applications, context, and knowledge of emerging areas coupled with depth in technology.” Curiously, a few providers of IT products and services that I recently spoke with plainly stated that when it came to projects like CRM, it made better sense for them to initiate a discussion with the CMO and CFO rather than the CIO. Does this mean that the role of CIOs will morph into that of a ‘business transformation officer’ who uses IT to change the way that an organization’s core business is conducted? A move to a must-have skill rather than a good-to-have one? What do you think? Write in and let me know.

Vijay Ramachandran, Editor vijay_r@cio.in

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Strategy

Executive Expectations

COVER STORy | STRETCHInG yOuR BuDGET |

VIEW FROM THE TOP | 38 Ashok Sinha, chairman & managing director of BPCL, says effective technology is a function of its efficacy, business viability — and psychographics.

Strategy is everything: we break down seven IT project domains to expose where you may overindulge or come up short.

Feature by Dave Linthicum, Roger A. Grimes, Paul Venezia, Alan Zeichick and Phillip J. Windley

Interview by Gunjan Trivedi

Applied Insight PRICInG FOR VALuE | 24 Businesspeople don’t value IT because they can’t match the price they’re paying to the services they’re getting. Chargeback clarifies the value of IT services — and raises the stature of IT. Column by Mark J. Denne

Supply Chain Integration SCEnT OFA MERGER | 42 Most mergers and acquisitions fail to deliver the expected business value. But Coty’s acquisition of Unilever’s cosmetics and fragrance subsidiary has been a success. The secret formula was a new approach to integration. 10

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Feature by Ben Worthen

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Essential Technology | 54 Simulation | Development In the Fast Lane

By Michael Fitzgerald Leadership |Innovation’s cutting-edge: Collaboration By Elana Varon

From the Editor | 8 CIO vs. BTO? | Should CIOs be morphing into business transformation officers? By Vijay Ramachandran

Inbox | 18 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

Govern Resurrecting the End-user| 50 When the Ministry of External Affairs tried to computerize the passport department in 1986, the project got stuck in a quagmire of end-user resistance. Here’s how the NIC started again and turned the project around.

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Feature by Balaji Narasimhan

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reader feedbaCk

Spread it Round The articles, 'Master Class' and '25 Leaders to Watch' (Ones To Watch, January 15, 2007 2007), were well conceived, designed and published. Both the coverage and the survey were detailed, and had the necessary ingredients. However, I have two suggestions. First, we, as nominees for the 25 leadersto-watch, had answered a detailed survey sheet and sent it to CIO. It would have been wonderful if half-a-pageworth of that information could have been published in the issue. The extract could have been taken from the survey sheet itself. Second, the circulation of CIO should increase and not restrict itself to limited copies. It should be available through channel sales and hit the stands. PRaSenjit MukheRjee Manager-IT, BSES Power

an issue to Watch

Master Class, The Right Stuff , and 25 Leaders to Watch (January 15, 2007) were good features. Some of the 2007 feedback I have heard, and agree with, is that the relevance of the quotes were high. I thought that the format of the package — since you spoke to both CIOs and CIOs-in-the-making — was a 18

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good idea. It left the reader with an allround perspective of the thoughts and the challenges that both sets of people face. Significantly, it also lent a feel of what future leaders are thinking about and reflected, in terms of advice, what present leaders think of that future. What I would appreciate is more space for the thoughts of future CIOs. I think, given the scope of the article, their inputs are highly relevant and need to be shared with the CIO community. Some of what needs to be talked about are things like the challenges they face in their industries, and the solutions they have come up with — specifically, the problems that these challenges raised before their teams and how they were handled. These learnings will tend to be more applicable to all CIO readers. jethin ChandRan Head–IT Infrastructure Planning and PMO, Wipro Technologies

the RFid Conundrum The cover story on RFID (Tag It Right, December 15, 2006 2006) was well-covered as it documented not just the companies that have implemented RFID, such as Madura Garments and Maruti Udyog, but also those that haven’t — but who are considering the technology for the future. For retail and apparel companies that haven’t taken the RFID plunge yet, it is a matter of timing and waiting for the technology to mature sufficiently

"What merits discussion are the challenges that CIOsin-the-making face, their solutions and, specifically, the problems that these challenges have raised before their teams. " until companies can see a business case for it. Barcode-scanning, for instance, is a mature technology today, and has become very common. As of now, it is a matter of enterprises focusing on the need at hand, and then seeing if RFID provides the answers to improve productivity. In that context, it was interesting to read about how Madura Garments reined in the technology to link their factory with the warehouse. MeheRiaR Patel DGM & head (IT), Globus Stores Retail

Corrigendum In our introduction to this year's CIO Advisory Board (February 15, 2007), the name of the senior vice president & CTO, Countrywide Financial Corporation India Services, was misspelled. It should have read Anwer Baghdadi. The error is regretted.

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.

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new

hot

unexpected

RFID's Mission To the Moon NASA soon plans to begin testing whether radio frequency identification (RFID) technology can survive in outer space. Agency officials say the test is the first step in an effort to determine whether RFID chips could be used in a manned mission to Mars. Fred Schramm, administrator for the internal research and development program at the NASA Marshall Space Flight Center, says a variety of paper and plastic RFID tags will be on board the US space shuttle Endeavour, which is slated to launch in July on a voyage to the International Space Station. The Gen 2 passive RFID chips will be stored in a case attached outside the station and left there for about a year to determine how they are affected by atmospheric conditions, Schramm says. In the test, the chips will be exposed to the extreme heat and cold, ultraviolet radiation and near-vacuum that exist in low orbit, he adds. After the test, NASA will determine whether the weight of RFID chips used in the experiment could cause problems in a space mission; whether the atmospheric conditions will degrade tags, so they can’t be used; and which

RFID

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Web ReaDeRs When the Massachusetts government decided to use openDocument Format (oDF) as the default document file format throughout its agencies, a key concern was that oDF would not allow the visually impaired to use assistive computer technologies. IbM recently announced it has helped solve that problem, developing technology that lets applications based on oDF communicate well with products that the blind use to access visual information on PC screens. In an effort dubbed Project Missouri, after the 'show-Me state', IbM

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has developed a set of application programming interfaces (aPIs) collectively called Iaccessible2. these aPIs make it easy for visuals in applications based on oDF and other Web technologies to be interpreted by screen readers that reproduce information verbally, says IbM. In the past, screen-reading technology has struggled to keep up with cutting-edge development and file formats such as oDF, ajax and DHtMl (dynamic hypertext markup language), says IbM spokesman ari Fishkind. IbM has donated its work on Project

Missouri to the Free standards Group, a non-profit that promotes open-source software. other companies working on Iaccessible2 development include oracle, saP and sun. Mozilla plans to integrate Iaccessible2 into its Firefox Web browser. oDF is currently in competition with Microsoft’s open XMl file format (the basis of office 2007) to become the industry’s default format.

—by Elizabeth Montalbano

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A New API Vision

soft approach @ the Workplace repeated efforts at nationwide Mutual Insurance Company to try linux on the mainframe faced internal opposition, some of it from It t employees worried that a mainframe-based server consolidation would be a threat to their jobs. they “fought tooth and nail to keep it from happening,” says James Vincent, a mainframe systems engineering consultant at nationwide. their resistance taught Vincent a lesson that he put to use after the linux project was finally approved in 2005. “at first blush, they feel you are taking away their jobs from them,” says Vincent. but as a result of the earlier battles, he developed a better sense of the concerns that the linux opponents had. and Vincent says that with “kinder words”, he helped convince them. this experience is an example of what share speaker George D’Iorio called ‘soft skills’ — a term he used to describe the abilities needed for tasks such as developing effective relationships with co-workers and vendors and running meetings. “Effective communication is a necessary skill in any kind of leadership,” he says. “and I think sometimes the professional skills [in It] are so much focused on the technology that other soft skills get overshadowed.” D’Iorio thinks that developing better interpersonal skills within an It operation can help improve its productivity and efficiency. He said that one thing his employer does to help sharpen such skills is hold ‘lunch and learns’, where various It t workers give presentations about a particular aspect of their jobs or a project that they’re involved in. Effective communication is something Donald Woodruff, an It consultant at utility company national Grid usa in Massachusetts, tries to practice on the job. one technique he uses is to establish ‘checkpoints’, which involves periodically making sure that the person he’s explaining a technical concept to understands it before advancing the discussion. “one of the most difficult issues for technical people is communication,” says Woodruff. “you you need to be able to talk at all levels. y y you have to be able to explain yourself.”

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(From Page 17) materials, such as silicon or copper, work best in space, he says. If those tests are successful, Schramm says the technology will be further evaluated on a rocket that is scheduled to take off in 27 months to conduct tests for a future planned moon launch. “Most things that will work with the moon will work with Mars, and we’re working with the moon in mind,” he notes. Schramm said the agency hopes RFID technology can be used to monitor and manage inventory on a spacecraft and to track internal and external environmental conditions both on missions to the moon and on future manned flights to Mars. He also points out that astronauts can’t immediately input data into systems when working outside a spacecraft, which could lead to mistakes. RFID technology could help solve that problem, he feels. “If they’re inside,” he adds, “we’d rather have them doing other things. We want automatic inventory registration.” For instance, if a food package is passed from one cabin to another for an astronaut to eat, the RFID-enabled system would register that the package is in fact gone and no longer available. If the technology is found to work under such conditions, Schramm believes that RFID tags could also be placed on any part of a spacecraft and on anything inside it, allowing data to be transported directly to a local network within the spacecraft or signaled back to Earth.

— by Patrick thibodeau — By Marc L. Songini 20

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tRenDlInes

On a Test-drive

different expectations from vendors in terms of innovation. ovum claims the use of the word ‘innovation’ has grown dramatically among It services vendors in the last six months. However, it seems that both clients and the vendors within It services have different ideas as to what innovation is, and what it should deliver. ovum’s It t services practice leader angel Dobardziev says the challenge is in the mismatch of vendor-client expectations and in the limitations of contractual arrangements, which often means that the clients can be unhappy even when vendors deliver on all of the agreed metrics. “Clients will talk about, and demand, innovation, but what they are really after are outcomes,” says Dobardziev. “Vendors should focus on these desired outcomes

Mirage VenDOR ManaGeMent Despite increasing vendor hype surrounding innovation in It, enterprise It leaders remain skeptical over whether it can deliver, according to analyst firm ovum. Details of ovum’s research were not disclosed, but the company says it has conducted “in-depth discussions” with 11 “major western and Indian It t players” that revealed that most vendors have different and often conflicting ideas as to how they think end-users define innovation. the research also indicated different stakeholders involved also seem to have

and take time to understand the different and often conflicting needs of various client stakeholders.” ovum recommends all parties involved must work closely together every step of the way, from defining innovation expectations to agreeing to the measures to track progress. this will mean ensuring an equitable approach to the “sometimes tricky” issues of risk-reward and intellectual property in innovative engagements, according to the company. “If you really want valuable innovation to be delivered as everyone expects, the deal should be treated as a partnership,” says Dobardziev. “It’s not enough just to say that a vendor-client relationship is strategic; you have to be prepared to invest in the relationship. If you don’t, then you’ll have an old-style customer-supplier relationship on your hands.”

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Vendor Innovation, a

— by rodney Gedda

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Put on your Business Hat I . t . M a I n t e n a n c e Network managers in the know realize application rollouts, major upgrades or widespread patching can wreak havoc on performance, but a new survey finds that even minor day-today infrastructure changes can send performance plummeting. The survey, conducted by King Research and Usermonitoring.org, polled more than 200 IT professionals about the impact that change has on Web-enabled applications. The results show application patches (close to 40 percent) and day-to-day infrastructure changes (about 37 percent) caused the majority of unplanned outages. While respondents said they are aware large planned changes could cause outages, the survey found that smaller changes seem to have the same impact. “Slightly more outages were caused by application patches and infrastructure changes than by either the release of a major application upgrade or the rollout of a new Web app,” the report reads. “It seems to indicate that minor changes are just as risky as major app releases.” Another finding shows that an ongoing problem in IT shops persists. Ideally, network managers would like to spot the performance problem before users and customers notice the service degradation. Yet, this survey shows 72 percent of respondents find out about poorly

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performance applications from user reports and complaints. About half the survey participants use service-level measurement tools to validate when a problem has been corrected, and about one-fourth said that “they assume problems are corrected if they don’t hear further complaints.” Some 37 percent of survey respondents reported that they rely heavily on expert opinion to diagnose the cause of performance problems, while 22 percent use internally developed diagnostics tools and 21 percent use commercially available tools. “IT continues to rely heavily on end-users to validate that problems have been corrected with fewer participants reporting the use of measurement tools,” the report concludes. —By Denise Dubie REAL CIO WORLD | m A r c h 1 , 2 0 0 7

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What cEO EOs Really THink Os of cIO M a n a G e M e n t The good news for CIOs is that CEOs believe IT performs as expected. The bad news? CEOs say they have low expectations of their IT shops, particularly when it comes to business innovation. A Forrester Research report, set to be published later this month, includes survey data from more than 70 CEOs who were asked how they regarded their companies’ CIOs and IT organizations. The findings show that while CEOs didn’t complain about IT performance, there is a lot of room for improvement in the CEOCIO dynamic. “The surprising part of the findings was the fact that CEOs were generally satisfied with IT, but at the same time didn’t believe that IT was proactive in terms of business innovation, cost improvements or effective asset-management,” says Laurie Orlov, vice president and principal analyst at Forrester, who authored the report. According to the survey, when the CEOs were asked about IT’s role in business innovation, 28 percent said IT offered proactive leadership, while 34 percent characterized the IT group’s contribution as “poor or mediocre”. Another 24 percent said IT would innovate “when pushed to do so.” About one-third of the CEOs polled “depicted IT as demonstrating proactive leadership for process improvement.” In terms of asset management, 54 percent of the CEOs responding were not impressed with IT’s ability to track and report on such assets as people and equipment. On the other hand, 31 percent said IT was managing assets effectively as part of its ongoing responsibilities. Orlov goes on to say that at first glance, CEOs approve of the work their CIOs are doing; on deeper inspection, however, the results of the survey could be troubling for IT leadership. “It starts to be revealing that CEOs have lower expectations of IT than one might have thought,” says Orlov. Reasons for these lowered expectations include CEOs’ disappointment in IT since the dotcom bubble burst and, at the same time, CIOs’ “hunkering down and being more risk averse” in terms of technology innovation, she says. — By Denise Dubie

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Going virtual is becoming a real answer for data center managers, according to a survey of large and small businesses. among north american companies, 51 percent are either testing virtualization technology in their data centers or have already deployed it, according to a report released by Forrester research. use of virtualization is less in Europe (35 percent either testing or deploying it) and asia-Pacific (21 percent), but generally growing nonetheless. Forrester compared results of a 2006 survey to a similar one in 2005 in which 41 percent of companies in north america, 30 percent in Europe and 23 percent in asia-Pacific were using or testing virtualization. although the asia-Pacific number is lower in 2006 than 2005, Forrester notes the survey sample was smaller there than in other regions. although virtualization is more likely to be embraced by large enterprises, awareness of it by sMbs is growing at a faster rate, the survey showed. awareness of virtualization by Global 2000 large enterprises grew to 92 percent in 2006 from 87 percent in 2005. but awareness by mediumto-large business jumped to 86 percent from 60 percent, and by small-to-medium businesses to 83 percent from 62 percent. Forrester surveyed 1,267 enterprises with more than 1,000 employees, and 503 sMbs with 100 to 999 employees for its report. — by robert Mullins s t R at e G y

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Of the CEOs polled, 34 % characterized the IT group’s contribution as ‘poor or mediocre’, and 28 % said IT offered roactive leadership.

Virtualization Gains Traction

Assess First, Fix Less s O F t W a R e Large organizations “are wasting a huge amount of time and effort” correcting performance problems with enterprise applications because they often fail to complete initial assessments that can prevent applications from falling short of expectations, according to a report released by software and consulting firm INS. The INS Application Impact Assessment survey of 75 IT professionals worldwide found that more than onethird of new or upgraded enterprise applications fail to meet initial performance expectations. IT departments are usually able to correct any problems by the time an application is fully deployed, but many of them do so by increasing bandwidth or server capacity, which is less efficient than simply modifying the application.

Enterprises can avoid problems with applications by completing an application impact assessment, “which identifies the sensitivity of an application to an underlying network, server, database and storage systems performance, and predicts application, server and network response times, throughput and needed capacity,” according to the report Only one out of four survey respondents always complete these assessments at the time of deployment, while another 42 percent sometimes complete the assessments. The cost of the necessary tools is one of the main reasons for not performing an assessment, even though some of these companies spend more than the cost of an assessment when they expand bandwidth or server capacity to correct application problems, states the INS report.

The report classifies companies as small if their annual IT budgets is less than Rs 45 crore and large if their budgets were more than that. There was a clear dichotomy in that small organizations met or exceeded initial performance goals 74 percent of the time, compared with only 53 percent of larger companies. But when it came to final performance of an application, 90 percent of large companies met or exceeded performance goals, compared with 77 percent of small organizations. “One inference that can be drawn is that small apps are more likely to meet initial performance goals, but efforts to improve upon that initial performance will be minimal,” the report states. “It is also clear that the large difference in meeting or exceeding initial and final performance goals (37 percent) for large organizations means that they are wasting time and effort correcting application performance issues that could have been dealt with simply by conducting an application impact assessment prior to initial rollout.” —By Jon Brodkin

Can We Build

Conscious Machines? Will machines ever be capable of human intelligence? only philosophers can decide, said two of today’s top technology minds during a recent debate at MIt. t t. Inventor ray kurzweil and yale y university Professor David Gelernter debated the question: will it be possible to build conscious, creative, even ‘spiritual’ machines? the debate celebrated the 70th anniversary of alan t turing’s paper ‘on Computable numbers’, widely held to be the theoretical foundation for the development of computers. In 1950, t turing suggested a test to determine ‘machine intelligence’. In the turing t test, a human judge has a conversation with a human t and a machine. If the judge cannot determine whether the human or the machine responded, then the machine is said to ‘pass’ the test and exhibit intelligence. the test is the source of ongoing dispute. kurzweil’s position was that machines will some day pass the t turing test. “We’ll have systems that have the suppleness of the t human brain,” said kurzweil. but current software and computing power aren’t up to the task, so look out 20 or so years, he added.

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Gelernter's position was that any machine that is programmed to mimic human feelings (an aspect of consciousness) is programmed to lie — because a machine cannot feel what humans do. kurzweil noted that recently a computer simulated protein folding, something that was believed to be impossible for a machine. Gelernter noted the simulation of the folding stopped there. “you you can simulate a rainstorm and nobody gets wet,” he said. y

— by nancy Weil REAL CIO WORLD | m a r c h 1 , 2 0 0 7

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Mark J. Denne

Applied Insight

Pricing for Value Businesspeople don’t value IT because they can’t match the price they’re paying to the services they’re getting. Chargeback clarifies the value of IT services — and raises the stature of the IT organization.

f IT is to be perceived as valuable, it has to have a price. Usage-based chargeback is the best way to build a priceto-value relationship for IT services, and it is one of the cornerstones for running IT as a business within a business. As long as IT has a solid understanding of its operating costs, it can use pricing as a strategic tool for improving alignment with the business by giving executives better understanding and control over IT resources. Different models, with different classes of service, can be used to drive more cost-efficient consumption of IT and to achieve more effective matching of service to business need. Four basic methods for pricing IT value are described below.

Subscription Pricing The simplest chargeback model, subscription pricing, is a pay-per-use model in which pricing is per unit of time. This is much easier to monitor and measure than consumption-based pricing. The operational cost of the IT facilities is calculated and amortized across a subscription period (for example, one year) and then divided between all users of the service. Depending on the operating profitability goals applied to the IT organization by the business as a whole, an element of gross margin may be added — perhaps to create a pool to fund IT research or future projects. Advantages Simple: if, for example, five lines of business were subscribing to a service that cost Rs 27 lakh per month to provide, the subscription charge (assuming a break-even business model) would be Rs 27 lakh/5 = Rs 5.40 lakh per business unit per month. 24

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Mark J. Denne

Applied Insight

Disadvantages No usage monitoring or penalties: it assumes that all parts of the business will use the service at the same level on a constant basis, with no penalties for excessive consumption or peak time usage. No cost justification: there aren’t metrics by which the actual level of consumption can be measured, calculated and justified to skeptical consumers.

The goal is to deliver IT services in ways t h a t present the highest degree of visible perceived benefit to consumers — just like in the real world of business.

Peak-Level Pricing The peak-level approach takes the subscription model and adds a mechanism to monitor and record peak consumption. Consumers are billed according to their peak use, not according to their average use. Advantages Simple to meter: only peak-level usage needs to be monitored and recorded. Clear cost justification: easy to show when consumers are using more than the base level resources. Disadvantages Penalizes variability: if there are just a few peaks of usage during a given period, the scheme can seem unfair. But shortening the analysis period — say from six months down to one — and the measurement intervals — from weekly to daily, for example — can solve the problem.

User-Based Pricing If user management is a bigger cost issue for IT than hardware usage, it makes more sense to meter IT by the person rather than the machine. If users are connected to their computers for fairly similar periods of time and have relatively wellunderstood transactional profiles — for example, bank customer service representatives who work on Web portals — this can be a fair and easy way to charge for usage. Advantages Easy to implement: tracking the authentication of individual users to IT services is relatively simple, especially if a single sign-on system is in place. Clear cost justification: the authentication records provide the basis for cost justification. Disadvantages Ignores system load: if users make heavy demands on systems when they log on, this model shortchanges IT.

Ticket-Based Pricing In IT environments where quality of service is critical, IT can meter and control usage very tightly using electronic ‘tickets’ that use a short validity period (say four hours). 26

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Advantages Consumption regulation: ticket-based pricing lets IT control system load to a fine degree, helping to eliminate usage peaks and ensure business continuity. Simple: all that is required to monitor ticket pricing is a low-latency (i.e., fast-responding) portal, most probably constructed as a Web service. Tickets provide permission to use the IT service multiple times during the ticket validity interval (a ‘multiple right of re-entry’ solution). Strongest cost justification: of all the models, ticket-based pricing is the most powerful in terms of cost justification. Pinpoint monitoring: tickets can be very specific, allowing both sides to monitor exact usage down to the specific application level. Disadvantages Ticket hoarding: for the ticket-based model to operate effectively, it’s often necessary to implement ‘use-by’ dates on tickets to avoid stockpiling.

First Class or Coach? There are other, more complex models for chargeback that bring even more depth to the monitoring and costs. But these four models provide a start. And they can be made more meaningful by layering a system of service levels (and varying costs per unit of service) on top of each model, similar to the airline fare class-pricing model. For example, network access could be offered under the ticket-based chargeback model at three price levels, each with varying degrees of bandwidth, service level guarantees and peak usage guarantees. The goal in any of these chargeback scenarios is to deliver IT services in ways that present the highest degree of visible perceived benefit to consumers — just like in the real world of business. CIOs, meanwhile, get the opportunity to manage their own cost structures, away from the prying eyes of consumers. Chargeback is a way to put IT services in terms that businesspeople understand and value. When IT is bought and consumed like other services, IT can become a business within the business. And that is the path to true IT value. CIO Mark J. Denne is a partner with Accenture. Send feedback on this column to editor@cio.in

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Susan Cramm

Executive Coach

Leadership Under the Influence Inexperience, old habits and fear can lead to unnecessary risk-taking by the CIO. Avoid this trap by following these simple rules for safe and effective IT leadership.

T leadership is never easy, but some people make it harder than it has to be. This point was brought home to me after I witnessed a recent car accident. As if driving isn’t dangerous enough, a young man used speed to navigate a turn and ended up hitting another car. Clearly in the wrong, he became belligerent and tried to blame the other driver. Unfortunately for him, the other driver was a firefighter with close ties to the local police. Once the police arrived at the scene, they conducted a field sobriety test and arrested the young man for driving under the influence (DUI). Clearly, the decision to drink and drive led the young man to a series of bad choices. IT leadership has its own versions of driving under the influence that can result in near misses, accidents and fatalities. These events are often dissected in the trade press and discussed at conferences by CIOs who, even as they say, “How could they be so stupid?” are also thinking, “There, but for the grace of God, go I.” Sadly, I see IT leaders take unnecessary risks all the time. Many are leading under the undue influence of inexperience, hubris, fear, old habits, technology hype, vendor pressure and organizational politics. It’s ironic that as a profession, we have enough collective experience to identify behaviors that ensure the success of our organizations and our careers. However, these rules are rarely written down, so that IT organizations and those who lead them can align their behaviors accordingly. To help you do so, let us review some of my favorite rules for safe and effective IT leadership. Build and lead a strong, credible IT organization. Don’t be the leader who has 22 direct reports and no viable successors. Spend half of your strategic planning effort to get

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the right people in the right roles working together the right way. Select people with integrity, who can work with others, are motivated more by making a difference than making a name. They are your professional peers and complement your capabilities. Organize IT similarly to the business. Expect more from your staff and delegate freely, but check carefully and be there to make sure their failures aren’t fatal. Never fire for mistakes but for the inability to learn from experience. Foster good relationships. Don’t manage from within IT. Spend some time learning the business by observing those in customer service. Connect with stakeholders regularly. Don’t worry about what you are going to say; focus on what you are going to ask to understand their goals, motivations and concerns. Don’t just be present, be omnipresent with business partners. Forge a shared IT vision, strategy and tactical objectives. Don’t wait for business to supply a strategy; work with the business and derive it together in an ongoing and collaborative manner, weighing all the implications. Do your homework to understand the business processes and data that drive your organization and the technology that could enable strategic change in your business. Finally, define business and IT decision rights, so governance processes work. Deliver on time, on budget. Don’t attempt innovation using waterfall project development approaches that have big budgets and long time frames; plan projects for nine months and cancel at 12 months. Don’t overload your organization with too many projects; define a top limit for project spending based on what your business can afford. Develop quality solutions. Don’t let project managers ‘roll their own’ when it comes to project management, development methods, technologies, compliance and continuity. Credibility is earned in dimes but spent in dollars. Introducing process disciplines and standardization will require significant withdrawals from your credibility bank, so set your aspirations and approaches accordingly. Realize business value from IT investments. Don’t think you’re delivering value because you have a prioritization process based on strategic fit and financial contributions. Use operational value measurements (cycle time, sales calls) that are measured during and after the project, and hold business partners accountable for demonstrating value realization. Leaders need to help other leaders practice responsible IT. The best way to do this? Define safe IT leadership rules collaboratively with the IT leadership team, and hold individuals accountable for supporting the behaviors and helping others do the same. In the same way that good friends take the keys from those who are drinking, colleagues must hold each other accountable for demonstrating responsible IT leadership in spite of the negative influences surrounding them.

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Reader Q&A Q: I agree with your rules for IT leadership but want to know about strategies or methods for implementing them. What steps would you recommend? A: The first step for implementing the safe IT leadership rules is to consider the effort as a change initiative. As such, make sure that you have some team members (in and out of IT) who can help you assess your current positioning, set priorities and plan a road map that makes sense for your company’s maturity level. Once you have your objectives identified, define success carefully, both in terms of measurements and a clear vision of the end state. The next step is to craft a story that will resonate with the needs of those who need to change. In terms of hitting the ground running, make sure that you connect the desired behavioral changes to business initiatives and objectives that have momentum. For example, a new acquisition could focus attention on architecture and integration. Q: In your column, you talk about helping staff learn from their mistakes. Can you provide suggestions for turning a mistake into a ‘teaching moment’? A: The best mistakes are ones that are just large enough

to make an impression but small enough to contain the damage. The best way to encourage learning is through effective delegation. A client of mine illustrates the importance of delegation by asking the following question during job interviews: “If one of your direct reports was insistent on trying an approach you knew would fail, what would you do?” Of course, the answer is to let him try his approach in a manner that limits the risk to himself or the company. Once an issue occurs, make sure that people learn from their experiences. Do this by asking, “How are we going to make sure this never happens again?” Make sure that you follow up to see that the root cause analysis is performed and the remediation plan is implemented. CIO

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

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Strategy is everything. A breakup of seven IT project domains to expose where a CIO may overindulge or come up short in 2007.

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Reader ROI:

Technologies and costs to watch out for Where you can gain or lose Areas of training you need to focus on

h YOUR

Beneath ITâ&#x20AC;&#x2122;s moderate projected spending

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growth of 6.6 percent for 2007 lies a considerable amount of volatility. Ongoing cost-cutting measures and emerging tech trends have many organizations on the move. And as funding is diverted from one project to another, how IT allocates its resources may well compound the success of an enterprise or drastically hamstring its overall undertaking. That CIOs will spend too much this year supporting the business and not enough driving it should come as no surprise. Yet, those adept at getting the most from mainstay maintenance investments will most likely free up the funds necessary to fuel new projects geared toward advancing the goals of the business. We polled analysts and industry leaders to uncover where a CIO will be spending too much and too little in seven project areas: SOA, compliance, security, virtualization, collaboration, networking, and application development. So, have a look, and sound us off about where you think IT should place its bets in 2007 and what you anticipate this yearâ&#x20AC;&#x2122;s disruptive budgeting forces to be.

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Budgeting for SOA Success Invest in training, security, and emerging technologies to ensure long-term SOA results.

SOA has been an

enterprisewide rallying cry for the past few years, as companies have sought to unlock Web services’ potential to augment the value of existing IT resources. Yet, most activity around service-oriented architecture has been limited to discussion, study, planning, and small projects. 2007, however, will witness a significant surge in SOA spending, as early adopters evolve POC (proof of concept) implementations into more robust deployments and late adopters buy into the architectural shift. Lack of insight and foresight, however, will spur many enterprises to divert too many dollars to areas that will prove less fruitful in ensuring the long-term success of their SOA. First, too much will be spent on hype — again. Many who should be heads-down in their own requirements will get caught playing ‘follow the buzzword’ or ‘manage by magazine’. This means excesses for steering committees, conferences and POCs to the detriment of real work getting done. Vendors, especially those pushing governance and ESBs (enterprise service buses), will get more than their due this year. Worse, such funds will be spent too early in the process, as many enterprises will look to vendors for an ‘SOA in a box’ before they understand their own requirements. In other words, they’ll buy the house before they know where they’re going to put it.

Strategy-focused consultants, who don’t provide detailed execution plans, will be yet another bloated line item in 2007. Strategic planning is important, but the real work starts with requirements, including a semantic-, process- and service-level understanding of the enterprise. Consulting spending will double in 2007 to Rs 24,750 crore, according to IDC — but will results? Companies would be better served by shifting more funds to training. SOA is as much a cultural shift as a technological one. And IT has to be versed in both to be successful. Not having the right people can be costly. More costly would be having to replace them. Security will again be an afterthought. Scrimping on funding now will not make up for potential losses down the road. Attention must be paid to policy management, both as a notion and as a set of technologies. Exposing services gives SOA power — not only to reap savings, but also to do a lot of damage. Finally, few companies will spend enough examining the emerging Web, specifically SaaS (software-as-a-service) and Web services marketplaces. Many enterprise apps can be outsourced, either to SaaS providers accessible through the Web or as sets of services that may be abstracted directly into your SOA. Indeed, of all the aspects to budget for, tapping the emerging Web could provide the highest ROI. Position your SOA to bank on it. —By Dave Linthicum

Weighing the Cost of Compliance Certain to spend too much adhering to regulations this year, IT may be putting the enterprise at risk.

From Sarbanes-Oxley

to HIPAA to PCI/DSS, (Payment Card Industry Data Security Standard), chances are your company is subject to a myriad of compliance requirements. And although the goals of such regulations are noble, the chunk taken out of your security budget to uphold them is considerable, in some cases precluding stronger, more tangible computer security 32

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protections. In other words, by spending heavily on the letter of the law, you may, in fact, be putting your organization at risk. Stephen Northcutt, director of the SANS Institute, agrees that IT’s ongoing emphasis on compliance may be worth reconsidering. “It’s an audit mentality, not a security mentality,” says Northcutt. “It’s, ‘Let’s do everything we can to meet a checklist of audit requirements

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that in the end do not guarantee or measure real security.’ The audit requirements and regulations are generally too broad, with gaps and overlaps. And when the first audit is over, the team switches into another, entirely different mode to satisfy the next audit, which requires different objectives.” Most companies fall under multiple regulatory laws with overly broad descriptions of what is secure. Whether you pass or fail a particular audit requirement is up to the discretion of external auditors. Not surprisingly, pleasing auditors often has little to do with sound security practice. “The first auditor said we had to use passwords with a minimum of six characters. Another said passwords had to be eight characters and complex,” says a bank IT director. “One cared about account lockout mechanisms. The other didn’t. Neither asked about all the other factors that impact overall password security. … And if you read the actual regulations, they don’t specify a particular number of password characters. They just say passwords need to be secure. That’s it.”

Robert W. Hodges, information security officer at Bon Secours Health Systems, says, “When we get two conflicting or overlapping regulations, we play it safe and take the most conservative, secure approach. That way, it satisfies both requirements.” But always taking the most conservative approach means higher spending — in many cases, more than is necessary from an overall security perspective. Regulatory clarification would help. Discretionary guidelines are often given specific answers in court. But with regulations showing more bark than bite despite the fact that most organizations are not fully compliant, you have to wonder where to draw the line when financing compliance efforts. After all, continually redirecting vast amounts of IT dollars and attention away from other practical security projects in order to remain compliant could prove considerably more costly down the line. Your only solution may be to hold your nose as you overspend. As Hodges puts it, “Who wants to risk their company being the defendant when the government decides to make a test-case example?” — By Roger A. Grimes

Pay to Protect Your Data or Pay the Consequences Shifting your focus to information protection is this year’s safest security bet.

2006 may have been

a wash in terms of overall computer security, but if you’re banking on status quo in 2007, chances are your budget won’t have the right mix. And if there’s one area you’re sure to come up short in this year, it’s information protection. “The problem of data encryption is significantly more complex than most people want to talk about,” says the CSO of a Fortune 100 company, who requested anonymity. “Data is all over the place, unidentified, and co-mingled. You’ve got employee personal mobile devices or home machines holding confidential information against corporate policy that you don’t even know about. I’ve talked to many other IT security leaders in companies the same size as ours, and they all tell me that protecting data is one of the most significant challenges they face. Whatever the solution is, it will be expensive and will not cover everything.” Dennis Hoffman, vice president of enterprise solutions at RSA, agrees. “Management is waking up to the fact that IT security is the poster child of TCO mismanagement,” he says. “For too long, the focus has been infrastructure-focused when it should have been informationfocused. Most IT leaders don’t know where all their information is, and if you don’t even know where it is, you can’t manage it.” Consolidation is one big-picture solution for which companies may not be budgeting enough this year. “We are talking server consolidation, data consolidation, fewer datacenters, and

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virtualization,” says Hoffman. “It’s much easier to manage the information coming out of three datacenters than 23.” Patch management is another area where companies may not spend enough in 2007. According to experts at Symantec, the average number of days after an exploit is announced until the patch is released is 31 days, and the average number of days from the day an exploit is announced until malware is released is 3 days, leaving an exposure gap of 28 days. A full 35 percent of machines contain known app vulnerabilities, according to a recent test by Secunia. Microsoft Automatic Updates appears to be working; other apps, however, need patching help. Firefox, for example, was unpatched more than 30 percent of the time. And more than 50 percent of Adobe users were running vulnerable versions. Put together a comprehensive patch management plan and stick to it. When it comes to securing the enterprise, however, knowing where to place your bets is delicate business. “We’ve got some big gaps that we are trying to close,” says the Fortune 100 CSO. “Every year, we try to do a new risk assessment, and make sure we are allocating resources where they are needed.” The stakes are high. Whatever you do, don’t be among those who will underinvest this year in risk assessment. — By Roger A. Grimes REAL CIO WORLD | m a r c h 1 , 2 0 0 7

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Server Virtualization Brings Bottom-Line Relief Tap into server virtualization to free up funds for strategic endeavors.

Companies not making

a virtualization play in 2007 stand to spend far too much maintaining their datacenters. The ongoing energy squeeze has many enterprises already making the switch to virtualization — and for good reason, as innovation in the CPU industry and recent maturation of competing technologies are proving that server virtualization leads to significant energyconsumption relief. The cost of replenishing hardware provides a second motivating factor, especially as many enterprises enter the buy phase of their server upgrade cycle this year. “At a meat-and-potatoes level, IT shops can cut hardware costs by a quarter or a half by turning to server virtualization,” says Frank Gens, an analyst at IDC, which predicts that the number of new physical server deployments dedicated to virtual hosts will increase by 52 percent this year. For those on board, 2007 has arrived riding a massive wave of virtualization technologies. So much so that x86-based server virtualization will not just be an option for tomorrow’s datacenter, it will be the foundation. Soon, vendors will focus on higherpower, higher-cost servers bundled with platforms such as VMware, Virtual Iron and Virtuozzo, which will eventually outpace servers bundled with raw OSes. Lower-end servers will remain an option but will decline in favor of medium- and heavy-duty platforms. Expect

eight-way servers to experience a rebirth after foundering in recent years due to high cost and software vendors’ attention on clustering. Spreading the price of an eight-way server among dozens of virtual machines will fit the budget far better. In terms of licensing, VMware leads the pack in price per socket, but competition may force that price down in 2007. Be sure to keep an eye on this market as it evolves. Additional savings can be had by timing an iterative migration path to take advantage of this dynamic market. What’s worth noting is that everyone stands to gain from virtualization, not just the big boys. High-power, relatively low-cost servers such as the Sun Galaxy x4200, the Dell PowerEdge 2950, and the HP ProLiant DL380 G5 make the case for investing in virtualization, regardless of the size of implementation. And there are plenty of free products available to taste what’s possible, although they lack enterprise features such as high availability and dynamic load shifting. VMware Server can be downloaded for free, as can a limited version of Virtual Iron. In fact, Virtual Iron has dropped the price of its enterprise product to Rs 22,455 per socket, driving the barrier to entry even lower. Although these free offerings probably won’t offer the features you’ll need for a production deployment, they certainly prove the point — the time is ripe for datacenter consolidation. — By Paul Venezia

Profit from Agile App-Development Mashups and SOA are fueling a shift toward scripting and agility — invest in skill sets accordingly.

Mashups and SOA are among the drivers of a development revolution, away from native coding in C++ — and from building millions of lines of managed C# and Java code as 34

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well. Companies will hire ASP.Net and JSP developers by the busload, but they are most likely to spend too little attaining JavaScript, Perl, PHP and Ruby skill sets. When coupled with

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the right frameworks and component suites, new-fangled scripted apps will turn software development teams into a faster, less expensive, and more responsive part of enterprise IT. On the front end, this means AJAX-based UIs, which help employees work more productively. Behind the scenes, SOAbased mashups will eliminate a lot of manual labor by enabling robust, non-brittle, many-to-many integrations that offer solid performance, security, and support for multistep transactions. Unfortunately, many enterprises will not spend enough to train and hire developers accordingly. Any shift toward scripting should be accompanied by a shift away from formal requirements and toward agile processes. But companies saying goodbye to huge software rollouts and hello to permanent betas will likely spend too little ensuring a successful transition. It’s as much a matter of having strong project management skills on board as it is to have developers versed in agile techniques. After all, when requested features can no longer wait for next year’s ‘dot zero’ release but are instead

deployed companywide in ‘next Thursday’s build’, not having the right personnel in place can be costly. Also out the window this year: traditional testing models, in which QA and security validation is performed after coding is complete. That said, companies will spend too much time and money on traditional testing and patch-and-fix deployment of security updates because they won’t spend enough on integrating strict vulnerability and functional testing into every phase of development. Traditional post-development acceptance testing will still be necessary, but by integrating testing throughout the design and coding process, you will shorten test-and-fix cycles considerably, freeing your team up to deliver more apps faster. More intriguing is where these shifts may lead. Expect 2007 to mark the beginning of the end of desktop software development, as anything you can do on the desktop, the SOA-based server will be able to do better, spelling bad news for those rolling out Windows Vista. —By Alan Zeichick

As-needed Networking Rollouts Pay Off Buying into the buzz of VoIP, Gigabit, and IPSes may result in less-than-optimal benefits.

VoIP, for one,

may be more of a gentle breaker caressing the shores of the infrastructure than the tidal wave vendors expect it to be. Pervasive adoption will occur, but companies will benefit by taking an as-needed approach to VoIP. High implementation costs and the established base of reliable PBXes have pushed VoIP into the ‘when possible’ category — when an office moves to a new building or the existing PBX needs replacing. What’s more, many PBX vendors are backing VoIP into their systems, allowing VoIP phones to integrate with traditional phones, thereby facilitating branch- and remote-office rollouts without having to rip and replace all the way to the core. The same goes for Gigabit to the desktop. Companies buy desktops equipped with Gigabit NICs but run them into 10/100 switches. There’s simply not enough need for the higher bandwidth to require every edge switch and uplink be upgraded. Companies not taking an asneeded approach to replacing 10/100 switches only when they age out are likely overspending on Gigabit. Those shopping for an IPS in 2007 should keep in mind that many admins view the systems with skepticism. For one, their promise has yet

to be realized. Worse, the systems often cause more problems than they solve. Virus and worm proliferation is certainly a pain point for every Windows shop, but the heavy configuration and maintenance requirements of most IPSes, not to mention the high cost of the solutions themselves, call into question the benefits of investment. Most companies would be better off funding the battle at the desktop and server level, rather than at the core or edge of the network, though that’s where it truly belongs. But the primary place you’ll spend too much this year will be on egress bandwidth. There’s still a notable disconnect among bandwidth offerings from large ISPs, even with lower T1 and T3 pricing. Fractional T3 costs significantly more than the same-size pipe from a cable provider, although the generally asynchronous nature and lower support class of cable is not to be discounted. Either way, end-user complaints about bandwidth are a foregone conclusion. Just don’t spend too much thinking you can silence them.

The primary place you’ll spend too much this year will be on egress bandwidth. And end-user complaints about it are still going to be a foregone conclusion.

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—By Paul Venezia REAL CIO WORLD | m a r c h 1 , 2 0 0 7

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Capitalize on Emerging Collaboration Options Foregoing licenses in favor of emerging alternatives will free funds to train employees to collaborate effectively.

Most organizations

are aware they can save money foregoing big-vendor licenses for e-mail. But when it comes to setting up meetings, the free/busy scheduling capabilities of associated calendar software are hard to beat. CalDAV (Calendar Distributed Authoring and Versioning), a standard for interoperable calendaring, aims to change that. And if CalDAV-compliant servers and clients take hold, many enterprises will find money spent on Exchange licenses can be put to better use elsewhere, such as toward a workflow app, freeing employees from having to use e-mail as an ad-hoc workflow substitute, as is the case at many companies. Kelly Phillips, director of IT at OC Tanner, says much of the money spent on intranets and portals in the name of collaboration is wasted. “We invested in an intranet only to find that the lack of collaboration tools and vibrant content has rendered it useless,” says Phillips. “Too often, intranets end up as internal brochure-ware with a phone book, a cafeteria menu, and maybe some pockets of good activity in sales support or HR. In some ways, the more content we add, the more useless it gets.” Instead of defining a centralized spot for everything, Phillips suggests investing in an enterprise search solution to create an index of resources. For all its hype, blogging remains under-used as a collaboration tool. Those on board, however, often spend too little setting up an environment that encourages responsible blogging. Train employees to be smart and effective. Good employee bloggers can be the marketing department’s best friends. Poorly-trained ones can be a company’s worst nightmare. Blogging software can also replace most mailing lists, which tend to clog inboxes, handicapping productive use of e-mail. Moving lowpriority messages to a blog with an RSS feed — and encouraging use

of feed readers — can increase productivity inexpensively. Knowledge management systems may be another cost overrun in 2007. Steve Fulling, CIO for Sento, a multichannel contact center, considers wikis a worthwhile alternative. “If resources weren’t an issue, I’d love to have an expensive knowledge management solution,” Fulling says. “But wikis have filled that need for us admirably — freeing up money for other, more pressing needs.” The most important line item for improving collaboration, however, doesn’t involve tools. Whether it’s poorly-planned phone conferences or e-mails that pile up unread, you lose productivity assuming people know how to use the tools you

The most important line item for improving collaboration doesn’t involve tools. Don’t be one of those companies that spends too little on training in 2007.

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give them. Don’t be one of those companies that spends too little on training in 2007. Facilitators, coaches and trainers can prove pivotal in helping people collaborate effectively. CIO —By Phillip J. Windley reprinted with permission. copyright 2007. InfoWorld. Send feedback about this feature to editor@cio.in

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Tuning IT with Business BY Gunjan trivedi

View from the top is a series of interviews with CEOs and other C-level executives about the role of IT in their companies and what they expect from their CIOs.

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Ashok Sinha: Over a year ago, we decided to conduct brainstorming workshops with a 100-odd members of BPCL's senior management. They in turn went to their people to figure out what is it that we do best, what makes us successful, and what are the ingredients at BPCL that make it work. Based on this discovery of our core strengths, in which almost everyone participated, we underwent a process of dreaming up a vision. Even the worker unions were taken into confidence, and in consideration of the vision, their roles and inputs were discussed and defined. We

called this vision Project Destiny. We wished to, in a nutshell, double our volumes and quadruple our profits. Each of the six business units in the organization has started aligning its roadmaps to enable the company to achieve the aggressive growth rate we envisioned. Though the design component — wherein we defined the strategies, roadmaps and business plans — is in place, we have kept the design live and continuous as things evolve and change with time. With the aggressive growth we are looking at, we also needed to identify leadership positions and competencies required. This was undertaken under a project named Caliber, which was all about ensuring proper succession plans, grooming people to the required potential, and ironing out constraints.

CIO: How will you realize the vision of transforming BPCL into the country's most profitable downstream player by 2010?

P h oto foto co rp

India’s oil and petrochemical giant Bharat Petroleum is progressing fast on its roadmap to emerge as the country’s most profitable downstream player, seeking to double volumes and quadruple profits over the next three years. BPCL’s chairman and managing director Ashok Sinha believes that IT is the catalyst fueling its burgeoning growth.

Imagin g by BINESH SREEDHARAN

Ashok Sinha, chairman & managing director, BPCL, says effective technology is a function of its efficacy, business viability — and psychographics.

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Ashok Sinha expects I.T. to: Track, compile and consolidate data on customers Develop integrated and feasible solutions for business Smoothen internal functioning of the organization

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Another project, christened Crescendo, was conceptualized to take care of the overall integration of the entire organization through supply chain management, starting all the way from demand planning to the actual buying of crude for refineries.

What role does IT have in BPCL realizing its vision? IT has been crucial to BPCL not just for achieving this goal, but also on an overall basis. It all began in 1988 when we restructured the organization. In order to make our structures work, we had to do a relook of all our processes, and streamline and embed them in our ERP system. Two years after we implemented the ERP, we revisited it and changed everything to get into the next level of ERP systems. Later, we used the existing infrastructure and processes as a stepping stone to bring into effect another phase of business process reengineering. The focus of such reengineering was to figure out whether our structures and processes were properly aligned, so that they ultimately help us serve our customer better. Here, IT continues to be a business enabler, as it continuously gives us inputs on how we can do things better. To be able to come up with progressive ideas and inputs regularly, which affect business positively and keep all processes and other projects in sync, we have started a project called Aryabhata. Our IIS (Integrated Information System) team that comprises both business and IT experts, and the ERP Competency Center contribute to Project Aryabhata.

You once said, "The major essence of change lies in its pace." How do you ride IT to stay ahead? Successfully staying ahead is a challenge. Undoubtedly, the IT department is very aware of a plethora of New Age technology solutions and cutting-edge products. But, if the business 40

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“IT is core to our business. The extent of our business and amounts of transactions are too huge to be handled in any other way. ” — Ashok Sinha sees no value in going a particular way, such solutions never get implemented. The real challenge, from IT’s point of view, is: how do we keep ahead while looking at things differently — and sell new concepts and ideas to business from the perspective of hardcore cost-benefit analysis? We run pilots to test things out and showcase benefits. If the benefits are visible, then the new solution gets implemented. For example: we introduced smartcards in 1998-99. We were probably the only nonbank entity to introduce prepaid debit cards. This was in the period when analysts were of the view that India would not ready for smartcards till 2007. However, we knew the technology was there and that we had to show why it made sense. Today, we have over 2 million cards in the market that operate all the time. Our total turnover through the cards is close to Rs 9,000 crore. So, we do stress on experimenting with IT to stay ahead in business.

Currently, Project Aryabhata is trying to look at newer technologies and figure out whether they will make sense to business or not. If they do, they will get adopted because IT is absolutely core to our business. With our size, we don’t have a choice in this matter. The extent of our business and amounts of transactions are too huge to be handled in any other way.

What role can IT play in developing an integrated view of your customer? And what are the challenges? We have six core businesses. All the customer data from these ultimately reside with IT. Therefore, we do need to have a single view of our customer across businesses because the customer, for example, could be a user of our LPG and he might also be fueling his vehicle at our service stations. Is there a way to link it all up? There is no straight answer as it is very data intensive and you have to eventually get into analyzing psychographics. That, in itself, is a huge challenge. It is quite possible at a conceptual level, but with the conflict that still exists among the businesses as to ‘Who owns the customer?’, I don’t think we have moved much at this stage. We are, of course, continuously looking at this issue because there are technological means to link all information on a customer as he touches us at various points.

Your annual report talks of an initiative to segment customers based on psychographics and fuelling behavior… As I mentioned, we have not been able to take it across everything. Just to cite one customer base we interact with, we have close to 22 million LPG households. If you start appending attributes and psychographics to each of these records,

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View from the Top

it will be a humongous database you would land up with. If we are to collect this data, it’ll be at a huge cost and won’t make viable business sense. We have indeed captured subsets of data — for example, the customers using petro cards. But considering the size of our country, even capturing subsets completely is a huge and expensive task. We can always build technological solutions that we need, but the business case is not feasible at present. We have other ways to tap our customers and will leverage those first, before conducting psychographics becomes a feasible option.

How do you see IT impacting BPCL's corporate governance roadmap? As far as Clause 49 (of the Listing Agreement of Stock Exchanges) is concerned, we have a fairly robust system in place. This has been possible because we have an equally robust ERP implementation. Today, it is only an issue about making sure that everything is aligned to the certification process and streamlined for external audits. We have looked at risk management profiles and external reviews of our processes to make sure that we are compliant with the regulatory requirements. IT here plays a collation game because it is ultimately all about people-governance. The initial IT impediments will always be present as there will be a certain amount of system and process realignment requirements to be met to embark on a compliance roadmap. Once you take a centralized view of your enterprise, there will always be process-related issues, especially in an organization of our size. Managing master data is critical to the approaches of how your system will work and how you are going to adopt regulatory compliance. We have had our share of roadblocks, but we had basic structures and processes in place to deal with them.

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Apart from smartcards, how are you using IT to further revenues?

SNAPSHOT

BPCL

Revenue:

Rs 85,149.62 crore (2005-06)

I was directly involved with IT or not. This definitely helps, as I can know more about what our IT team and the IT decision-maker would be thinking, and am clearer as to how solutions will be rolled out and begin to impact the business. This helps me keep close tabs on IT strategies in sync with business in a profitable way.

It is very difficult to Locations: correlate one with the other. 700 VSAT locations This is more of a loyalty Business Units: card, rather than a sales6 orienting card. It helps Refineries: track customers who keep 3 coming back. Nevertheless, Employees: since different customers 13,940 have different needs, we How core is your I.T. Budget: have brought out specific senior IT executive Rs 100 crore solutions riding on IT to to BPCL’s I.T. Staff: serve them better, ultimately 196 strategy-building impacting our sales. For Executive Dir. (IIS): exercises? example, we have introduced S.P. Gathoo a fleet-card for corporates Our senior IT executive is that run a fleet of 150-200 always part of our strategycars. With the fleet-card, building endeavors. We BPCL basically reduces the drudgery of have an executive council and the head the customer’s administration department of the IT department is a core member. keeping track of various facets of the 200 We continuously get inputs from cars, like vehicles’ mileage and those that him in tandem to its other members need to be refueled, etcetera. such as administration, finance and Today, we can provide a consolidated international trade. All of them are status report of each car registered under part of the same governing council. the fleet-card. Similarly, we can track trucks This helps us keep everything in sync, for their owners. Even if the truck is in every requirement addressed, and all Assam, the owner in Bangalore can get an processes and systems tightly integrated SMS as soon as the truck refuels. This, I feel, in place, ultimately helping business is quite simple as once the basic transaction grow steadfastly. CIO is over, the information flow is just part of communication. But, these services are value-additions to our customers and positively impact our sales.

Have your earlier stints with finance and IT at BPCL helped you understand your senior IT executive better? I was part of IT in this company, not only as director (finance) but earlier as well while setting up systems at our refineries in 1986. IT has been core to my role throughout, irrespective of whether

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

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Most mergers and acquisitions fail to deliver the expected business value. But Cotyâ&#x20AC;&#x2122;s acquisition of Unileverâ&#x20AC;&#x2122;s cosmetics and fragrance subsidiary has been a success. The secret formula was a new approach to integration.

Scentof a merger Reader ROI:

Why M&As fail How an SOA approach can speed and simplify supply chain integration Why small integration teams are smarter

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Supply Chain Integration

On Dec. 14 and 15, 2005, Coty, one of the world’s largest cosmetic and fragrance makers, held an all-hands-on-deck executive meeting at the company’s headquarters in New York City. Five months earlier, Coty had acquired Unilever Cosmetics International (UCI), a subsidiary of the eponymous conglomerate, and Coty’s IT team was just finishing moving UCI employees off Unilever’s infrastructure and onto Coty’s. This was tedious work, such as switching people from Outlook to Lotus Notes, the sort of project Coty CIO David Berry calls “brainless.” Now, Coty’s IT department was itching for a challenge. But not the one Berry was handed at the meeting. UCI’s order entry, processing, financial, warehouse and shipping systems were still different from Coty’s. The newly merged entity was like a corporate Noah’s Ark, carrying two sales forces, two marketing departments, two financial teams and so on, preventing Coty from gaining the efficiencies it had counted on when it laid out Rs 3,600 crore for UCI. At the New York meeting, Coty CFO Michael Fishoff told Berry that he had to have the companies integrated by the end of Coty’s fiscal year, June 30, 2006. In other words, he was giving Berry six months. “Integration means the supply chain,” says Berry, an American based in Haarlem, the Netherlands. And the supply chain was a mess; it spanned 10 countries, employed four ERP systems that fed three warehouse systems running five major distribution facilities on two continents. And now Berry had to figure out a way to get all those systems to communicate with one another. And do it in 180 days. On his flight home, Berry had a couple of drinks and thought, “How are we going to pull this off?” By the time he got off the plane, he was, in his words, “a nervous wreck.”

By Ben Worthen

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Supply Chain Integration

A Mania for Mergers Mergers and acquisitions follow the stock market. M&As peaked in 2000, with Rs 15,300,000 crore spent on almost 39,000 deals, and dropped considerably when the market crashed. But over the past few years, as the market has rebounded, the number and value of M&As have crept back up. In 2004, companies spent Rs 8,550,000 crore on M&As; a year later, it was Rs 12,150,000 crore. Through November 2006, companies spent Rs 14,850,000 crore on almost 33,000 M&As, a rate that put 2006 on pace to be the largest year ever for M&As. Dan Dalton, a professor at Indiana University’s Kelley School of Business, says that companies have gone on an acquisition binge because record profits and soaring stock prices have left them more liquid than at any time in the recent past, and there are only three things they can do with the cash: save it (an option that executives favor but investors frown on); pay it out to shareholders in the form of dividends (which investors like but executives don’t); or use it to grow the business by acquiring another company (which, if it

You don't want to be one of those guys whose merger didn' t work becaus it took too long.” — David Berry, CIO, Coty

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works, makes both executives and investors happy). Unfortunately, M&As usually don’t work. Anywhere from 65 percent to 80 percent of M&As never deliver a real return on investment, according to Stephen Kaufman, a senior lecturer at Harvard Business School. “They end up destroying shareholder value rather than enhancing it,” he says. There are two principal reasons why M&As fail. First, to acquire a company, one has to pay more than it’s worth — “10 to 15 percent above market value,” says Dalton, who says the extra cost covers the premium necessary to convince a company to sell as well as the debt the buyer assumes to fund the acquisition. The result is that acquirers invariably start off in the hole. The second problem is that while acquisitions are almost always made with a clear goal in mind — for instance, expanding one’s presence in a market or entering a new one — integrating the two companies can take so long that it throws off the calculations that were used to determine whether the deal was a good idea in the first place. “Indecision is the worst and most corrosive chemical in a merger,” says Kaufman. Each minute spent trying to decide the best way to integrate is a minute spent paying for things that are not generating value. That’s why, Kaufman says, “It’s better to be 100 percent fast and 70 percent right, than 70 percent fast and 100 percent right.”

What Coty Bought and Why Coty was growing rapidly — its revenue jumped from Rs 8,550 crore in 2004 to Rs 9,450 crore in 2005 — thanks in large part to a strategy that emphasized celebritybranded perfumes. Coty’s roster is headed by big names like Jennifer Lopez and Celine Dion, soccer star David Beckham, country singer Shania Twain and tween icons Mary-Kate and Ashley Olsen. UCI, meanwhile, owned one of the fashion industry’s biggest names, Calvin Klein, as well as other top brands. But cosmetics is a non-core business for Unilever. And so, in July 2005, Coty finalized the deal, paying Unilever Rs 3,600 crore for the Rs 2,700-crore subsidiary, and agreeing to future payments (contingent on profit goals) that could be worth an additional Rs 450 crore. For Coty, the deal represented an opportunity to become a larger player in the prestige fragrance market of high-end perfumes like Calvin Klein and other top UCI brands Vera Wang and Chloe. Coty also believed it could reap economies of scale from having just one sales force, marketing group and so forth selling and managing two sets of products. And it hoped to retain the best people from both organizations. But if the integration wasn’t done quickly enough, not only would Coty not gain those economies of scale, it could scare away its best people.

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Supply Chain Integration “People like to have a clear vision of the future,” says Michele Scannavini, president of Coty Prestige, who works out of Coty’s Paris office. “When [a merger] takes too long, anxiety grows and you risk losing the key talent in the organization.” Coty faced the same risk with its customers too. “The retail trade wants to know how you’re going to go to market,” says Coty's CFO Fishoff. “Now, all of a sudden, we’re one big company. But we’re not doing business as one company. We still have two salespeople, and you have to get two different shipments.” Until it consolidated its two lines, Coty risked losing the raison d’être for the acquisition and risked alienating its customer base. And that’s not what it shelled out almost a billion dollars for.

“Good Enough” Integration

M& A

Sense “Mergers and acquisitions are always trickier than anyone ever thinks they are,” says Dan Dalton, a professor at Indiana University’s Kelley School of Business. With this in mind, Dalton offers five things to remember when embarking on an M&A:

You’ll need to figure out how you’re going to recover the premium you will have paid in order to acquire the company in the first place.

Don’t overestimate the economic synergies (economies of scale, merged workforces [see number 3 below], aggregated resources) you expect to reap.

Don’t underestimate the number of good people you will lose. Even if the merger involves two stellar CIOs, there will be only one CIO job.

There will be hundreds of new processes and procedures, and every single one of them is certain to upset someone.

Upon returning to Haarlem, Berry and Your customers and suppliers will want to know what the M&A means his team began developing their strategy for them. And they will almost certainly be reevaluating their relationship to make sure that Coty didn’t fritter with you. Be honest and open and communicative with everyone involved. away the advantages it sought in the UCI — B.W acquisition. The June 30 deadline made speed paramount. Berry would focus on the processes that had to be completed to merge the two workforces. Everything else, from daily If they could do that right, Berry and his team might make sales tracking to real-time order monitoring, could wait. the June 30 deadline. Traditional systems integration is an all-or-nothing “You don’t want to be one of those guys whose merger proposition: you teach one system to speak another’s didn’t work because it took too long,” says Berry. “So I bet language. If it can’t learn, it flunks. That’s why these the farm that this was going to get the job done.” projects can drag on for years. But Berry needed a different philosophy and a new methodology. And he knew what it would be. In September 2005, Coty had signed a deal with iWay, a middleware vendor, to facilitate developing a service-oriented architecture The flip pad on the easel in the corner of Berry’s Haarlem (SOA). The SOA was intended to help Coty manage a Rs office is down to its last sheet of paper. On that sheet is 2,250-crore procurement outsourcing deal it had just a diagram explaining how SOA works — red ink for the signed with IBM. But in November, Berry had gone to a systems, green for the data flows, black for the names of the Gartner conference in Cannes, France, that focused on systems. And since explaining how SOA works and getting using SOA to integrate disparate systems faster than his staff to understand this new way of thinking (services, traditional integration projects were able to do. not applications) is one of Berry’s hardest jobs, he hasn’t let Rather than teaching each system all the other systems’ anyone touch the pad in more than a year. languages, the SOA could act as a universal translator. (An Berry didn’t realize what he was getting himself into until order in SAP would be rendered as a service, which could a two-day meeting that began on January 11 last year in a be recognized by, say, J.D. Edwards, without having to conference room at the Zoete Inval Hotel directly across the reconcile the two languages.) The only thing the Coty team street from Coty’s Haarlem office. Twenty-five key process would have to teach the software would be the business owners, from functions including finance, customer service, processes. For example, what that order looked like and distribution and IT, were going to create the integration plan. where it should be routed and under what circumstances. It was the first time that many of them had ever met.

What’s Critical, What’s Not

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Supply Chain Integration “We are not a technology company,” Berry told the audience. “We can’t be writing code.” The point of an SOA, he continued, is to map the tasks that applications perform to the processes that a company follows in the course of doing business. At the technology level, these tasks — for instance, shipping an order — are translated from the proprietary language of the system that performs them into services written with XML-based standards. At the business process level, these services can be moved around and used repeatedly to build new applications without ever having to write new code. Berry told his audience that the purpose of the first day was to understand the processes that everyone used. Each of the representatives took turns talking about how they did their jobs and how they used their systems. What emerged was a picture of how the company worked. The new company had five distribution centers. The two inherited from UCI — in Lille, France, and Mount Olive, New Jersey — ran on the J.D. Edwards platform. One Coty center in Germany ran LM6, the other, Ratioplan. The North Carolina center ran Oracle/COPs. They were all, says Berry, “old and

We didn't have to build the Taj Mahal; we just needed a roof.” —Gary Gallant, VP of information management, Coty

tired.” Furthermore, each country had unique processes (and in some cases, technologies) that had to be accounted for. Italy, for instance, is already using the SAP system on which Coty will eventually standardize. The largest customers there usually place orders at the individual store level and expect products to be delivered directly to those stores. But, England uses a legacy ERP system from JBA, and Coty’s largest customer there, the Boots pharmacy chain, places orders by EDI and has them delivered to central warehouses. There were smaller differences that the integration project would have to accommodate as well, such as label reformatting. The SOA project would have to identify all of these and turn them into universally readable services. The day ended with a formal dinner and resumed on the morrow, focusing on how Coty was going to make all this happen. “We didn’t have to build the Taj Mahal; we just needed a roof,” says Gary Gallant, Coty’s vice president of information management for the Americas, who came along in the UCI acquisition. “For example, we could have said anytime someone creates an SKU, we need to replicate that in every system. But then, we never would have made our go-live date.” Instead, Coty limited its focus to anything that touched the customer: sending an order to the warehouse, ship notification, billing and so forth — what Gallant calls “the bare necessities of order management.” This focus on customer-facing processes came at the expense of internal ones. For instance, Coty’s business leaders were used to receiving a daily report tracking sales and inventory levels. But Berry decided that integrating that report with the new UCI products would have to wait until after June 30. This was not a popular decision with the business leaders, but the daily reports, as nice as they were, did not directly affect customers. In order to minimize the confusion, Berry decided to create small SOA project teams: one project manager, four IT directors and an iWay consultant in Europe, and an even smaller team in the United States. The countries that already had the SAP system in place would be integrated by Accenture, Coty’s partner on the SAP project. Berry says that creating small teams was one of the best decisions he made. “Too many brains can work against you,” he says. “We didn’t have the time to listen to every alternative.” Smaller teams didn’t require costly overhead like dedicated office space, and, most important, eliminated chains of command that might have prevented Berry from getting timely and candid feedback on whether “we were on the right or the wrong track.”

Integration Ho! The next five months were intense for the project teams and Coty’s IT executives. Phone calls to the United States at 3:00 AM became routine, according to Gallant.

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Supply Chain Integration The Coty team spent the first few weeks mapping processes and determining what in fact touched the customer, and therefore needed to be included in the integration. Actually integrating the processes was the easy part; one of the team members would take a process — for example, an order notification from a salesperson — and describe what each field should be, if the date needed to be flipped from European to American formatting, which distribution center an order needed to be routed to and so on. Because the applications were being converted into services, the Coty team could set these up with a drag-and-drop tool and didn’t have to do any coding. Accordingly, the team spent most of its time testing. In many cases testing was done the Friday, Saturday and Sunday preceding a Monday go-live date. One particular test stands out in Berry’s memory. It was the end of March and Coty was planning to go live with the SOA in Spain, France and Italy on April 1. Berry watched as the system processed several hundred orders. At the end of the day, he called a distribution center in Germany to see how things had gone, and the manager there basically said, “What orders?” It turned out that the system could not figure out what to do with the orders, so it parked them rather than releasing them or kicking them back. The project team created a new process rule: orders that can’t be delivered should be bounced back to the sender. The Coty team found other problems, both large and small, and fixed them as it went along. The company went live with its US distribution facilities in April, the United Kingdom and Ireland in May, and Germany, Austria and Switzerland in July, just after the fiscal year–end deadline.

The Sweet Smell of Success Thanks in large part to the added revenue from the former UCI products, Coty recorded a record Rs 13,500 crore in earnings in 2006. Meanwhile, the IT department’s work allowed Coty to combine sales and marketing forces as

planned at the beginning of the 2007 fiscal year in July. But while the speed work was finished for the IT group, its job was far from over. It now had to go back and work out all the details it had neglected during the integration, such as those daily reports the business leaders wanted — they now have a Web-based tool that can give them any data they want — and real-time monitoring of transactions. (Coty now knows the moment there’s a problem with its systems.) There was also time to reflect on the project. If there’s one thing Berry could do over, he says, it would be to take the design of the end-state architecture more seriously. Given the manic pace of the project, he didn’t think that he had time to stop and come up with one; instead, he figured that the end state would evolve naturally over the course of the project. Finally, in May 2006, he gave in to pressure from the iWay consultants to articulate an overall systems architecture. It turned out to be a relatively easy process, taking only a couple of days to produce a working blueprint. This allowed him to get a pretty good idea of what pieces of technology he would need to replace and when. “Get it nailed down early,” he recommends. Coty is still working on its global SAP system. Over the next couple of years, it will deploy financial, business planning and some manufacturing modules in Europe and the United States. And wherever it needs to touch another system, the integration will be done with SOA. As for the SOA itself, using it as an integration tool is only the beginning. Ultimately, Coty intends to use it for business intelligence and to facilitate its move to being a real-time company. But first things first. “[The integration of the two companies] may not be the most perfect or efficient, but orders are coming in and going out,” Berry says. Now, he says, “We’re doing a lot of finetuning.” CIO

Ben Worthen is a senior writer. Send feedback on this feature to editor@cio.in

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ResuRR e Reader ROI:

How to build end-user confidence with small, quick wins What continuous leadership can do for difficult projects

the

Why security isnâ&#x20AC;&#x2122;t everything

When the Ministry of External Affairs tried to computerize the passport department in 1986, the project got stuck in a quagmire of end-user resistance. Hereâ&#x20AC;&#x2122;s how the NIC started again and turned the project around.

Govern Main.indd 50

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R ecting

end-user By Balaji NarasimhaN

In 1986,

long before the e-governance bug had bitten India, the Ministry of External Affairs (MEA) attempted to computerize the regional passport office in New Delhi. The task was farmed out to a private company, which didn’t deliver to the MEA’s expectations. The project failed, and one of the chief reasons for this was that the drive to computerize concentrated overtly on security of the issuance system. This increased the workload on users, causing resentment among the staff — who had expected computerization to make life easier. Pushing computerization even in today’s machine-friendly environment isn’t easy, but trying to implement a new system after the old one bombed, leaving behind disgruntled users, is an unenviable task. But that is exactly what Dr B.N. Shetty, senior technical director & HOD, External Affairs Informatics Division,

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was asked to do. “It was crucial for NIC to implement the project successfully and they needed a strategy,” recalls Dr Shetty.

I.T. GUERILLAS In 1989, three years after the first failed attempt, the National Informatics Centre (NIC) took on the task of putting together another system. In the first phase, all major passport offices were taken up for rollout. Over time, the implementation washed over the other offices. By 1996, all major offices were computerized, and the rest were covered by 2001. Importantly, the progress of the implementation was slow initially, but sustained, because users didn’t have much faith in IT. How did the NIC move into territory that had been lost to IT and was filled with unfriendly natives, and still convert all of them? More to the point, how did the NIC ensure as little REAL CIO WORLD | m a r c h 1 , 2 0 0 7

Project Management resistance as possible and break down the opposition that had existed? The NIC officials did their homework: they studied the land, and pored over the manual system and the failed computerized system. In doing so, they discovered that the biggest failing of the manual system was lack of transparency, while a fixation with security was the weak spot of the computerization effort in 1986. The NIC readied itself for a rough time. Experience suggested that ‘small incursions with big wins’ was the way to go. The computerization process in the passport offices, says Dr Shetty, was undertaken in three stages. “These included basic computerization, security related modules, and public facilitation,” he added. Basic computerization modeled itself on the manual process and covered counter operations, data captures, internal file movements, dispatch, and undelivered cases. The security-related modules were implemented to handle checks against anti-social elements and double passport holders. For public facilitation, technologies like SMS and IVR were applied.

Because of user doubts, we decided to introduce computerization module by module, office by office. — Dr b.N. Shetty Senior Technical Director & HOD, External Affairs Informatics Division

reduce workload. Resistance “The transition from the old to computerization did system to computerization weaken, but the NIC was was not all easy. Since users still unwilling to take were not confident about the any chances. outcome of the new system, SNAPSHOT They decided that it was decided to introduce Passport subsequent modules for computerization moduleComputerization areas like security and by-module, office-by-office,” PASSPORT CONTROL ISSuANCE SySTEm: public facilitation would be says Dr Shetty. 31 passport offices introduced one by one after Module by module gained PASSPORT continuous interaction with them ground. They took INfORmATION users made them realize potshots at user doubt and SySTEm ON NET that every new module was came back with pots-full of (PISON): 160 Indian missions designed with their needs in trust. Initially, explains Dr mind, and that changes were Shetty, they only introduced PISON DATAbASE SIzE: being introduced to make and computerized acceptance > 60 million their lives easier. “Although counters. This was where alphanumeric and the pilot took about 8 basic details were entered image records months, the first rollout and cash receipts were given PASSPORT took 2 ½ years,” admits Dr to applicants. APPLICATION fILES: 35 million Shetty. He attributes the At this stage, all that the delay to their decision to officials could do was tally TOTAL PASSPORT APPLICATION fILE ensure a smooth transition cash apart from preparing PAgES: from manual systems. cash and movement 500 million Today, if the NIC can boast registers. From the outside, of implementing an end-toit looked like a small step, end complete solution for but the success of this the issuance of passports — from online module was crucial in convincing users submission to dispatch of machine that computerization would drastically readable passports across the country — it is because this system to introduce new IT initiatives is still being followed. Another important thing that both NIC and the MEA have done is stick with a single person to head IT initiatives. While many government officials are transferred regularly — thereby derailing the IT implementation process — NIC’s Dr Shetty has been involved with the computerization of passport offices since 1989, probably because process reengineering e-governance projects in the MEA is part of his responsibilities. While he pooh-poohs the idea that he was personally responsible for the success of the project, his continued presence from the initial phase has played a significant role in ensuring the success of the project.

SNOWBALL EFFECT Success begets success — and in the case of thriving IT projects, it also leads to upgrades. “The pilot project was started using 386 systems with 8 MB RAM, the 52

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Project Management Xenix OS and Oracle 5,” recalls Dr Shetty. Today, the department is running Itanium servers with Linux and Oracle 9 in some offices. The OS and the capacity of the PCs are not all that have changed — while earlier applications were based on dumb terminals, the passport department has recently switched over to GUI-based Web browser applications in one of the passport offices at Mallapuram in Tamil Nadu. While upgrades are crucial for any system, botched upgrades can lead to downtime and user frustration, which — with a skittish workforce – could lead to a failed project. Therefore, the passport department ensured that the NIC team working on this project carried out the system upgrades only between Friday night and Monday morning — after office hours. Nobody can say that the upgrades were unnecessary. The passport department, which processed more than 22 lakh passports in 2001, saw the figure double to over 44 lakh in 2006. It is important to note that the passport department also has to maintain records of all the passports it issues. And just from 2001 to 2006, that’s almost 2 crore passports.

STAMPED FOR EFFICIENCY While computerization has benefited the passport department immensely, the chief beneficiary, as with all successful egovernance projects, is the common man. Dr Shetty says, “As per NIC’s mandate, efforts have been made to help the financially, physically and intellectually weaker section of society through the Passport Control Issuance System (PCIS). It increases transparency and decreases discretion while issuing passports.” Today, Indian citizens can apply for passports and follow up without having to visit a passport office. Further, by strengthening the monitoring of the issuance system, the NIC has reduced subjectivity while issuing passports. The system has also reduced waiting time for passports, besides enabling the passport department to issue error-free passports. One problem that the NIC faced was archiving old data for speedy recovery.

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towaRds shoRteR immigRation Lines Machine Readable Travel Documents lead to quicker service. In his address to the International Conference on Aviation in Bangalore in February this year, Dr. Taïeb Chérif, secretary general of the International Civil Aviation organization (ICAo), said that ICAo-standard Machine Readable Travel Documents (MRTD), including electronic passports, are an effective way of increasing security. But what are MRTD? According to the ICAo, a MRTD is an international travel document like a passport or visa, which contains both eye- and machine-readable data. Each type of MRTD contains, in a standard format, the holder’s identification details, including a photograph or digital image, with mandatory identity elements reflected in a two-line machine readable zone (MRZ) printed in optical Character Recognition-B (oCR-B) style. ICAo says that the global interoperability of MRTDs facilitates inspection of international travelers at borders and generally enhances security. MRTDs currently in existence include Machine Readable Passports (MRP) and Machine Readable Visas (MRVs). Today, all passports issued in India and 18 missions abroad are machine printed and machine readable. However, there are still over 140 missions where they are hand-written because low numbers make a complete system unfeasible. Not having passports created in a single location could however create a security hole. So, the NIC created a Web-based system that will enable the Indian mission to submit forms online. This allows the application to be processed and printed centrally at New Delhi and sent back through via courier. on another front, the NIC plans to create e-passports, which will see contactless chips embedded in the back cover of passports. This chip will contain data including digital photographs and signatures. At a later date, they plan to include biometric identification data (possibly fingerprints) on the chip. This, says Dr B.N. Shetty, senior technical director & HoD, External Affairs Informatics Division, will go a long way in speeding up immigration checks, besides ensuring that impersonators traveling on fake passports have a tougher time. — B.N.

They adopted a mantra to create a ‘less paper office’, which was achieved by scanning data of about 35 million passport application files, which translates to over 500 million pages. Apart from enabling easier retrieval of records, this also saved the passport department a lot of room. The NIC is not resting on its laurels. It has ambitious plans for the future, chief among which is the proposal to initiate, in 2007, central printing of passports for Indian missions abroad. The NIC is also contemplating the introduction of epassports on a pilot basis for diplomatic and official passports and upgrades of the

PISON (Passport Information System on Net) system to connect individual passport offices on a real-time basis. While the NIC can proceed with such plans at its own pace, there are other norms that are dictated from above. For one thing, the International Civil Aviation Organization (ICAO) has mandated that, as of 2010, all passports issued around the world need to be machine printed. And NIC will be there before the deadline — possibly even as early as 2008. CIO Special correspondent Balaji Narasimhan can be reached at balaji_n@cio.in

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Essential

technology Simulation software lets you speed up application development projects by using models. Early adopters have said goodbye to prototyping and gathering requirements on paper.And they’re pretty happy.

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From Inception to Implementation — I.T. That Matters

Development in the Fast Lane By Michael Fitzgerald

Simulation | In 2003, Citigroup’s mortgage lending group launched a new retail banking

product and then found itself mired in what would become 8,000 hours’ worth of software fixes and enhancements. That result wasn’t unusual, says Michael Chandler, director of user experience and product design in the consumer lending division of Citigroup’s North American IT unit. So, Citigroup decided to change its mode of operations for application development. One goal: improve the requirements definition stage and speed up prototyping, with the help of simulation software from iRise. The results: after Citibank’s mortgage division relaunched that retail application in November 2006, IT made just 120 hours of post-production changes, most of them minor. Chandler says that iRise clearly helped: “We’ve taken out paper-based prototyping and manual, text-based requirements, and moved it towards the electronic medium.”

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essential technology

Welcome to the world of software simulation, an emerging area of application development tools. Don’t think of flight simulators, though: think of CAD/CAM tools that eliminate paper-based tasks. Tools like iRise “allow you to build the simulation of what you’re going to get at a really low cost,” says Carey Schwaber, an analyst at Forrester Research, who calls poor requirements definition the root cause of bad software. IRise claims that it can cut requirements time in half and cut reworking time by 75 percent, numbers that Schwaber says sound reasonable. At a time when businesses are asking CIOs to help deliver innovative changes quickly, old-world application development schedules simply may not fly. Simulation tools, targeted mostly toward business analysts, offer a novel solution. They also fit in well with the agile programming trend.

Citibank ChangesTempo But simulation software, intriguing as it may be, won’t be a Band-Aid you can just slap on your current process. To pick up the pace of its software development,

Creating this culture in Citigroup IT was a big step forward, Chandler says, but IT found two big development inefficiencies remained — around prototyping and effective requirements gathering. As at most firms, prototypes came out of meetings where requirements were put down on paper. Models were also built on paper. “Paper prototyping is lengthy and it’s not connected to anything else. You prototype it and you throw it away,” Chandler says. The firm had previously tried to build prototypes using Microsoft’s PowerPoint and Visio tools, as well as coding in HTML and XML. But these were kludgy, as were the results. About 18 months ago, Chandler started looking at simulation tools, settling on iRise, a product that makes it simple to build prototypes of software interfaces and collect the associated requirements. (Helpfully, another group in Citigroup IT had been using iRise with success, and Chandler was able to forecast potential time-savings with the tool based on that group’s experiences.) His team started with five licenses on a 90-day trial basis, using the tool on several types of development

Requirements development is like four blind men describing an elephant.A simulation tool can fix that by forcing people to speak the same language. Citigroup went after its root problem in defining project requirements, which involved various business partners just “throwing requirements over the wall,” Chandler says. Developers got a large list of functional specifications, but lacked a sense of what the ultimate product should look like. Then, “when the production version comes, you’ve got 10,000 hours of changes,” Chandler says. So Citigroup adopted a user-centric design approach for all consumer mortgage lending products. Whether the ultimate users were employees or customers, their needs helped define the requirements of the project.

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projects, including a Web-based job, a client-server effort and even a mainframe project. Today, his group has 20 licenses in consumer lending and another 21 throughout other Citigroup divisions (and hosts the iRise server edition for other Citibank development groups.) The iRise tool has helped Chandler’s group of 34 usability engineers (whom he describes as business analysts, in effect) to work about 42 percent faster at creating requirements specifications, Chandler says. For prototyping, they’re now working between 66 percent and 80 percent faster, depending on the application.

Model Behavior Advice from the trenches on making the most of modeling software. Simulation software can add some welcome velocity to your application development efforts, but it’s not a bandage you can just stick onto the problem. You’ll also need to lay some groundwork with your people and examine internal processes — you won’t see the results you want. Here are some tips from early adopters: Shift your culture. Tools alone won’t fix a broken design process. Citibank had to start by rethinking its requirements definition process and leading a culture change to make sure business analysts designed with the software user’s needs in mind. Train your analysts. Prepare to invest time and money in order to get the tool in place. BMO Financial Group knew that if it didn’t train its analysts thoroughly in using simulation tools, they would not be able to effectively interpret the results with customers. “It’s not the tool which will solve the problem, it’s the process, and the quality of the people, their skill set,” says Jesse Hanspal, BMO’s director of development technology services. Establish a performance baseline. Develop metrics to show how your software development process worked before you started using the simulation tools. If you don’t have a measurement in place detailing your performance now, you won’t be able to measure genuine improvement. — M.F.

However, Chandler cautions that Citigroup’s shift to user-centric design means that it’s hard to say how much of the increased speed comes from iRise. “We spend more time on definition and design” than in the past, he says. Still, while he can’t say that they’ve cut project time in half, “we have reduced our post-production enhancements and fixes.” REAL CIO WORLD | m a r c h 1 , 2 0 0 7

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essential technology

BetterTalksWith Customers At Bally Technologies, a leading maker of equipment for the gambling industry, another simulation tool has helped IT pick up the pace as the company strives to create its next generation of products. Bally’s IT group adopted Serena Composer (originally made by Apptera) in February 2006 to help better define requirements in its application development process. Ron Beck, director of software development at Bally, says that Composer is turning doubters into believers in the IT group, by improving communication between IT and its internal business-side customers. “I can take the tool out to the customer, talk to them and model their process while we talk,” says Beck. “We put a user interface around each of their various functions and then we can say, ‘This is what you said, and here’s an interface. Is this what you want?’” The customer gives feedback while Beck, or more often a business analyst, is onsite. Beck or the analyst goes back to the software development team and the business team members who will be involved in developing the new product, and shows them the requirements and the model. At this point, they’ll do a technical assessment, then start the project. Since Bally uses an agile programming environment with 30day development cycles, this prototype process fits in comfortably. Bally Technologies has not been using the tool, which costs Rs 1.35 lakh per license, for long enough to have statistics on its ROI, Beck says. But he has his anecdotes from customer meetings, and he knows that his quick prototypes get his documentation team started on manuals weeks earlier than was previously the case.

Requirements Revamp At BMO Financial Group in Montreal, the IT group similarly hopes simulation tools can help improve its requirements process. BMO’s Jesse Hanspal, director of development technology services, calls his challenge the “elephant problem,” in 56

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TOOLBOX: Simulation Software What’s inside the new modeling tools for application development? Here’s a look at three early examples: iRise, Composer and Profesy. iRise Studio, Shared Server: Studio, a sophisticated modeling tool, is the most advanced in the bunch today. Customers use it for requirements definition, prototyping and early usability feedback, among other things. The company’s server software allows real-time collaboration and manages check-in/check-out of documents by various group members. Companion reader software lets business-side customers view models of applications. Serena Composer: Lower-cost modeling tool, not quite as robust as iRise, lacks the collaboration and group tools. Recently-added free reader software for its customers. Sofea Profesy: Similar to Composer, Profesy offers modeling tools aimed at business analysts. Sofea’s customers often focus on formalizing business processes and simulating how back-end systems will interact. Lacks free reader software.

— M. F.

reference to the old tale of blind men each of whom had their own interpretation of an elephant. Requirements development suffers from the same thing, he says: marketing, IT, the project’s users, the product managers, audit staff and other stakeholders all have their own perspectives. “The English language is better for prose and poetry than modeling,” says Hanspal. A simulation tool, on the other hand, can force people to speak the same language, by showing them a model of what they say they want, he says. So BMO has begun using the Profesy tool from Sofea. (Profesy costs in the range of Rs 4.5 lakh per license.) Hanspal says that Sofea helps him model entire software systems, to dynamically simulate what customers might see at a branch, for example. It will help reduce the number of software defects, he hopes, by improving the requirements process. Hanspal’s group is still in the early days of using Profesy, with just a few business analysts using it. Profesy has already sped up projects, Hanspal says, but he can’t say by how much, partly because the company

has only recently established a baseline of how it developed software previously. Concurring with Citigroup’s Chandler, Hanspal says that tools alone won’t ensure good requirements definition. BMO has also developed a training program to improve the skills of business analysts — a smart investment since the most expensive problems in software development boil down to poorly-defined requirements, Hanspal says. CIO

Send feedback on this feature to editor@cio.in

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Pundit

essential technology

Innovation's Cutting-edge: Collaboration Collaborative applications can move CIOs beyond being mere technology innovators. BY Elana Varon

collaboration | How businesses can use IT to harness the collective creativity of their employees is a hot topic. Tom Malone, a professor at MIT’s Sloan School of Management, recently launched the Center for Collective Intelligence to study the subject. He says, “One of the most interesting possible roles for CIOs going forward is to become organizational innovators.” I think Steve Bergman, CIO at Goodwill Industries and a winner of the CIO 100 Award, has a good story to tell about the collaboration process that lies at the front end of innovation — and the role IT plays in supporting that process. Goodwill is a big, decentralized organization that has a couple hundred affiliates in two dozen countries. Goodwill is known for selling donated clothing and household items, but it also provides job training and placement services. Business leaders around the company concluded that to facilitate growth, the organization needed a better way to share information Bergman says he didn’t set out to be an innovator. When he joined the organization, he interviewed many of the key business leaders asking them about their most pressing IT issues and how he could make the greatest impact. “Collaboration and knowledge sharing were at the top of the list,” recalls Bergman. The only tools employees had to locate and communicate with each other were email and the phone 58

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The portal has 80,000 users — more registered users than any other corporate application.

directory — which we all know have their limitations. So, Bergman looked for a portal application that could support both knowledge management and online learning. He talked to a bunch of vendors, but didn’t find what he was looking for. Buying the integrated portal from an established vendor would have involved extensive customization, since none of the portal vendors at the time could support both KM and online learning. Bergman figured that, after he paid for the licenses, there wouldn’t be enough money in his budget to build the necessary functionality. Then, someone on his staff found an open source portal distributed by Liferay. In collaboration with developers in the OS community, Bergman’s team created a new enterprise portal app, into which they integrated a commercial learning management application. They built the portal for less than the Rs 1.21 crore that was budgeted for it. Within the IT organization, two innovations occurred. First, there’s the software itself, which Bergman and his team built. Then, there’s the use of the open source development process. The internal development team had to get used to throwing requests out to the community when they needed help. But the bigger story is how this application is enabling business innovation within Goodwill. The portal, MyGoodwill, has

some 80,000 users company-wide who are tapping into it to develop new business initiatives — more registered users than any other corporate application. A recent example is an emerging computer recycling business that got a boost from a discussion on an internal listserv. “We have thousands of computers donated to us each year, a small percentage of which are so old that they can not be sold in our stores,” says Bergman. Member organizations around the US were recycling them, not only to dispose of them responsibly, but also because it offered a way to provide their clients with jobs and help fulfill Goodwill’s long-term goals. A recycling expert at headquarters pulled together a task group of members from around the US to share their insights about the recycling business. “They exchanged white papers about business models and promising practices through our knowledge management center. They posted questions to one another on the message boards, and they blogged about interesting aspects of the emerging industry,” Bergman says. The portal has been deployed for about a year. Bergman’s next step is to measure the impact that collaboration through the portal has on the business. But he notes that the shift to a collaborative culture is a long-term proposition. CIO Send feedback on this column to editor@cio.in

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