CIO July 1 2008 Issue by Sreekanth Sastry

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From The ediTor

At a recent Cio roundtable, some interesting facts came out. While most of the IT

Driving the Green Agenda Is it time for enterprises to feature Green IT in their priority list?

leaders agreed that pursuing a green technology initiative at their organizations was an idea ‘whose time had come’, not many ranked Green IT very high on their priority list. “We will go green as long as it helps us bring our costs down,” admitted a CIO friend. Many CIOs present at this roundtable opined that not every enterprise will pursue a ‘selfless’ kind of a Green IT roadmap, but would rather explore different ways to reduce power bills by choosing modular UPS systems and more efficient cooling systems for their data centers. “After we are done with UPSs and cooling systems, we could look at procuring green servers and networking equipments,’ said another CIO. As of now, the indian Green IT story does not seem to have matured to an extent, wherein, a CIO would look at procuring more energy efficient routers and switches, which account for less than 1 percent of the total power Green IT poses challenges for bill — surely not enough to raise any CIOs — from selling a Green eyebrows in an organization. project internally, to defining However, bigger enterprises with the real scope of going Green more complex and much larger data center needs, might still want to take a more holistic approach and drive the Green agenda across everything from desktops, servers, routers and switches to even UPSs, since even a 1 percent saving in their annual power bill would be very substantial. For instance, companies such as Mahindra&Mahindra apart from India’s third biggest software company Wipro are driving their Green agendas as enterprise-wide initiatives. From a strategic perspective, Green IT poses several challenges and opportunities for CIOs, ranging from how to sell a Green project internally, to defining the real scope of going green, and even sitting across the table with administration department for nailing the real culprits behind huge power bills. Meanwhile, for those who want to measure how energy efficient their data centers are, the Green Grid, an IT industry consortium has two metrics — power usage effectiveness and data center infrastructure efficiency. Do you think these metrics could be applied to your IT organizations? What role can IT play in driving an organization’s Green agenda? Write in and let me know your thoughts.

Pankaj Mishra Executive Editor pankaj_m@cio.in

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content JULY 1 2008‑ | ‑VoL/3‑ | ‑issUe/16

Business Intelligence I Pho PhoT T o by Sr SrII Va V aTS TSa a ShandI Shand I lya

COVER stORY | REFInIng CRuDE DAtA | 24 Every day, oil companies harness gushers of data to assess market conditions for a gallon of gas. Learn how they match the right tools with information to maximize profits.

CoVE Co VEr: r: dESIG d ESIG n by bI b I n ES ESh h S r E Edharan E dharan

Feature by kim s. nash Plus:

WhEn bI FuELs gROWth From a basic BI system that was started in 2001, Indian Oil Corporation has come a long way and is now changing gears to move to a structured BI platform. Feature by balaji narasimhan

CIO Role CIO PLus | 36 Expanding your job description can be good for your career, too — provided you master the politics and rethink how you run IT. Feature by stephanie Overby

Knowledge Management WIkI WhILE YOu WORk | 44 The technology popularized by Wikipedia can help companies gather and manage their own collective knowledge. Feature by Margaret Locher

Book Excerpt sAME busInEss, DIFFEREnt LEns| 50 The CEO of Shutterfly outpaced competitors by reimagining the online photo-finishing business to connect with customers. Feature by Jim Champy

more » 4

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content

Essential Technology | 53 Cloud Computing | Cloud Computing:Not Just Pie in

the Sky By Bill Snyder Open Source | Halt, Who Goes There?

By Bernard Golden

From the Editor | 2 Driving the Green Agenda

By Pankaj Mishra

NOW ONLINE

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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

Case File Small Doses of Hope | 32 No one likes a handout â&#x20AC;&#x201D; not the giver and not the receiver. But then how do you help the poor with loans, when the loans are so small that just servicing them will drive you out of business?

2 1

Feature by Kanika Goswami

Leadership Find Your Depth in the Supply Chain | 18 CIOs can make compelling candidates for chief supply chain officer. Four CIOs explain how they made the move. Column by Martha Heller

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Advertiser Index

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Rajesh Uppal Chief GM IT & Distribution, Maruti Udyog Prof. R.T. Krishnan Jamuna Raghavan Chair Professor of Entrepreneurship, IIM-Bangalore S. Gopalakrishnan CEO & Managing Director, Infosys Technologies Prof. S. Sadagopan Director, IIIT-Bangalore

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new

hot

unexpected

The CIO and the City license over an entire calendar year on the website's Wiki. While most city-based plans involve the city and nothing beyond, Saraph says that anybody from anywhere can be a part of this venture. “Pune is a global city. It has global citizens. Pune can choose what works for it and citizens are free to help designers shape what is relevant to them by participating,” he says. Will this project face any resistance from users? Saraph says that resistance comes from the absence of a shared vision or strategy. He feels that even corruption can be reduced if one succeeds in creating communities around shared visions. But, given that only around 15 percent of e-Governance projects actually deliver full benefits to citizens, what chances does ‘Design for Pune’ have? Saraph is of the opinion that the best way you ensure

success is to launch many projects. “’Design for Pune’ will launch many designs. You can expect many of them to succeed if you make sure you have many to bet on!” Saraph feels that another way to ensure success is by fostering rapid evolution. “I have launched an open vision for Pune 2015 on Punetech.com, which provides an opportunity for the vision to evolve and launch projects that are more likely to succeed,” he says.

IllUStratIon by UnnI krIShnan aV

Dr. Anupam Saraph is a different CIO in more ways than one — he is the CIO of the city of Pune. But, when it comes to projects and deadlines, he falls in the same frame as his peers. And one of the projects he is working on is ‘Design for Pune.’ It is a unique project that involves the people of Pune to better the city through a competition. The process, says Saraph, is simple, “Any individual, team or organization can participate in the competition by registering on DesignForPune.com. All participants will list their vision for Pune, the challenges they expect Pune to face and the strategies they would like to explore, on the site. A panel of judges will select the most promising entries for the competition.” Selected entrants will build their vision of Pune on SimCity and document their progress under a creative-commons

C o l l a b o r at i o n

—By Balaji Narasimhan

Quick take

Shankar Rao on New Jobs s t a f f m a n a g e m e n t CIO’s have to keep dealing with new recruits. It often becomes a challenge for them to familiarize new recruits with the organization, to enable them to contribute to the IT department effectively. Saurabh Gupta spoke to Shankar Rao, CIO, Sasken Communication Technologies and here is what he had to say:

What is the most common mistake that people make in their first 90 days on a job? In their first 90 days people are not really trained. Before they jump into anything, they need to understand the current set up and have a basic understanding of the network and operations of the company. Most new recruits don’t realize the importance of this exercise. What should a new recruits top five priorities be in the first three months on a job? The top priorities for a beginner would be to understand

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the business of the organization, figure out the business needs of the organization, work out its technology requirements, comprehend what applications are used in the business and grasp the key elements of the technology used in the business. How do you induct and familiarize a beginner in an organization? Apart from the detailed induction program that one goes through, this also depends on the level that one joins in. The individual has to be educated about the policy and culture of the company and then enter the department to comprehend current projects.

Shankar Rao

When is an appropriate time for a professional to tinker with the IT strategy of an organization? Definitely not in his early days. This can happen only after he has spent sufficient time to understand the company’s business and its current technical landscape and IT strategy. Only then can he think of tinkering with the IT Strategy. REAL CIO WORLD | j u ly 1 , 2 0 0 8

Hot Tech, Cool Chips

Should CIOs be Responsible for Business-Buy in? C i o r o l e CIOs are expected to be equipped with not just technical adeptness but also entrepreneurial astuteness in solving critical business problems. They need to cultivate cross functional expertise — getting business buy-in is one of them. But, because it lies outside the traditional domain of their duties, should CIOs be responsible for it? Sneha Jha asked some of your peers and here’s what they had to say:

“Yes. Business processes are increasingly taking the help of technological innovations. The CIO can play a very vital role in integrating with business process.” trendlines

pradip kumar mukhopadhyay VP-Systems, the oberoi Group

“If CIOs are not made a part of the decision-making body and business problems arise later, then they can only play a supporting role. It is always better if they play a leadership role. ” SubhaSiSh Saha Cto, apeejay Surrendra

“Absolutely. IT is not just an enabler; it is also a business driver. IT

should definitely go to business to sell them innovative ideas for increasing revenue, boosting sales and cutting costs. CIOs should have entrepreneurial capability to shoulder these responsibilities.”

Lend your

praSanta roy Senior Manager-It, Vodafone 12

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Voice

Write to editor@cio.in

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Researchers at Purdue University and Intel have developed heat dissipation technology that can boost the performance of chip-cooling systems by up to 200 percent. The researchers are developing ionic wind engines, devices that work with current air-cooling technologies like fans and heat sinks. The devices pass an electrical current to stir up stationary air molecules, leading to better air flow and dissipation of heat. "To date, we have demonstrated that the technology can enhance fan cooling by more than 200 percent," said Suresh Garimella, professor at Purdue University, who is also a researcher on the project. Current air cooling technology is attractive because of its cost advantages and ease of implementation, Garimella said. However, fans and heat sinks can't manage all the heat generated by chips. Ionic wind engines can be placed on a chip or a laptop to complement the current air-cooling technology to better manage heat dissipation, avoiding the need to switch to alternative, costlier cooling approaches like liquid cooling, Garimella said. "The ionic wind technology we are developing is designed to work in addition to conventional fan-driven methods, not necessarily as a replacement for current systems," Garimella said. Ionic winds are generated when electrically charged atoms stir up air molecules, which normally are stationary. When current flows from a negatively charged electrode to a positively charged electrode, it collides with air molecules, producing positively charged ions that move back toward the negatively charged electrodes, creating an ionic wind. When the ionic wind gets the air molecules moving, the air flow on the chip surface increases, leading to better heat transfer and dissipation. The engines are small enough to be fabricated on a chip or laptop and can be selectively placed depending on air flow, Garimella said. Portable platforms pose a challenge as there is limited space for cooling systems, he said. As chips become faster the amount of heat that needs to be removed increases, which increases the challenge to cool down a laptop and its surfaces, Garimella said. "We are currently dealing with challenges to demonstrate the viability of the technology at the micro scale, and these must be overcome before the technology can be brought to market, at least for the chip-cooling arena," he said. Garimella couldn't comment on when the technology will reach chips, but he noted some inherent advantages over alternatives like liquid cooling. "Although liquid cooling typically provides higher heat removal rates, air cooling technologies are cheaper to implement and by using ionic wind engines, their cooling capacity can be enhanced," Garimella said. —By Agam Shah

Chips

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CoMInG Soon: A LAptop in Your pocket

64%

62%

26%

22%

12%

Violation of company policy

Inappropriate and offensive language

Excessive personal use

Breach of confidentiality rules

Other

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Nearly a third of employers fired employees for abusing corporate e-mail, according to the 2007 Electronic Monitoring & Surveillance survey.

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InfoGraP hICS by PC anoo P

Every Move You Make

These increased capabilities will affect data centers as well, he said. When PC servers replaced some Unix machines, he said, skeptics complained that the new machines had problems. However, lower cost eventually led the smaller systems to replace larger ones where it made sense. Cockcroft expects the same to occur with what he calls ‘millicomputing’ — clustering extremely low-power chips on a board instead of a more conventional architecture that uses a few processors consuming more power and generating more heat. A theoretical design he outlined would place 120 ‘millimodules’ in the same space as a standard enterprise motherboard. There would be a 256MB RAM limit for apps in such an architecture, so such systems couldn't completely replace other systems in the enterprise, he acknowledged. However, considering that the cost of powering a server over several years can exceed the cost of the hardware itself, he argued, it makes sense to offload tasks to lower power systems when possible. —By Sharon Machlis

Source: american Management association and the ePolicy Institute

be permanently connected to a network of friends. Teens are already texting and social networking in an effort to constantly communicate, he noted. ‘Lifesharing’ would be a logical next step. The progress behind such advances isn't the overall boost in processing capabilities seen under Moore's Law, Cockcroft said, but the increasing robustness of lowpower chips and devices that use them. In other words: handhelds are advancing faster than laptops. For example, laptop memory capacity typically doubles every two years, while pocket devices are seeing such doubling annually. By the year-end, smart phones will likely have double the CPU power and RAM of current state-of-the-art offerings, Cockcroft said. Next year, 1Mbit/sec 3G networking will start being replaced by 20Mbit/sec speeds, and users could see 100Mbit/sec 4G by 2010. Faster networking speeds also help battery life, he said. In addition, wireless USB offering 480Mbit/sec in a small area is "perfect for phones," allowing easy wireless multimedia transfers.

trendlines

Your laptop is likely to soon go the way of 5.25-in. floppy disks, made obsolete by smaller, more useful technology: the smart phone. Based on current trends for low-power chips used in cell phones and iPods, we're likely to see eight times the CPU power in handheld devices by 2010, computer architecture enthusiast Adrian Cockcroft told the Usenix '08 technical conference. "I wouldn't need a laptop if I had that kind of performance," said Cockcroft, formerly a distinguished engineer at Sun Microsystems and currently a member of the Homebrew Mobile Club that designs open-source mobile phones. Instead, Cockcroft envisions an always-on device that can connect seamlessly to your car while you're driving, a desktop monitor and keyboard when you're working, and other devices such as a projection system at meetings. Such powerful handhelds could power what he called 'Computer-Assisted Telepathy' — permanent connections to alternate ‘worlds’ such as Second Life — as well as ‘lifesharing’, where people could

mobile Computing

B Y C . g . ly n C h

Best Practices

Consumer Tech: CIOs Remain Divided Over Adoption and Support

trendlines

to support, or not to support? CIOs are asking themselves that question when it comes to consumer or Web 2.0 technologies in the workplace. So far, opinions remain split around this issue, according to a CIO magazine poll of 311 IT decision makers regarding their views on consumer technologies in the enterprise. The survey found that two-thirds of respondents offer some type of consumer technology as corporate applications to their employees, mostly IM (50 percent), wikis (30 percent) or blogs (23 percent). Some 29 percent are monitoring the business case for mainstreaming such technologies. However, 54 percent of respondents believe consumer applications are 'inappropriate for corporate use,' while more than a third say they take the draconian measure of shutting down any unsupported technology as soon as they detect it. To understand which consumer technologies made IT executives cringe the most, we asked them: which consumer technologies pose the greatest threat to your organization? A clear consensus emerged on the number-one threat: portable storage devices. In fact, 43 percent of respondents believe external hard drives, iPods and USB devices pose the greatest security threat to their organizations. However, other technologies also worry survey respondents. Nearly one in five (18 percent) view consumer e-mail as the greatest consumer tech security threat followed by instant messaging (11 percent), social networking sites (nine percent) and smart phones/ PDAs (seven percent).

resist the urge to shut it down. blocking sites such as f facebook or consumer e-mail like Gmail doesn't stop workers from accessing those applications over their iPhone while at work. t talk to users to find out why they're using a consumer technology. Maybe they're using f facebook to connect with customers.

reevaluate usage policies. Dust off that user agreement you've had sitting in your filing cabinet since 1997 and update it to include things like iPhones, facebook and Skype. f

trust your users. In the end, employees are measured by their productivity. If they use IM to chat with friends, odds are you'll pick up on it.

A Tipping Point for Consumer Software? 47% prohibit the use of such software

9% allow

whenever users want them

% allow with IT approval

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Split DeciSiOn Opinions are mixed about consumer applications like Google or Zoho at the office.

% say consumer applications are not appropriate for corporate use.

46% would

allow if it were free or low cost and/or makes employees more productive.

Source: CIo research

DegReeS Of fReeDOm More than half of respondents let users find and use their own software applications.

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trendlines

i n t e r n e t Whether you're a social butterfly constantly seeking new sites to cross-pollinate, or a caterpillar creeping after your friends from one network to the next, you have likely experienced social-site fatigue by now. Even if your buddy lists consist entirely of people you actually know, keeping up with the endless stream of Flickr photos, Twitter tweets, and Facebook-dwelling zombie hunters is practically a full-time job. To put the fun back in friendship, social network management services — some of them still in beta — are rapidly evolving online.

Yoono is a browser plug-in designed to keep tabs on all your friends on most social networks, including AIM, Facebook, Flickr, Twitter, and Yahoo. Yoono sits in the left side of your browser window and alerts you when messages come in. It gives you a single place to go to post new blog entries, IM a friend, or poke someone who just has it coming. Other services add their own features to the social sites you visit. UK-based Rummble.com, for instance, lets you use a Google Maps-powered interface to record where you are and what you're doing, and post that info to Bebo, Facebook, Flicker, Twitter, WordPress, or YouTube. Sprout gives you tools for creating a customized widget populated with content from all your favorite sites, and then embedding your widget on your blog or your MySpace or Facebook profile. Oosah helps you manage the multimedia content you've spread across

the Web. This site gathers the pictures, video, and music you've posted to Facebook, Flickr, Picasa, and YouTube, and makes them accessible via a single interface. You can easily add and delete media to and from the various sites with a single log-on. Among recent trends in Web information management, mashup tools like Intel's Mash Maker may have the most potential for bringing your favorite sites together. This plug-in lets you build custom pages out of any content you find online, whether it's a buddy's profile or a news feed. The ever-expanding glut of social networking sites has become too much for most of us to manage, and it's unclear whether this year's batch of social site aggregators will actually solve the problem. —By Robert Strohmeyer

CEOs embrace disruption for Innovation Modern CEos are as much a force of disruption to your organization as market forces, George Colony, himself a CEo at forrester, warned CIos. Colony said the role of the CEo today is to not only ensure the lights are on all the time, but to challenge the company so that it will innovate. Colony has spent the last 12 months interviewing a wide range of CEos and asking them what their 'success imperatives' are. he distilled this down to a list of seven, which cover every imperative shared with forrester; getting and keeping the best people, collaboration, reaching global markets, increasing profits, building a positive culture, customers and innovation. a series of buzz words and terms were shared with Colony about the CEos role in 'embracing disruption.' Pointing to his list, Colony asked CIos what was missing. "no CEo mentioned technology," he said, adding that It has moved to become bt — business technology. "the list of seven does not include technology, it is technology," he said. "your your success imperatives must link with this list." y "the CEo is trying to retain stability, but they also stand for disruption and destruction, which is deep change. the clocks have to work, trains must run on time, but we must also change," Colony said. Cio role

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"Innovation and transformation are the two most over-used words in the world," Simon y yates, vice president and research director of forrester said. "your your CEo wants it from you and y they want it badly because there are so many pressures facing them from economic forces, rising gas prices etcetera, that investors are going to be less patient. Innovation is the answer for all businesses." forrester research director alex Cullen warned that the latest wave of technology is set to pose a threat to CIos and their departments. "technology technology is moving beyond the traditional It t model, which is that technology is complex, hard to assemble and operate and requires specialists." Cullen said that CIos can prove their worth with innovation driven from the existing technology and services the organization has. he cited German travel operator tUI, which recently launched a system that allowed its retail staff to log on to the call center phone system and take calls when the retail side of the business is slow. the result has been decreased pressure on the call center and increased customer service.

—by Mark Chillingworth Vol/3 | ISSUE/16

IllUStratI on by MM Shan Ith

Web apps pps to the rescue

Stuck in the UC Maze C o m m u n i c a t i o n Most small and large enterprises are uncertain of the benefits of a unified communications implementation, according to a recent survey of 2008 networking plans from Forrester Research. Fifty-five percent of the 2,187 North American and European companies queried said there is confusion about the value of unified communications for their company. Only 11 percent of the firms have already deployed it. Another 16 percent are rolling out and 57 percent are evaluating or piloting it, Forrester found. "We were not surprised," says Forrester analyst Ellen Daley, author of the survey's report. "There's been a 21 percent increase in UC pilots since 2007, but no increase in firms buying UC. A lot of people are talking about UC, a lot more are tipping their toe in; but at the same time they're all saying they're not sure about the value," she says. Daley says Forrester receives inquiries from clients regularly asking simply: what is UC? "Because they're not able to define it very clearly for themselves and the supplier landscape is confusing, that translates to confusion about what it does for their company," Daley says. "It's hard to prove that ROI right now." Companies understand the components of unified communications — VoIP, unified messaging, presence, multimedia conferencing, collaboration, and so forth — but the value of the overall pitch is vague, Forrester found. The impact on the growth of the unified-communications market will feel the uncertainty, Daley says. "We don't think there's going to be conversion of these UC evaluations and pilots into full blown investments in the next 12 to 18 months," she says. "We think there's enough confusion in the marketplace on value, features and [marketing] that we're going to see very long evaluation and pilot periods." UC does have the potential to mirror the wireless e-mail industry, Daley says. But for now, unified communications is not priority No. 1 for enterprises in 2008: mobility is. Sixty-four percent of respondents say that providing more mobility support to employees is a priority, with 23 percent citing it as a critical priority. While one-third to over one-half of the firms surveyed, already use in-house wireless LAN and public cellular data, the greatest interest in adoption lies with WiMAX (54 percent), which only 9 percent of firms use now. Wireless e-mail or BlackBerry and personalized contacts and calendar still top the list of mobile applications that are deployed fully at firms. However, customer-facing applications are gaining ground, as 12 percent of firms are rolling them out and 27 percent are evaluating or piloting them, Forrester found. Unified

IT Departments Waste Energy

Il lustrat ion by pc anoo p

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trendlines

S u r v e y IT managers have been accused of ignoring green issues after a new survey from international consultancy group Morse revealed that 89 percent of businesses have no idea how much energy the IT department uses. Analyst group Gartner said that the IT industry is responsible for 2 percent of global CO2 emissions, the same amount as the airline industry. The Morse survey, questioned over 100 IT Directors in the United Kingdom. It found that 76 percent of companies have set no targets for reducing the IT department's power usage, and that 63 percent of organizations claim to have a strategy to become more environmentally friendly. Yet according to Morse, ignoring the IT department's power use suggests that many of these green strategies are little more than hot air. Sixty-two percent of organizations said that green IT was not a top priority and only 24 percent of organizations said they are working towards a set energy reduction target. "This survey is a realistic snapshot of the IT manager," said Tim Turquand, consultant at Morse. "IT managers don't have an idea of how much their data center is costing them." "The survey clearly shows that IT departments do not know about their electricity bills," he added. "Green IT strategies are just not aligned to any business strategy at the moment. For example, most businesses have recycle bins for printer cartridges and or paper, but they forget about their 20,000 square foot data center which is the biggest pollutant." "If they don't know what their power consumption is, how can they expect to reduce it?" Turquand asked. The problem, according to Turquand, is that currently the electricity bill of a company is traditionally paid by the central facilities or operations group, which gives IT departments very little visibility into how much power they consume. —By Tom Jowitt

—By Jim Duffy REAL CIO WORLD | j u ly 1 , 2 0 0 8

6/27/2008 9:48:57 PM

Martha Heller

leadership

Find Your Depth in the Supply Chain CIOs can make compelling candidates for chief supply chain officer. Four CIOs explain how they made the move.

Illust ration by MM Shanit h

ask every CIO I talk to, the same question: do you want your next job to be another CIO role or do you want to move out of IT? Roughly 40 percent, I find, want out. While many in this group yearn to start their own company or move directly into a CEO role, the majority see future happiness as a COO. They know that the role bears some similarity to their current job but has a broader scope of influence and presents a meaty new set of challenges. There are a number of career paths from CIO to COO. One of the most promising involves managing the supply chain. "The move from IT to supply chain leadership is beginning to happen on a broader spectrum," says Mike Hugos, former CIO of Network Services Company and author of Essentials of Supply Chain Management. "Traditional IT, as we've known it for the last few decades, is being outsourced and CIOs are being downgraded to reporting to COOs and CFOs. With technology as a leading concern for supply chain leaders, CIOs are poised to step into the role and report directly to the CEO. The move gets the CIO a highly visible role and a seat at the boardroom table." With their experience automating the supply chain, managing a slew of vendors and negotiating a complex set of contracts, CIOs can make compelling candidates for chief supply chain officer. Four CIOs who have made the move share their experiences and offer advice for those interested in making the transition. In 2005, George Chappelle left his role as CIO of H.J. Heinz to join Sara Lee as its new CIO. Nearly three years later, he became chief supply chain officer of Sara Lee's North American operations. "I had some previous experience in supply chain before coming to Sara Lee as CIO," he says. "As we implemented

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Martha Heller

leadership

SAP, we touched parts of supply chain, like inventory control, so I had gotten to know the supply chain through that project, as well."

What to Expect All operations, all the time. "Ninety-five percent of what I do now is operations," says Chappelle. "Outside of an annual operating and long-range plan, we're plotting the future in days and weeks and following an awful lot of numbers." While transaction processing and the data center have exposed CIOs to their share of operations, "the supply chain role is completely different; success is no longer measured in 12- to 18-month intervals," he says. A smaller geographical footprint. While most largecompany CIOs run a global organization, many chief supply chain officers do not. "Food companies do not lend themselves to a corporate chief supply chain officer because food is sold by regions," says Chappelle. "As CIO you have the opportunity to interact with every geography; now my focus is North America." In 2005, Keith Kaczanowski was CIO of Brady when the company needed someone to spec out a plan to source products from Asia. Kaczanowski was ready for a change, so he took on the role of VP of supply chain management; he now runs global sourcing for a group of newly acquired businesses.

What to Expect One step closer to the action. "IT is an enabler to the rest of the business; it impacts results but at a step removed from the P&L," says Kaczanowski. "In my supply chain role, I am measured on specific cost-reduction targets, workingcapital improvements, inventory improvements and newproduct introductions. I like having accountability for targeted operating results and being closer to the action." One step farther from the action. While supply chain leaders may be closer to the company's P&L, they are farther away from what takes place in the enterprise. "I find that I know more about the part of the business I'm in but less about the parts that I'm not," says Kaczanowski. "When I was in IT, I enjoyed knowing a lot about the entire company." When Wesco International acquired Communications Supply in 2006, Mason Rotelli, who had been CIO for eight years, added supply chain to his role. Two years later, as the parent company was absorbing portions of IT, Rotelli moved out of the CIO role completely and became VP of supply chain management. "I was excited about the opportunity to be more deeply involved in the company's P&L," he says. "Considering our cost of goods sold is 80 percent of what we sell, supervising our spend is pretty important."

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Your CIO background is an advantage. CIOs who deliver quality IT services will certainly earn the respect of the executive committee. What to Expect All vendors, all the time. "I spend most of my time developing relationships with hundreds of suppliers, learning to position them in the marketplace, understanding their ability to be successful, establishing performance-based contracts and negotiating terms," says Rotelli. "CIOs who do not enjoy their time with suppliers will probably not enjoy this job." More execution, less design. While as CIO, 'execution' has to be your middle name, you still spend plenty of time on strategy and design. "I now manage purchasing and inventory management people, who are more execution-focused," says Rotelli. "If you love the creative side of IT, you may miss that in supply chain." In 1991, Allen Dickason, then IT director at Frito Lay, took advantage of PepsiCo's leadership program and accepted an assignment as VP of distribution for Frito Lay. After returning to the IT organization, and after CIO roles at Dean Foods and Kinko's, he became SVP of supply chain for Brach's Confections in 2004.

What to Expect Your CIO background is an advantage. While CIOs will have a steeper learning curve when it comes to the weights and measures of raw materials, they will also have an advantage. "As a supply chain leader with a CIO background, you have a broader and more complete understanding of how your business and its systems work," says Dickason, who left Brach's in 2008 to do IT and supply chain strategy consulting. "When my suppliers struggle with their own technology issues, my systems background is a help to them. It allows for a better partner relationship and a smoother-running supply chain." Executive committee credibility. CIOs who deliver quality IT services will certainly earn the respect of the executive committee. But move into a supply chain role and "the general managers and presidents see a different side of you," says Dickason. "The fact that you are multifunctional increases your value to the organization dramatically and matures you as an executive." CIO

Martha Heller is managing director of the IT Leadership Practice at the ZRG, an executive recruiting firm in Boston. Send feedback on column to editor@cio.in

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Bruce J. Goodman

Peer-to-peer

Your Bond With Business Humana CIO Bruce Goodman learned how to reap financial results from IT by understanding in detail the ways his company makes money.

Il lustratio n by unnikrishn an AV

hen I started in IT at MetLife in 1970, my background was as far away from insurance as you could possibly imagine. I was an engineer and studied toward a doctorate in solid-state physics. I decided that to succeed, I had to understand what made the business go and what contributed to the top and bottom lines. So, I took the same courses that somebody who sells the product needed to take, and I passed 10 different exams to become a chartered life underwriter. Once I understood how we created and sold insurance products, I knew I could use technology to influence business results. This orientation toward business results â&#x20AC;&#x201D; driving new sales and productivity, increasing customer retention, reducing administrative costs and increasing profit â&#x20AC;&#x201D; became my success formula for creating value with IT. MetLife was the first large life insurance company to automate its sales offices, and it gave us a competitive advantage. At the time, a lot of people were skeptical of the initiative, but because of my knowledge of how agents made sales, I was able to make the case to the executive vice president of individual insurance operations on how different the world would be if we took advantage of then-emerging minicomputers to move systems out to the sales offices.

It's All About the Numbers By far, the largest expense in the insurance business is paying claims. The obvious question becomes, 'how can IT help the business drive that cost down?' When we do so, we drive those savings right to the bottom line. The impact can be measured in the millions of dollars.

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Bruce J. Goodman

Peer-to-peer

The folks at MetLife told me, 'If you want to be CIO of the company, we want to see you run a business.' They gave me a business that was losing money and told me to make it profitable. If I succeeded, I'd get to be CIO. For a health plan like Humana, we accomplish this by providing integrated tools that offer transparency to patients about their healthcare utilization, its costs and options they can discuss with their doctor (such as the potential to switch to a lower-cost, generic drug). We implemented an IT-enabled program called 'Maximize Your Benefits' that creates value both for our members and the company. We use outbound automated calling, personalized monthly statements and pop-up customer care screen alerts to advise our members of opportunities to switch from a brand-name medication to a lower-cost generic drug. We also let members know that they could save money using our mail-order facility to fill recurring prescriptions instead of going to a pharmacy. We then use analytics to measure the results â&#x20AC;&#x201D; for example, by tracking whether individual members took our recommendations. We can see which type of message is most effective in changing behavior, and we can calculate the savings. The results have been significant and are directly attributable to IT.

Learn How to Run a Business How do you learn to key into business drivers and results? Probably the best training is to run a P&L yourself. When I had gone through a few different IT roles at MetLife, the folks there said to me, If you want to be CIO of the company, we want to see you run a business for two years first. They gave me a business that was losing money and told me to make it profitable. If I succeeded, I'd get to be CIO (and that's what happened). Through that experience, I learned first-hand the pressures of responsibility for business results and what it takes to make a business viable and healthy. You could run your IT organization as a business within a business. Deliver IT services, pitch your products, make your numbers. You may never sell your company's product, but you should understand selling and budgeting. You should also report to the CEO and have a seat at the table. As a member of the Humana executive committee I hear about all the important issues the company is facing. While I'm listening to my colleagues I'm thinking about and responding with ideas for how IT can help. If you aren't at executive committee meetings, you can get yourself on the distribution lists for internal reports about business results, and you can network with your fellow businesspeople to understand their issues. If you report to the CFO, you can still cultivate a businessresults focus. In fact, this is an area of common ground with your boss since the CFO is the master of business results. At 22

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Humana, if we in IT have an idea, we have one of our financial analysts within IT review its potential costs and benefits and determine what the results of a pilot would need to be, to justify further investment. If you don't have your own financial people, borrow one from the CFO's organization. Then the CFO will know you are serious about finding out whether your ideas make business sense.

Get Results, Help Your Career I have no doubt that business competency and a focus on results is a boon to any IT executive's career. First, it makes a huge difference in how the CEO views you. If the CEO sees the IT head as a technologist who is not an active partner in trying to achieve business results, that CIO is probably not going to have a long-term future at that company. He'll get out of step with business goals and people will complain that they can't get what they need out of IT. Second, a strong results focus positions you for further opportunities. In addition to my CIO role, I also run the entire service operation at Humana, a combined organization of about 10,000 people. The services group is responsible for controlling administrative costs and also, through operation of our call centers, has a big impact on customer retention. I got this role because I made the case that if IT and service operations reported to the same person, we'd work better together to define priorities and deliver systems that drive results. In companies where IT and services are separate, IT is only responsible to deliver the project while the operations group is responsible for requirements and deriving the value. That can lead to finger pointing if the payoff doesn't go as expected. One word of caution: it's possible that a CIO can become so business focused that he or she doesn't pay enough attention to executing reliable IT service. You have basic blocking and tackling responsibilities that you can't ignore. You can delegate that, but you still have to ask the right questions of those to whom you delegate and make them show you their metrics. Looking back at my career, there are three things that I believe have been essential to my success: understanding business processes, knowing where the leverage points are to improve top- and bottom-line performance, and developing strategic partnerships with the business. By focusing on these areas, any CIO is positioned to fulfill a strategic role. CIO Bruce J. Goodman is senior vice president and chief service and information officer at Humana, and is a member of the CIO Executive Council. Send feedback on this column to editor@cio.in

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Every day, oil companies harness gushers of data to assess market conditions for a gallon of gas. Learn how they match

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Cover Story | Business Intelligence

by Kim S. Nash

Crude is trading at all-time highs — above $140 (about

Rs 5,600) a barrel. And oil and gas companies are booking fat profits. In May, Exxon Mobil reported Rs 43,600 crore in profits for its latest quarter, just short of its record-breaking Rs 46,800 crore the quarter before.

It's tempting — and politically expedient — to explain such astounding numbers by saying that greedy oil companies are taking advantage of market fears, making money on the bent backs of corporate and individual consumers. So many of us, after all, have no choice but to buy fuel. We fill our cars to drive to work, where buildings must be cooled, supplies must be shipped, products trucked and executives jetted hither and yon. Yet economists will counter that taking advantage — spotting a Reader ROI: revenue opportunity and moving on it — is exactly what companies How BI can be should do: that's capitalism. Oil companies excel at identifying where instrumental in their profit advantage lies. And they obtain that advantage through interpreting data sophisticated business intelligence systems. Why a structured BI Without good BI, oil companies risk their livelihoods, says David platform is vital Knapp, a senior editor at the Energy Intelligence Group, an information How BI can help predict provider for the oil industry. "Those that have lagged in understanding finances of your company have lagged in performance," Knapp says. And BI is all about

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Cover Story | Business Intelligence understanding what makes your company — and your industry — thrive. Oil companies have always lived and died on BI, says Gary Lensing, VP and CIO for global exploration and production at the Rs 1,280 crore Hess. "Data drives what we do, always quantifying where that value is." Hess and its competitors harvest data from inside and outside their four walls, plus they factor in wild cards such as war, weather and global politics. BI in oil and gas isn't a simple matter of buying a set of analysis tools and feeding data into them. Oil companies pass information through multiple layers of software, with nearly every employee focused on collecting and storing some kind of data. Exxon, for example, wants its geophysicists to know Fortran, C and Java so they can code their own, quick analyses. When Hess drills a well, Lensing says, engineers collect status data every 15 seconds. But to get a global view of company performance, data must be fed into off-the-shelf BI analysis and reporting packages familiar to most CIOs, such as those from Cognos or SAS Institute. Then the companies add supplychain information. SAP for Oil & Gas modules manages the supply chains at companies like Hess and Valero. Those companies also use at least some of SAP's analysis and storage applications, including Business Warehouse. Oil companies store data in both common databases, such as Oracle, and specialized ones for the oil industry, such as OpenWorks or StratWorks from Halliburton. When it comes to BI, Big Oil has a big view. "We're not as transactionally driven as other industries," Lensing says. "Are you trying to gain operational efficiencies by squeezing pennies out of transactions, or are you looking at core assets and trying to extract additional value?"

P hoto by Srivatsa Shan di lya IMAGING BY ANIL T

Factors in the Price of Gas Old-timers called oil ‘Texas Tea,’ but the US oil industry really started in Pennsylvania, with the 1859 discovery of light crude burbling between rocks in a farmer's creek. People at first used it to grease machinery and light lamps. Fifty years later, rigs pumped black gold from wells across the country and fortunes were made. Now, as then, oilmen cagey about their claims don't say much about what they know. But some will talk about how they know it. In an industry where the top five oil companies last year booked Rs 6,000,000 crore 26

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From a basic BI system that was started in 2001, Indian Oil Corporation has come a long way and is now changing gears to move to a structured BI platform. It stands looking skywards at Rs 5,600 a barrel. A surge of inflation – and that one-drop of oil has just become a lot dearer than it ever was. The petroleum sector in India is a little strange — while nobody questions the demand, you can only sell at a price that is fixed by the government. Added to this, is the fact that customers can buy the same product from any of your competitors at the same price. Then, the obvious question that haunts someone who is an integral part of the petroleum industry, among other things, would read: how do I make my company gain a competitive edge?’ IOCL seems to have found its answer. Otherwise, how does one explain this steep rise in sales? The company’s figures speak for itself. It sold 59.29 million tons of petroleum products during 2007-08, as compared to 54.84 million tons in 2006-07. The profit after tax was Rs 6,963 crore after considering the compensation of Rs 18,997 crore in the form of oil bonds issued by the Government of India. If that sounds like great statistics, here is another — IOCL’s gross turnover, inclusive of excise duty, touched Rs 247,479 crore, up by 12.1 percent as compared to the previous year’s Rs 220,779 crore. But, the question still remains: what exactly did the company do? It turned to BI. “This goes back to 2001 and it was conceived as a decision support system (DSS). We had realized from the very beginning that once SAP gets stabilized, transaction processing would not be the only requirement of the system. We were determined to exploit the SAP database for our decision aiding process,” says Swaranjit S. Soni, executive director for information systems & CIO, IOCL. But, as simple as that sounded, it wasn’t smooth sailing. The implementation brought with it a new set of hurdles. It was a time consuming process. SAP itself was a complicated implementation, covering as it did 700 locations. Once they had SAP in place, the IT team at IOCL had to implement an add-on optimization package for SCM. After this, the DSS

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Cover Story | Business Intelligence

was implemented. In its infancy, the DSS was in the form of structured useful reports, developed in-house by Soni's team. The hard work paid off. He says his DSS goes far beyond a traditional SAP system that is used only for managing transactions. “We are not talking about reports for transaction processing,” he reiterates strongly, “the reports I am referring to are pointed and focused reports for decision support.” Even today, the system is helping IOCL immensely. “Our approach helps us optimize procurement, thereby ensuring the best product mix, lowest logistics cost, and maximum gross margins,” says Soni. But being a frontrunner in the oil industry, IOCL realized that it couldn’t afford to rest on its laurels. It had to move with the times. Which is why, it is in the process of putting together a new structured BI system based on the existing system. “Our IT re-engineering project is called ‘Manthan’ (churning) and this mythological name itself suggests discovery of ‘amrit’ (nectar) from the churning of the ocean,” says Soni. Under the new structured BI platform, existing reports will be more visually appealing with interactive graphics and dashboards. The existing system takes care of demand forecasting, among other things. Soni says that this is based on a custom model. “This is the starting point for integrated planning through our optimization model and forms the base for our long term investment decisions. It also forms the base for our marketing strategies.” This system also enables IOCL to handle crude procurement, arrive at the right product mix, and manage inventory. Soni says that a crucial part of the exercise that ensures that IOCL is king of the hill — competition analysis — is currently collected on a monthly basis from industry performance reports and this process is not currently under the ambit of the SAP system. So, will the new system help IOCL stay ahead of competitors like Reliance Petroleum, Bharat Petroleum, and Hindustan Petroleum? “To maintain and enhance market leadership,

management must have access to various forms of data like historical data, projected data; data that is capable of interpolation and analysis, and data that is easy to access and visually appealing. Armed with these tools, we can definitely excell,” Soni points out. “We are happy that our IT group has discovered the ‘amrit’ with the DSS system, and the journey will continue with the structured BI system,” says Soni. With soaring profits and an effective BI system in place, India’s energy major registered a growth of 8.7 percent in 2007-08. Today, IOCL stands tall with its head held high – proving that it’s not just the oil prices that can skyrocket. Not when your BI mantra is ‘value for knowledge’. —Balaji Narasimhan

"Our approach helps us optimize procurement, thereby ensuring the best product mix, lowest logistics cost, and maximum gross margins," says S.S. Soni, Exec. Dir. Information Systems & CIO, Indian Oil. Vol/3 | ISSUE/16

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Cover Story | Business Intelligence in sales, thieves target that intelligence. In February, Petrobras, the Rs 4,48,000crore state-owned oil giant in Brazil, had four laptops and two hard drives stolen. They contained ‘secret and important information,’ the company told Brazilian news outlets, about an ocean reservoir that in the next few years could produce up to eight billion barrels of oil. Brazilian police are said to be investigating. Geologic information like the sort believed to have been stolen from Petrobras is one piece of the ‘upstream’ part of the business, where companies and countries explore and drill for oil deposits deep in the earth. Analysts combine geologic and seismic data with what-if engineering models showing how best to get the oil out and the projected costs of such a multi-year project, explains Louie Ehrlich, CIO and president of Chevron Information Technology. Then there is the ‘downstream’ work of refining crude oil into something usable, such as gasoline or diesel, and of getting those products sold and delivered. Those jobs generate information on refinery capacity and throughput, and the cost of marketing and distribution. Exxon and Chevron, the biggest oil companies in the United States, are known as ‘integrated,’ meaning they work both the upstream and downstream ends of the business. Petrobras does, too, though Ehrlich points out that no company is perfectly integrated, meaning that what it finds in the ground does not always ends up in its own refineries. Chevron might find crude that its refineries don't handle, he says. "Some types of oil require more complex refining capability to process." Chevron produces about two million barrels of oil

per day and only refines about 15 percent in its own refineries. Upstream usually costs more than downstream. Exxon, for example, spent Rs 62,800 crore on upstream jobs in 2007. Chevron, Rs 62,000 crore. But downstream costs stack up, too. Exxon's were Rs 4,400 crore and Chevron's Rs 13,600 crore. Prices at the pump reflect these expenses. In the US, the cost of crude oil constitutes most of the price of gas, accounting for 73 percent, according to the US Department of Energy. Refining, meanwhile, is 8 percent; so is distribution and marketing. The remaining 12 percent goes to state and federal taxes. Each oil company analyzes its costs and potential income, says David Smith, an IT consultant to the oil industry at Electronic Data Systems, trying to profit at each step (except for taxes, which are fixed). Traditional economic principles of supply and demand alone fall short when you try to forecast prices, Smith says.

Big Oil's Big Picture After oil, the best kind of gusher to discover and manage these days is data, and therefore profits, in real time. That's what Hess is after. For the past four years, the Rs 1,280crore integrated oil company has been building BI systems to trace and interpret data from start to finish in as close to real time as possible, says Lensing. The idea is to be able to see activity at all its assets in Norway, Denmark, the UK, the US, Thailand and Africa. Are its four fields in Equatorial Guinea producing as expected today? Is the refinery in New Jersey running at capacity, or can it take in more

barrels of oil before the end of the month? What have sales at its 1,370 gas stations been since last Saturday at noon? No one business intelligence product can do it all, though. For financial analysis, Hess mainly uses tools from Hyperion, which Oracle bought last year. To estimate how much oil or natural gas its wells can produce, the company develops a model of the reservoir terrain based in part on readings from bouncing seismic waves in the area. For a look at patterns in well production, Hess runs a tool popular among pharmaceutical firms called Spotfire, from Tibco. Spotfire lets analysts visualize data by producing graphs, charts and other pictures, into which users can drill down with queries. One of the real-time parts of the BI chain is well data. An engineer in Houston can monitor drilling activity in West Africa, see an anomaly in how the drill bit sinks into the ocean floor and can send that data over satellite to a geoscientist in Houston, who can view it and e-mail a recommendation on how to adjust the machines, Lensing says. "The ability for people on a platform to communicate with people in the home office and work on the same set of data means we can get more production done faster and more accurately," he says. "How you choose to analyze the data and the decisions you make — there's your competitive advantage."

The Cost of New Business For Petrobras, an oil field discovered off the coast of Brazil could become the world's third biggest, after one in Saudi Arabia and another in Kuwait. The potential bounty: 33 billion barrels.

BI in oil isn't just buying a set of analysis tools and feeding data into them. Oil companies pass information through multiple layers of software — almost every employee is focused on collecting and storing some kind of data. 28

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India

Share of World's Total (%) 2007

Production

Former Soviet Union to Europe and China 6,726 barrels

Europe to US and Canada 408 barrels

Canada to US 2,426 barrels

2006

Consumption

3.3

3.1

Reserves

0.4

0.5

Refinery Capacity

3.4

532 barrels

Top 10 Consumers

1,038 barrels

Share of world's total %

'000 barrels/ day

USA

23.9

20,698

China

9.3

7,855

Japan

5.8

5,051

India

3.3

2,748

Russia Federation

3.2

2,699

Germany

2.8

2,393

Country

Mexico to US 1,533 barrels

N Africa to Europe 1,923 barrels

South and Central America to US 2,592 barrels

Middle East To West Africa to US 1,933 barrels

Europe 2,957 US 2,218 Africa 772

Japan 4,032 China 1,587 Singapore 844

Largest inter-area oil movements by volume. Barrels per day.

InFoGRAPhICS By An Il T

Source: British Petroleum, Financial Times

That's an unofficial estimate attributed in April to Brazil's National Petroleum Agency. Petrobras officials decline to confirm it, insisting that more testing must be done. Olinto Gomes de Souza Jr., a senior geologist there, is helping analyze some of the test data. After four years of exploration and computerized modeling, the company last November announced that it had hit oil 6,500 feet beneath the ocean surface and another 16,000 feet into the ocean floor. Now proof drilling continues, boring through rock and salt layers atop the oil. At each centimeter, Petrobras looks at 10 to 12 variables, including temperature, pressure, and weight of rock and sediment. Stored in an Oracle database, the information is queried with analytics software from SAS Institute. After geologists assess the information, it's sliced and diced against financial realities. "The amount of money we spend is very high â&#x20AC;&#x201D; $100 million (Rs 4,000 crore) for a well alone," de Souza says. "We want to get it right." To reach its goal of becoming one of the five biggest oil companies in the world by 2020, Petrobras has to take some calculated risks. "No company has tried to explore

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under it," he says. But promising data has triggered major staffing decisions: Petrobras has created a new group of senior managers to oversee exploration of this area and plans to hire 14,000 drillers, geologists and engineers. It takes years to go from initial exploration to crude oil production and sales of finished gasoline. They use a mix of their own intelligence and public data, such as from the Energy Information Administration (EIA). Although demand for gas is growing in China and India, so far it's not enough to offset the expected drop in US demand. New well and rig technologies could take some of the cost out of drilling, but no one knows exactly when or by how much. There is no shortage of data points; the value is in interpretation. "It's about filtering rather than finding a piece of information," he says. "Understanding what this whole pile of stuff can do for you is the key."

Adjusting to Change Every Wednesday morning, the shouts and hand gestures that make the Nymex trading floor in New York frantic begin to calm. Petroleum traders are waiting for the release of data from EIA on countries' inventories of crude oil and gasoline, as

South Korea

2.7

2,371

Canada

2.6

2,303

Saudi Arabia

2.5

2,154

France

2.3

1,919

Top 10 Refinery Capacities well as world Share of '000 crude prices. Country world's barrels/ At 10:30 am, total % day the EIA's website USA 20 17,588 sees a storm of China 8.5 7,511 activity: 1,000 Russia 6.4 5,583 page views per Federation second for 15 Japan 5.2 4,598 seconds, says India 3.4 2,983 Charlie Riner, a lead analyst South 3 2,668 Korea for the site. Oil Germany 2.7 2,390 companies, Saudi 2.4 2,100 c o m m o d i t i e s Arabia traders, analyst France 2.2 1,959 firms, and Canada 2.2 1,919 government agencies in the United States and other countries have written bots to collect the data. Then traffic ebbs. Inventories are the most closely watched data in the industry, says Joanne Shore, a senior petroleum analyst at the EIA, the statistics keeper for the US Department of Energy. "This is what moves markets when it comes out," Shore says. If, for example, US supplies fall sharply from the week before, that can mean demand is rising and prices likely will, too. It's not only traders REAL CIO WORLD | j u ly 1 , 2 0 0 8

Cover Story | Business Intelligence who want this data. Corporations such as Valero fold it into its analysis of inventories and market activity so that they always know their standing compared to rivals. In the oil and gas business, you are what you own. The amount of crude waiting to be refined, or the alreadyprocessed liquid in storage tanks ready to be sold and delivered, represents much of a company's value at a given moment. As a refiner, Valero buys barrels of oil to heat and pressurize into other products, such as diesel fuel, asphalt and lubricants. The Rs 3,80,000 crore downstream company owns 17 refineries that together can produce 3.1 million barrels of product per day. But Valero doesn't sell that much in a given day so it must store finished goods until they're ready to be shipped to customers. The company tracks its own inventory movements. Market analysts run inventory reports "a few hundred times a day," says Kirk Hewitt, vice president of accounting processing optimization. As the cost of crude fluctuates during trading hours, Valero sales and marketing staff want frequent updates so they can sell products at the most profitable price and buy crude to feed their refineries at the best price. "We're dealing with a commodity whose price changes every second," Hewitt explains. "So our margins change every minute. Our costs change every minute." Valero uses WebFocus tools from Information Builders for nearly all its BI reporting. Valero wants to make its BI faster overall. Now most reports use information from data warehouses populated each night with batch updates from SAP. But Hewitt says moving to a service-oriented architecture will enable more frequent updates, so the analysts can query more current data throughout the day. The company is working with SAP to implement SAP Exchange Infrastructure, or XI, to make that happen. Valero monitors the value of its inventory, along with sales and efficiency at its gas stations, to make adjustments to the price of its products as it watches demand and supply shift. Aside from gasoline, the company makes asphalt, 30

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sulfur and other secondary products. These prices haven't increased as much as gasoline has, or in proportion to the rise in the cost of crude needed to make them. Valero has to balance its dependencies.

Managing X-Factors On April 21, news spread that unidentified attackers had punctured a Japanese oil tanker with rockets while the ship was sailing to Saudi Arabia. That same day, Royal Dutch Sh e l l announced that African militia fighters, protesting corporate oil activity on the Niger Delta, had damaged a pipeline in Nigeria. Worried about oil supplies, traders pushed oil to $117 (about Rs 4,680) per barrel, setting a new record. BP, the Rs 84,000 crore British oil company, has paid in financial terms and human lives. In 2005, explosions and fire at BP's refinery in Texas, killed 15 people and hurt 170 others. The refinery, which by itself makes about 2.5 percent of all the gasoline sold in the United States, had to be partially closed. Then it suffered damage from hurricanes Rita and Katrina later that year. Chevron, meanwhile, noted in its annual report that although product margins for the oil industry were generally higher for 2007, profit margins on Chevron's refined products were negatively affected by planned and unplanned downtime at its three largest US refineries.' Smith, the EDS consultant, says competitors should have BI in place to assess an event like BP's Texas City disaster or Chevron's partial shutdowns immediately. "If I'm Shell, I should understand what's the opportunity to fill gas orders that BP and Chevron might not be able to," he says. The Federal Reserve Bank of Dallas has developed a model to forecast the price of gasoline that accounts for surprise events. Stephen Brown, director of energy

economics and micro-economic policy analysis there, uses a combination of Excel and EViews, a Microsoft Windows-based application designed to perform regression analysis. Unlike most BI tools, EViews was designed specifically for analyzing time-series data. Advanced regression analysis capabilities aren't usually part of mainstream BI tools, although SAS and SPSS offer some. First, Brown assumes that a certain number of unpredictable events will happen in a given year. For example, some refineries will shut down for some period because of fires or hurricane damage. Brown looks at refinery histories to calculate an average outage, then sets his model to account for it. What Brown's model can't account for is politics. There's no way to calculate an average impact of country leaders acting erratic â&#x20AC;&#x201D; something the Rs 8,56,000 crore Chevron must deal with. About 26 percent of its proven oil reserves are in Kazakhstan, the company says. Kazakhstan isn't the most stable of countries. It broke off from Russia in 1991 and is now ruled by a president granted lifetime powers and immunity from criminal prosecution.

42%

The amount the price of crude has jumped since the beginning of 2008.

From Wildcat to Datacrat No one argues that oil isn't one heck of a lucrative industry. And all those profits don't come from good business intelligence practices alone. But it's a powerful notion to run a company with the mind-set that virtually every employee is a data analyst. "Engineers and geoscientists and everyone have been taught BI from the start," says Lensing, the Hess CIO. Give people in any industry access to information along with tools to interpret the past, model the future and imagine different paths between the two, he says, and they can change the trajectory of companies. CIO Send feedback on this feature to editor@cio.in

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Case File

No one likes a handout â&#x20AC;&#x201D; not the giver and not the taker. But how do banks help the poor with loans, when the loans are so tiny that just servicing them will drive banks out of business?

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Case File

By KaniKa Goswami

IllUSt ratIoN By MM Sha NIth

anakapura is a township of about 50,000 on the fringes of Bangalore. It’s known more for the road that leads to it: Kanakapura Road, on which an Art of Living Center is located. But it’s also the hometown of Razya. For three years, the 28-year-old could not find work in the small town and her husband barely made ends meet with his job in the sericulture business. That all changed when Grameen Koota, a microfinance institution, lent her enough money to start a scrap business. In its first year, the business earned the family a profit and Razya was able to send her kids to school and purchase some furniture. Razya is one of many. Although most others are not as fortunate. It sounds unbelievable but Bangalore, arguably the world’s IT capital, is the 13th poorest district in Karnataka. An estimated 38 percent of the district’s 1.7 million people live below the poverty line. Experts agree that development among this class of poor is hard. Mainly because the cost of servicing microfinance loans (under Rs 30,000) doesn’t make business sense and commercial banks don’t trust the poor to repay their loans. That’s a view that’s beginning to change. “Microfinance is needed for people who are left out of formal financing institutions. Their inability to pay is never a reason, they pay back better than others,” says Suresh K. Krishna, MD, Grameen Koota. According to Grameen Koota’s website, it’s repayment rate is 99.99 percent. The high administration costs associated with small loans, however, is a harder nut to crack. Some experts estimate that servicing a microfinance loan is about six times more, proportionately, than servicing an average bank loan.

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transaction records were maintained off the system, “you had to do a lot of work to generate proper transaction data,” Krishna says. And the system’s simplicity, once a measure Sorry, We Can’t Help of its success, began to be a drag on efficiency When Grameen Koota started in 1999, its because it did not allow modifications to aim was to help poor women in rural areas existing accounts. For example, if the term and urban slums through micro credit. Their of a loan’s repayment was to be changed target audience were women who earned from 60 weeks to 48 weeks, a loan officer between Rs 40 to Rs 80 a day. If they could had to create a new account. These tedious consistently deliver need-based financial workarounds left Grameen Koota unable services to these women — in a cost-effective to handle the volumes it needed to meet its manner — they could be a financiallygrowth targets. sustainable microfinance institution to Worse, the software was unable to the poor. support new product innovations. It could The Grameen Foundation, which also handle only three products: a general loan, a works with the Grameen Bank in Bangladesh consumption loan and a supplementary loan. (which got the Nobel peace prize for its This locked Grameen Koota out of a world of work in micro-credit), supplied Grameen other loan and insurance possibilities and Koota with Rs 44 lakh to start work in the hampered its growth. Bangalore district. Growth, however, was exactly what Today, the institution’s mission hasn’t the institution wanted. After its initial changed — but its way of working has. When success, the institution, which will soon it started, it worked with a microfinance get the status of a non-banking financial management application. Like all start-ups, it institution, wanted to spread the goodness. was satisfied with an application that met its So it set itself some difficult targets. It’s basic needs: track its portfolio and accounting strategic goals for 2007-08, for instance, for microfinance. aims to increase both its client base and its But growth started catching up with portfolio by a 100 percent. the software. Maintenance issues cropped To do this, it needed to be able to open up, MIS reports took longer to create and new offices quickly, be more efficient in expanding the institution’s operations was the areas it already serviced, and create becoming a problem. management reports much faster than it “For example, [the system] could not already did, so that decision maintain transaction data,” Reader ROI: makers could take calls like says Krishna. It overwrote “each The importance of IT opening new branches. transaction on top of the last one, in microfinance It also needed a system maintaining only balances.” How IT can help that was flexible; since every This meant that a loan officer microfinance branch might want to tweak in a remote village could not spread its reach and its system. For example, how tell when the last repayment efficiency interest is calculated differs was made — only how much What CIOs can learn more needed to be paid. Since from IT in microfinance by region.

These problems kept commercial banks from seeing the poor as a potential market until Grameen Koota showed them.

real CIo WorlD | j u ly 1 , 2 0 0 8

Case File “The flexibility and scalability of the [new] product means that we’ll be able to simultaneously standardize common processes, accommodate regional variations, and scale for new innovations in the future,” says Krishna.

Spread the Goodness In a bid to get a system that would meet all its current requirements and handle expansion, Krishna and his team walked through all the available products but failed to find a generic product that met their needs. They also realized that an off-the-shelf product would leave them more ‘vendor dependent’ than they were comfortable with — especially since the expansion would require local customizations. The option of developing a system inhouse was considered, but was quickly scratched out because it would require too much specialization. It was around this time that the Grameen Koota team figured out that an Open Source solution would fix all their problems: it was scalable, it would free them from vendordependency and it could be customized at the branch level. And it would be less expensive than a bought solution — an important criteria.

manuals and infrastructure “Applying an Open Source had to be created. model to a microfinance “Transforming all the data application is a very into the new format was really innovative approach to challenging. We had about 1.2 tackling the severe cost SNAPSHOT lakh deviations,’ remembers pressures in the microfinance Grameen Krishna. For example, there sector. It helps MFIs Koota were loans in the old system (microfinance institutions) Branches: 51 that showed up as a late profitably extend their reach payment, but Grameen Koota to poor communities,” says Centers: 4,218 said there were not. So, loan Lee E. Tenny, managing repayment schedules had to consultant, IBM Global Districts: 13 be regenerated. “We needed Business Services, Financial to migrate all the data, but Services-Strategy & Change. Villages: 1,549 since the transaction history After it jotted down [of a loan] was not part of the its goals, Grameen Koota Clients: 121,359 earlier application, we had to identified a solution: Mifos, run an intermediate script and an Open Source management Active borrowers: 104,358 get all the data in place, then i n f o r m at i o n sys t e m put it into the format required designed specifically for the Loans disbursed: Rs 221.22 crore for Mifos. Though nothing microfinance industry. Mifos, was lost it, took quite a bit of developed at the Grameen (as on September 2007) time to migrate,” he says. Technology center at Seattle The migration needed to be done branch with help from IBM, allowed individual by branch. For a while, each branch used MFIs to modify the software to their needs. both their existing system and Mifos in It also provided the key functions required parallel. Each week, data was re-migrated by a MFI including client management, to Mifos on the day when no meetings were loan and savings portfolio management, held. This was done to capture any changes loan repayment tracking, fee and savings made in the legacy system during the week, transactions, and reporting. since Grameen Koota didn’t have enough For Grameen Koota, staff to enter changes on both systems. This the journey to implement introduced performance issues because Mifos has been an arduous with tiny payments every week the database one, partially because the kept expanding. institution also played an In retrospect, some people associated with important role in developing the project think it would have been easier if the solution further. the migration could have been done with a The challenges were merger tool and a separate migration tool. on two fronts: migration Training everyone on the new software and training. Legacy data would also take away much mindspace. needed to be rediscovered Training was done inhouse, but in a staggered or corrected before it could manner, across the centers. “We took training be migrated — from 44 sessions at many places, clustering some centers spread across 13 branches and training one set of people at districts — onto Mifos. In a time. Over the five months that it took to the meantime, training

“The flexibility and scalability of [Mifos] means that we can standardize processes, accommodate variations, and scale for new innovations.”

— Suresh K. Krishna, MD, Grameen Koota.

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Case File

ReaChing Out tO MORe the aim of Grameen Koota is to reach out to 20 percent of the poorest households in Karnataka by 2010 and one million clients by 2012. t to do this it needed to:

Increase the nu mber of Services Before Under the old system , Grameen Koota co uld only offer three products – limiting its market.

s Cliente Increase it 0% Base by 10

Before time to collate reports took Because MIS stem, it was harder for sy sions to open under the old ake quick deci m to s er ag s. man ge lla vi e BRANCHES in mor new branches

44 33

12 14 1 2

Income Generation Loan Emergency Loan Supplementary Lo an Life Insurance Health Insurance Cattle Insurance Planning for Indivi du Loans to Urban Po al or

7 150000

2000 2001 2002 2003 2004 2005 2006 2007 2008

after made ports can be on With Mifos, re decisi r ve ne he w , immediately uld them. This co makers want ason that the re be part of the from 20 branches t institution wen anches in 2008. br in 2005 to 51

after Mifos permits the ins titu to innovate with new tion product and has allo wed it to offer more servic es.

General Loan Consumption Loan Supplementary Lo an

CLIENTS

120000 90000

modified (a change in allow existing accounts to be Before: The old system did not te new accounts. crea to had ers offic ). Instead, loan accounts. the term of a loan, for instance new get to time time, leaving them less This occupied a loan officers’ is consequently more Koota can modify accounts and after: With Mifos, Grameen strategic goal to 08 7-20 200 its t mee in helping it scalable. This will go a long way crore – a 100% rise. increase its portfolio to Rs 92

migrate, half were trained, and then they trained the other half,” Krishna says. The team quickly set up a help desk to aid with issues during dry runs. Its aim was to identify operational issues and rectify them. Documentation of all processes was also carried out in this phase. Since Mifos is an Open Source application, every step needed to be documented and updated on the Mifos site, so that other users could benefit from new customizations. To play safe, Krishna hasn’t yet pulled the plug on the old system. “I have not removed our legacy software even now. So far, nothing has happened and I plan to go ahead with only Mifos now,” he says. What helped, everyone agrees, is that the ground was ripe for user acceptance and users and the IT team were enthusiastic.

HelpInG WHoleSale Their work has paid off. Ask Razya. During her second year as a Grameen Koota member, she started a small silk trading business,

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buying material from a wholesaler and selling it at local markets. The business makes her Rs 50,000 a month — enough to open a bank account, purchase life insurance and pay for her brother-in-law’s wedding. And she’s still looking ahead. “Now, my dream is to build a home for my family,” she says. As for Krishna, he’s already looking for new ways to serve his clients. Currently Grameen Koota is figuring out how to mine their data. “We understand the profiles of our customers. If we know their requirements, we can tailor products according to their needs,” he says. Their work has made Grameen Koota celebrities in the microfinance world. Among other awards, they are on the Forbes top 20 list of best microfinance institutions and they have won the 2007 Pioneer in Microfinance Award. More importantly, they are also closer to their goals. The new system has allowed them to open new centers faster and meet their target of acquiring 10 lakh clients by 2012 — simply

INfoG raphIcS By pc aNoop

Increase its portfolio

60000 30000 0

by making their processes more efficient. In an October 2007 study by the Microfinance Information eXchange, Grameen Koota scored well on multiple efficiency indices including the number of loans per loan officer. At 728 accounts per officer, Grameen Koota’s staff dealt with double the number of accounts compared to their peers in other Indian nonprofit organizations. At last count they had opened 51 centers, a far call from the number they had in 2005: a mere 20. “Grameen Koota has almost 1.3 lakh clients. Every month we disburse about Rs 3 crore and recover about Rs 10 crore to Rs 12 crore and these are all in tiny amounts,” Krishna says proudly. He likes to point out that “our repayments are so high because people do not want to discontinue this advantage we offer. This is a lifeline for many. Grameen Koota may well be the support system that many have been waiting for.” CIo Kanika Goswami is assistant editor. Send feedback on this feature to kanika_g@cio.in

real CIo WorlD | j u ly 1 , 2 0 0 8

CIO Role

More CIOs are being asked to take on responsibilities outside of IT. And it's not just the business that benefits. Expanding your job description can be good for your career, too â&#x20AC;&#x201D; provided you master the politics and rethink how you run IT. By Stephanie OverBy

Reader ROI:

Why CIOs are taking responsibilities outside of IT The pros and cons of having multiple job roles The implications for the CIO role

j u ly 1 , 2 0 0 8 | REAL CIO WORLD

Among the entire management team at Best Western International, Scott Gibson has the longest title. Sure, there's a tendency toward wordiness when it comes to describing positions at the hotelier. Look at the nameplate on Ric Leutwyler's door: senior vice president of brand quality and member service. But the extra ink required to print Gibson's latest batch of business cards goes beyond verbosity. The 47-year-old technology executive, who joined the company in 2005 as CIO and senior vice president of distribution, added a third title: senior vice president of strategic services. That means, Gibson heads the IT organization and the call center operations team, where he oversees all methods of distribution from call centers to Vol/3 | ISSUE/16

CIO Role travel agents to online travel sites, and he is in charge of corporate strategic planning. (For the record, that makes him CIO and senior vice president, distribution and strategic services.) While that drawn-out descriptor may make him unique among his Best Western peers, Gibson's hardly singular when judged against the CIO cohort. More than half of CIOs report having responsibilities outside of IT, according to a survey of 1,500 CIOs by Gartner Executive Programs. Meanwhile, anecdotal evidence suggests that an increasing number of IT leaders are accepting official positions that extend beyond the traditional technology function. "We've seen enough of it going on that we can say it really is a trend," says Bobby Cameron, vice president and principal analyst for Forrester Research. It's what Martha Heller, managing director of the IT leadership practice at executive search firm ZRG, calls the 'CIO-and' phenomenon. The new CIO-plus roles are more substantial than hyphenate titles of old like CIO and vice president of e-business. Today, notes Heller (who is also a CIO columnist), "the add-on titles are typically more strategic, enterprisewide and often customer-facing." That seems like good news. CIOs have been so successful that their bosses are betting they'll add value outside of IT — an affirmation, if there ever was one, of the business value of an IT leader. And CIOs in these magnified roles are better positioned to deliver improved processes and business results than if they held only the technology position. "CIOs have a greater ability to influence their firms' direction — process, strategy, business models — when they have more of a role on the business side," says Cameron. But a hybrid role has its downside. It requires infinitely more from the IT leader — and the IT staff, who have to take on more responsibility as their bosses' workload compounds. If you think you've got your hands full with just IT, well, forget it. What's more, having a dual role can breed resentment outside IT as CIOs encroach on others' turf. Yet, some experts say these hybrid roles are a necessary outgrowth of the increasingly business-focused CIO role. "The natural evolution is to have the topmost role of the senior technology executive become a general management role, not a technology role," says Cameron. "As a result, it is normal for [today's] CIO to pick up additional responsibilities that require the same style of general management discipline." But these 'CIO-and' roles have some wondering what will become of the standalone chief information officer role. "The CIO is going to be more of a process innovation and business transformation agent who understands how to apply technology to support strategic initiatives," says Sam Gordon, CIO practice director at Harvey Nash Executive Search. "I think it's unlikely that the CIO role ,as we know it, will exist in 10 to 15 years' time."

company uses IT. In software companies, there's the ever-present CIO-CTO hyphenate. Manufacturing companies have been known to add supply chain duties to the CIO position. But the expanded CIO role of today, say experts, is different. IT executives are taking on corporate strategy, heading up revenueproducing business units, and taking on roles as varied as logistics and international expansion. According to the 2007/2008 CIO Survey by Harvey Nash USA, 44 percent of respondents reported having responsibilities outside of IT. "The kind of stuff CIOs are good at — consistency, predictability, an organized approach to problem solving — can be a unique skill set in many companies," says Cameron. "IT is one of the only departments that spans the enterprise, which puts the CIO in an excellent position to drive value in other areas." Indeed, CIOs who have worked hard to prove the importance of IT have made that case so well that their bosses are beginning to take advantage of their expertise. "We have worked hard to demystify IT and be seen as integral to the business. We've learned to think and act and speak 'business first,'" says Joe Drouin, VP and CIO of TRW Automotive, who recently took on additional responsibility for global logistics. "This is all being recognized by senior executives who say, 'This person is more than a technologist. He or she knows my business as well as anyone else, if not better. What else could I have him or her do for me?'" The phenomenon is familiar to Al Etterman. When he took a job at software company OpenWave in 2002, he recounts, "I started as CIO, but I picked up a couple of other pieces along the way." He ended up in charge of a corporate program office, real estate and facilities. "I kind of forgot to duck," he says, half-joking. When JDS Uniphase (JDSU), a California-based manufacturer of communications test and measurement solutions and optical products, hired Etterman in 2004, the new job encompassed not only the CIO role but

Scott Gibson, Best Western CIO and SVP, distribution and strategic services, volunteered for extra roles because he had a strong vision for how the job should be done.

Hyphenates Are Hot Again There is precedent for the CIO-plus role. In the 1990s, you couldn't throw a rock in IT leadership circles without hitting someone with e-commerce-this or digital-that tacked on to his title. But the trend subsided when the dotcom bubble burst. Other title enhancements have tended to be industry-specific or related to how a particular

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CIO Role also the position of SVP of customer advocacy. He added chief administrative officer to his portfolio a year later. Most of the time, additional titles are bestowed after success with an IT initiative. "It almost happens through osmosis. That initiative becomes a stepping-stone to a bigger leadership role," says Gordon of Harvey Nash. When Tom Coleman became CIO of plumbing products manufacturer Sloan Valve Company in 2000, he was concerned that the company wasn't getting enough out of its SAP software. "I had experience with business process reengineering so I started talking to my boss, the CEO, about the fact that unless the software were connected to business process improvement, the system was worthless," Coleman recalls. Long story short, business process improvement became one of the top corporate initiatives. Coleman became, in addition to CIO, the chief process officer (CPO). Other times, however, an expanded role comes straight from left field. TRW's Drouin had discussed the idea of added responsibility with his boss. "I was expecting something that might be more intuitively linked to IT," he says. Like running TRW's continuous improvement organization or its shared services centers. At an offsite last year, Drouin suggested to the COO that the company form a task force to reduce inventory, outlining plans for the team and even offering up a few IT people to contribute. To Drouin's delight, the COO loved the idea. But to his surprise, the COO asked him to create and run a new global logistics organization. The focus of the new job: get a handle on inventory and materials management, but also oversee transportation, freight, distribution, warehousing and customs. It was pretty far afield from any additional role Drouin had pictured himself taking on, but he was game. For one thing, "I don't think I could have comfortably declined," says Drouin. "My boss and I discussed that I was ready for a new challenge." Besides, says Drouin, the add-on role opens up a world of possibilities careerwise. "Having this additional, non-IT responsibility could lead my career in a different direction than I had always assumed — into a more general management or operations-management leadership role. It could be a good thing."

Ready fOR tHe extRa RespOnsIbIlIty? OR Just WIllIng? For all the talk about the unique qualities a CIO can bring to an additional enterprise role, IT isn't the only function that can offer its expertise more broadly. Finance, for example, has an impact on every part of the business, too. Yet it's rare to see the CFO tackling anything other than his executive fiduciary responsibilities. It may be that CIOs — still viewed by some as the ugly stepchildren of the C suite — remain eager to prove their worth and are more willing to take on additional duties. Says Harvey Nash's Gordon: "IT leaders see [these expanded roles] as a way to be seen as a true businessperson." The danger is that the CIO could end up taking on tasks that no one else wants to do. "The CIO can end up doing strategic jobs that are core to business success and dependent on IT, or the CIO may get invited to do onerous tasks that they wouldn't want to put on 38

j u ly 1 , 2 0 0 8 | REAL CIO WORLD

The CIo Executive Council, a professional association of IT leaders founded by CIo’’s publisher, surveyed 58 CIos who have additional responsibilities outside of IT. Here’s what they said about their extra-IT roles, how they obtained them and how they balance their time.

Roles Beyond, But Related to It Most common additional responsibilities: Information security 69% Business process improvement or transformation 62% Corporate website/online identity 40% Innovation/change management 38% Business continuity 34% Respondents chose multiple answers

lookIng FoR MoRe WoRk CIos seek non-IT roles Sought most or all additional responsibilities Sought some additional responsibilities

33%

42%

26%

Didn’t seek additional responsibilities

a attent Ion shIFt Amount of time spent on traditional IT AmOunt Of tImE

less than 20%

16%

20%-39% 40%-59% 60%-79%

PERCEnt Of f CIOs

48%

22%

80% and more Source: CIo Executive Council

10%

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CIO Role their resume," says Forrester's Cameron. When asked if CIOs who take on extra roles are being exploited, JDSU's Etterman is matterof-fact: "You probably are being taken advantage of." But Etterman, who describes himself as a 'fixer,' doesn't mind as long as it's an area where he can add something to the role and take something new from it for himself. If CIOs are being used by the corporation when being tasked with non-IT roles, it's certainly with their consent. "It's in my interest to make myself valuable to this organization," says Gibson of Best Western. "I saw a hole in the strategic services area and the difficulty the company had filling it. I had a strong point of view about what we should do with strategy. So I volunteered to take it on. I can make a difference and make myself more valuable." For Gibson, who says he doesn't make decisions on a 'good for my career/bad for my career' basis, the added roles have been a boon. "Having multiple roles has made this job more interesting than jobs I've had before. It's been good for me." But, says Cameron, "most CIOs do consider it a good career move, because most people believe that the bigger the sphere of influence, the greater the success of the individual." CIOs are likely to view being tapped for additional responsibility as a vote of confidence. "In this case, my boss saw an opportunity to advance the organization by creating a new function, and he had the confidence in me to lead it and deliver results," says TRW's Drouin. "He didn't have to make either of those choices." Indeed, these additional responsibilities confirm how far CIOs have come. "[These roles] validate IT as being a true strategic enabler rather than a support function," says Gordon of Harvey Nash.

Companies may be exploiting CIOs with extra roles, says Al Etterman, EVP and chief administrative officer with JDS Uniphase. But that’s acceptable if there are benefits for the role and the individual.

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Still, it's not a decision to be made flippantly. "If someone does make the move [to take on additional business roles] and it doesn't work out, it can be bad for your reputation, " says Gordon. That caused Best Western's Gibson to toss and turn more than a few nights before adding a third responsibility. "I know a couple of CIOs who have evolved into COO and CEO roles, so I guess it was clear to me that it was possible to succeed outside of technology," says Gibson. But he had never worked outside of IT. "I probably came into it with more trepidation than anyone else. Part of me was saying, OK, this is really different. Why do you want to do this? Why does Best Western think I can do this?'" CIOs can — and should — say no to opportunities that don't work for them. For one thing, CIOs who are still working to improve the technology group will only hurt themselves — and the business — by donning another business hat, says Cameron. "If a CIO has expanded responsibilities but doesn't manage IT well, that CIO is less likely to be in a better position to deliver improved processes and business results," adds Cameron. A 'no' needn't be seen as a negative. "If the role doesn't have the right sponsorship in the company or does not add value to your career, why take it?" says Gordon, who's seen CIOs turn down additional roles they didn't feel were strategic or would be too much of a distraction to the IT role. "If I wasn't up for the broader responsibility, I would have had to say no," says Gibson.

The Upside of Multiple Roles For Gibson, excitement ultimately outweighed apprehension. His second role of vice president of distribution put him in charge of a revenue stream. "The job of IT person gives you a lot of opportunity to wreck revenue, but this would give the chance to add to revenue," says Gibson. "Having more of a business portfolio was more attractive because it seemed more challenging. I'm establishing business relationships with partners, defining the business terms, as well as delivering the technology to bring more revenue." The unknowns of an extra-IT role can be a thrill. "It's fun. It's interesting. It's different every hour of the day," says JDSU's Etterman. "I can go from a real estate negotiations meeting to an Oracle conversation about SOA and Web 2.0 to compensation discussions to a board meeting." The potential benefits to the CIO — and the company — can't be denied. Dual-role CIOs stay around longer, says Forrester's Cameron. "There's a much more obvious connection from them to the business because they're more instrumental in driving improvements in the company." Indeed, CIOs who have taken on additional business are better positioned to deliver improved processes and business results. "I am both the customer and provider of a solution. There are people on my team that are using technology to generate revenue, and there are people on my team who are delivering technology," says Gibson. "Conflict [between IT and the business] has not gone away, but it's isolated at my level."

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CIO Role Best Western is currently rolling out ITIL best practices, for example. There's a natural tendency within the business to want to introduce new technology features and functions fast and furiously, without much consideration of what that can do to the stability of the IT environment. But Gibson has been able to slow things down and introduce ITIL-inspired change-management processes that empower the technology team to delay production changes if they represent a significant risk to current capabilities. "Since, in some cases, I'm both the senior user and the leader of the technology team, direct reports from both sides are empowered to work together," says Gibson. "We're able to make a lot more headway in making those processes most effective." At Sloan Valve, Coleman's triple-threat role as CIO, and, since 2004, chief process officer and leader of corporate strategic planning, has eliminated a lot of bureaucratic back-and-forth between departments. "I sit down once a month with functions to talk about priorities," says Coleman. "Most big projects are driven by the strategic plan. There's nearly complete alignment, although I don't care for that word. There's clarity."

Be Careful What You Wish For Coleman spends half his time on IT issues, half on process management and improvement, "and 20 percent of my time on strategy. That's 120 percent," he says with a hearty chuckle. Time management is critical for a CIO who takes on roles beyond IT. And it's not always a laughing matter. "The downside is that it might kill me," says Drouin. He underestimated the additional workload. "And I don't even feel like I am fully engaged in the new job yet. I am certainly not doing justice to my new team, at this point, in providing leadership and direction. I am out of my comfort zone. I simply don't have the same breadth or depth of experience with logistics that I do with IT, which adds to the stress level." Drouin is worried that as he gets the new logistics group up and running, he could easily let his CIO self slide. From conversations with peers who have juggled multiple roles, "it seemed that the IT role kind of got pushed to the back," Drouin says. "I do not want that to happen to me. I love the CIO role, both what it is now and what it is becoming. I like that the CIO role is becoming very business-process focused. CIOs are engaging with their peers at a different level, looking for solutions to business problems and ways to improve business process." For CIOs taking on additional roles, delegation is paramount. "While making adjustments to be seen as successful in a new role, you definitely have to burn the candle at both ends for a while," says Gordon of Harvey Nash. "But generally, this is an opportunity to develop a team around you." Best Western's Gibson had to put most of his attention on IT, rather than on distribution, when he started his job. Having more than one role meant Gibson had to appoint managers who could make critical IT decisions, as well as establish processes that did not require his daily oversight. Now, he relies on his direct reports to deal with most tactical, and even strategic, challenges without him. "You have to have a predisposition for empowering your direct reports and giving them the freedom to deal with things," he says.

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Tom Coleman, CIO and Chief Process Officer, Sloan Valve says,â&#x20AC;&#x153;In the early stages, a lot of people assumed I wanted to take over their department.â&#x20AC;?

Overcoming Resistance Most CIOs who take on another role don't feel diminished by it. But for members of their staff, it can take time to adjust to the new reality. "It was confusing for my team initially," says Gibson. "But now I think they feel like they're coequal members of my larger team. In this role, I can do a better job of having the business make clear what they want to pursue with technology; I can actually make the lives of IT people a little better." Drouin says the IT group at TRW has been supportive of his add-on role. "Generally, they have seen it as strong support from the top that we have made significant progress as an organization." Individuals on the business side can take longer to come around. When Coleman arrived at Sloan Valve, he inherited an IT role previously filled by a dictatorial personality: "That had created a lot of resentment, so I had to be careful about coming across as allknowing." When he decided to take on additional responsibility outside of IT, he knew he had to tread even more gingerly. "In the early stages, a lot of people wondered what my real agenda was. They assumed I wanted to take over their department or become the next president of the company," Coleman recalls. Coleman made it clear he had 'zero interest' in running the show. "Clearly there can be resentment if somebody feels they have been passed over for a role and the CIO does not have the requisite 'business credentials,'" says Gordon. "It may be a misunderstanding of the CIO role that causes people to be on guard, not considering IT to be 'part of the business.'" When Michael Hites was CIO and vice president of planning and IT with New Mexico State University, "everyone from the 'past' [would still ask] me about the latest BlackBerry or how to REAL CIO WORLD | j u ly 1 , 2 0 0 8

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Six questions you should ask before you agree to additional job responsibility. CIOs eager to challenge themselves or prove their worth may be quick to take on additional responsibilities outside of IT. But it may not be best for you or your company if it means IT has to take a backseat. Here are some questions to ask your boss — and yourself — before signing on for double duty in a CIo-plus role. 1 ] Will it change my position in the company? Find out if the job comes with more money, or with access to the board of directors or executive team. If the additional position does not enhance your standing within the organization, "it may be an indication that they're just dumping something in your lap," says Bobby Cameron, vice president and principal analyst with Forrester Research. Michael Hites, an associate vice president of administrative IT services with the University of Illinois, adds that if you don't know why you're taking on the role — you probably should turn it down. 2 ] do I want to move out of It or just supplement my CIo role? Hites, in his previous job as CIo at New Mexico State University, was also in charge of the university's strategic planning process. "I already had experience working with people throughout the entire organization, so taking on a universitywide planning role was a natural extension." 3 ] are my objectives clear? Make sure you understand how your success in the new role will be measured. You and key stakeholders should agree about what you're expected to achieve, says Sam Gordon, CIo practice director with Harvey Nash Executive Search. 4 ] Is my It organization functioning well? If you're midway through an enterprise software implementation that's teetering on the brink of disaster, it's probably not a good time to add something to your plate. Your IT house should be in order, advises Joe Drouin, VP and CIo for TRW Automotive. 5 ] do I need to be the smartest guy in the room? In a non-IT role, a CIo may suddenly find he's got a lot to learn. Not being the expert may put you on the defensive, says Drouin. "You need to have the confidence necessary to cope with this." 6 ] am I happiest as the It guy? "If you bleed IT and truly love the technology side, don't take another role," says Hites. "Your bias will be clear and it will keep you from succeeding." —S.o.

fix their website," he says. "It's my responsibility to be known as 'the strategic planning guy,' not theirs. My actions need to clearly show that." Hites, who began a new job in March with the much larger University of Illinois as associate vice president of administrative IT services for the university administration, which includes UrbanaChampaign, Chicago, Springfield and Global Campus, says his experience outside of IT helped him get the job.

a CIO-plus futuRe? Gibson, whose CIO-plus role at Best Western marks his third C-level position, started out the way most CIOs used to — as a programmer. "But the longer I worked in businesses, the further and further I moved away from the nuts and bolts of technology," he says. Gibson sees his position as head of IT, distribution and business strategy as just another advancement in his evolution. "It's a natural progression," he says. "People who find themselves in the business of being successful CIOs today are people who would be successful in other areas of the business outside of technology." Perhaps the majority of IT leaders fall into that category. But not everyone's game for tackling the CIO role and something else, notes Cameron. The increase in CIOs doing double or triple duty in the business does have some in the IT community wondering — or worrying — about what this means for the standalone CIO role. "I do actually think the CIO role should be a discrete role, one that should be important enough to warrant a dedicated, senior executive position in any company," admits Drouin of TRW. He says the CIO role at TRW is big enough to keep one person busy. "On the other hand, I appreciate the confidence my boss had in giving me a role that is really core to our operations. This was a very personal decision, more about my own development and readiness to take on an additional challenge than it was about my boss feeling a need to expand the CIO role." The CEO of Sloan Valve recently asked CIO and CPO Coleman if he wanted to drop the CIO part of his title altogether. "My CEO would tell you, IT is becoming the process management department. The CIO is becoming CPO, period," says Coleman. JDSU's Etterman ultimately gave up straddling the CAO and CIO roles. Earlier this year he hired someone to take over his IT role fulltime. "At a certain point, you look around and say, this is really stupid," says Etterman. "The CIO role is big enough. You can figure out how to do a couple more things well. You can't do much more without compromising the value you're delivering to the IT organization." JDSU's CEO and board members reluctantly agreed. "There just wasn't enough of me to go around," says now executive vice president and CAO-only Etterman. Forrester's Cameron, for one, doesn't think the CIO title is endangered. "The CIO title sticks," he says. "There will always have to be someone in charge of technology." At Best Western, Gibson plans to keep the CIO title — and the other two. "There's no danger I will turn them over to someone else anytime soon," he says. "On the other hand, I don't know that I'm so emotionally invested that I would be reluctant to do that in the future. I want to be valuable to this organization in a way that works for this organization." CIO Stephanie Overby is senior editor. Send feedback on this feature to editor@cio.in

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Knowledge Management

While You Work By Margaret Locher

The technology popularized by Wikipedia can help companies gather and manage their own collective knowledge. Here's how to get started. 44

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Tony Pagliarulo, VP of application development with information technology vendor EMC, and his team, were building a knowledge management system three years ago and needed a way to organize in one place all of the schedules, code and other details of the project. He chose a wiki â&#x20AC;&#x201D; a software application that allows groups of users to create, edit and comment on online documents â&#x20AC;&#x201D; so that each team member could contribute and access up-to-date information on the project. Because his team had the most current information, they were able to make better decisions and get the project done faster. And Pagliarulo has used wikis to manage IT projects at EMC ever since. Meanwhile, EMC's use of wikis has expanded to support other business functions and purposes. "Wikis are now used broadly throughout EMC to store documents, create logs and encourage discussions," Pagliarulo says. "There are hundreds of communities used for project management and team-building."

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Diverse organizations, including businesses, schools and government agencies, are waking up to the benefits of wikis â&#x20AC;&#x201D; one of the group of Web-based applications designed to improve information sharing and collaboration known collectively as Web 2.0. By making it easier to gather and share information as well as record discussions about a subject, wikis (familiar as the software behind online encyclopedia Wikipedia) can help people improve their processes and get projects done faster. Among 311 CIOs who participated in CIO's 2008 Consumer Technology survey, 30 percent said they provide wikis as corporate applications. Almost half of those who use wikis said they employ them primarily as a collaboration tool, with employee communication cited as the second most common reason for supporting wiki software. There are more positives than negatives to using wikis. They don't require a lot of personnel to support them and many of the tools are free. At some companies, end users run their own wikis, without help from IT. But for organizations that want to deploy wikis enterprisewide, or where it's important that end users follow consistent rules, IT departments must be prepared. They should not only be able to choose the right software and support it, but also to help define the purpose, structure and scope of company wikis.

Decide Why You Want a Wiki Early adopters say corporate wikis work best when they're focused narrowly on a specific project or collection of information, as well as on a specific group of users. The heated debate within the Wikipedia community over its editorial policies suggests that having lots and lots of contributors begets conflicts over wiki management. "Wikis are very good for a departmental project," says Pagliarulo. "It remains to be seen how this technology will scale for active collaboration among very large groups" and across multiple locations. It's possible, that if you're a multinational company you might end up with a wiki for each business location or department along with a global one to serve bigger-picture conversations. Defining the scope of your wikis will also help you determine which software best suits your needs. WikiMatrix. org is a site that can help you identify which software is right for you by comparing options according to price, security, support, features and multimedia options. Alexander Milne, senior director of public technology at the Wharton School of the University of Pennsylvania, decided he needed a wiki to help his team share documents in a central repository that was easy to access. Wikis appealed to Milne as the solution because, "You just need a browser and you're ready to go." He deployed a free, open-source

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open pen Source and free, or hosted for a fee, these applications are among many wiki software options.

BrainKeeper | Provides knowledge management tools. Prices based on the number of log-ins required. ClearWiKi | A hosted wiki that enables users to search within common file types like PDFs. editMe | Hosting service provides custom wikis for a monthly fee but no marketing services. paux | Free, Java-based open-source software that is similar to a content management system. MediaWiKi | The free software Wikipedia uses for its websites boasts lots of features and can support high traffic. MoinMoin | Another free application. Users can get help from MoinMoin developers. SoCialtext | Provides 'wiki appliances,' or dedicated boxes, for deployment at customers' sites as well as hosting wikis in the company's data center for a few dollars per user per month. Services include marketing the wiki to users. StiKipad | Simple enough for small-scale purposes but can be customized for big projects. Price is based on storage capacity, with an entry-level allocation of 30MB available for free. Wetpaint | A free hosted wiki that's easy to learn and edit. Some wiki users say it's good for first-timers. â&#x20AC;&#x201D;M.l.

application called Moinmoin. After three years, Milne's wiki has become the go-to spot for most IT documents. "I have heard on more than one occasion, 'Let me check the wiki' or 'I believe that was documented on the wiki,'" he says.

Choose Your Software The software used by Wikipedia is the open-source Media Wiki. MediaWiki and many other wiki applications can REAL CIO WORLD | j u ly 1 , 2 0 0 8

Knowledge Management be downloaded from the Web and run by an IT shop behind the corporate firewall. Other free applications, such as PBwiki or Wetpaint, may be hosted. These free applications, whether hosted or not, frequently include features like video integration, customizable templates, and version control that allows you to refer back to an earlier iteration of any page. But there are also vendors, like Socialtext, Paux and Brainkeeper, that provide commercial wiki software options either on a hosted basis or deployed behind a company's firewall, or integrated with other corporate systems. Employees might already be using homegrown wikis; you have to decide whether to let these be or migrate them to a corporate platform. In fact, wikis are often developed and managed by teams outside of IT, and often without IT's support or knowledge. Jeff Brainard, director of product marketing for Socialtext, observes that small groups within a company will often bypass IT and start with wiki software packaged in a network-ready appliance or hosted service.

there are some benefits to letting a vendor worry about the back-end aspects. Socialtext, for example, not only sets up and monitors wikis for its customers, it also helps brand and market them to users. The company's customers take different approaches to wiki management: Humana uses appliances that are hosted in Socialtext's data center, while Symantec has deployed the product behind its firewall.

Outline the Wiki's Structure With a Small Team Once you decide to deploy wikis, you'll need to set up rules for using them. These include defining to what extent end users will be able to edit wiki pages, setting standards for how administrators will respond to updates from users, and setting rules around uploading text files or videos. Two years ago, Michele Hovet, IT director for the city of Arvada, assigned a team of five to develop the city's first wiki using MediaWiki software. "We wanted a place to look up all the projects that were happening around the city and to view information and updates," says Hovet. She chose MediaWiki because it was free and easy to set up, although she plans to look at other applications for future projects. The IT team used the wiki to share project management information and documents. Two Web developers set up the wiki, working with other IT staff members and project managers who designed the wiki's framework, populating it with a list of topics relevant for project management. Pagliarulo used a six-member team at EMC when the IT department began planning its first project management wiki, which was intended for a development team of 30 people. Those six included an architect and a systems administrator, who worked with the others to evaluate the server environment and analyze how much storage space would be required to support the wiki's growth. If you think your wiki has an audience beyond its primary contributors, get their input too. For example, if salespeople are creating a wiki, it would be valuable for marketing staff to be able to see it so they are aware of new projects or tools the sales team is using. If consistency is important across a department or company, wikis that offer auto-generated templates make it easy for users to create and edit wiki pages while ensuring that all the pages look the same, says West. The template can have, for example, a standard header. "And if you want to make a change to all the pages, you just change the template once," she adds.

â&#x20AC;&#x153;At some companies users will bring in IT only if they need to integrate the wiki application with the larger IT infrastructure.We have an incredibly savvy group here. If they feel comfortable with the technology, we say go for it.

â&#x20AC;&#x201D; alexander Milne Senior Director of Public Technology, The Wharton School

If a group of employees goes the free, do-it-yourself route, he says, they can create and maintain their wiki for a shortterm project, without needing to get IT involved. Jessamyn West, a library technology consultant and author of the Librarian.net blog, has used Wetpaint and other software for various wikis. "It's empowering to see what you can do on your own. Some tools are often so user-friendly that, if you can use Word, you can use them." At some companies, users may bring in IT only if they decide to deploy wikis enterprisewide, and need to integrate the wiki application with the larger IT infrastructure. "We have an incredibly savvy group here," says Wharton's Milne. "If they feel comfortable with the technology, we say go for it. If a number of faculty converge on the same solution, we will support that." But at other companies, such as EMC, employees are discouraged from using any platform that IT doesn't endorse. "We do limit use of non-IT-supported wikis for security and access reasons," says Pagliarulo. Despite the ease of using most wiki software, as with other applications, 46

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Put Someone in Charge Once you have parameters for what the wiki will accomplish, and how, decide who will be responsible

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Knowledge Management user of â&#x20AC;&#x201D; many wikis. "The person building the wiki needs an organizational sense of how to present the information or no one will be able to find anything." Because a wiki is not meant only to be used for information storage, but for conversation and reference, gardeners should not be shy about pruning to keep lists and entries from becoming unwieldy. Each of the hundreds of wiki communities within EMC has an administrator, says CIO Pagliarulo. "Each community has policies, processes and guidelines for how it should be used. An administrator ensures the data is clean and gets purged at appropriate intervals."

Know Your End Users 1. An unclear purpose. Jeff Brainard, director of product marketing with wiki vendor Socialtext, finds from observing his company's customers that wikis fail when their scope isn't clearly defined. 2. An anything-goes attitude. You want to encourage users to contribute and discuss wiki content, but someone has to make sure it stays relevant. Wiki administrators must keep pages and entries clean and orderly or the wiki won't be useful. When you have a list of bookmarks and links, "people always add, but never subtract," says Jessamyn West, a library technology consultant. "You end up with an appallingly large list and unhappy users." 3. The wrong software. It may be tempting to download free software and build your own wikis. But before you do, say experienced wiki creators, make sure someone has the time to maintain the pages. Similarly, don't jump into a contract to have a vendor host your wiki if you can effectively manage it yourself. 4. Ignoring feedback. Usability is critical to wiki success. Experts advise that you start a wiki with a small group of users, and that you pay attention to what they say about how the wiki looks and functions. â&#x20AC;&#x201D;M.L.

for maintaining the content. At least at first, the wiki administrators will be one or two people among the end users and developers who set it up. Socialtext's Brainard calls these administrators 'gardeners' because they help the wiki grow, weed out outdated material and help new users. Wiki gardeners should keep a close eye on how the wiki expands to ensure it stays true to its original purpose. "Maintenance is critical," says library technologist West, who has created â&#x20AC;&#x201D; and describes herself as a happy end

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Feature -02.indd 47

In the city of Arvada, Hovet's plans for a 'one-stop shopping' wiki for project charters and guidelines hit a snag when the wiki was opened to managers and project managers across the whole organization. "We wanted everyone to contribute to the content and help shape our best practices," says Hovet, "but other city staffers did not adapt well." Getting people to learn and understand a new technology turned out to be harder than the IT staffers anticipated, Hovet says. The city was rolling out new project management processes at the same time as it launched the wiki. A cross-section of city project managers felt all that newness "would have been intimidating for staff," she says. "This was two years ago when the mention of the word 'wiki' earned you funny looks. Now it's more of a mainstream tool." Hovet's team put project documents and other information on the city intranet instead. But Arvada's project management team still uses the wiki. Once you've agreed on the wiki's purpose and you're done developing it, you need to get people to use it. Among ways to get the word out, managers can mention wikis in their communications with the company, whether that's via e-mail or newsletter, or at company meetings. Brainard says you can even use the wiki to publish company blog content for employees to read as a way to increase visibility and adoption. Hovet didn't promote Arvada's first wiki very widely. But she now has plans to make the wiki software available on the city intranet, and at that point, she intends to spread the word. "We normally do a lot of promotion with new software," she says. "I hope our implementation of wiki technology on the intranet will allow all employees to participate in conversations about topics that affect their employment with the city." CIO

Margaret Locher is a Massachusetts-based freelance writer. Send feedback to this feature on editor@cio.in

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6/27/2008 9:01:26 PM

Book Excerpt

Outsmart! how ow To Do What your y our Competition Can't By Jim Champy, Financial Times Press, 2008.

a m e Business, B usines Same ame me Busi Bus Different Lens The CEO of Shutterfly outpaced competitors by re-imagining the online photo-finishing business as a way to build social connections between its customers. By Jim Champy

Jeffrey Housenbold was an eBay vice president with an

MBA from Harvard. His wife had earned an MBA, too — from equally prestigious Wharton — and she had a high-powered job to match. They were also raising three sons under the age of 5, a full — time job all by itself. Predictably, what the Housenbolds never had enough of was time. "Between her schedule and mine, I barely had time to talk to her, my kids, my mom, or anyone else outside business," Housenbold confesses. But Housenbold and his wife found a way to capture special moments and share them with friends and family through photography and a website, Shutterfly.com. "We spent $1,900 (Rs 76,000) on Shutterfly prints," Housenbold told me, "and that was the year before I even worked there!" Housenbold became CEO of Shutterfly in January 2005. At the time, the company, which Dan Baum and Eva Manolis had founded in December 1999, billed itself as just an online photo finisher. But within two

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Book Excerpt

years, Housenbold had turned Shutterfly into something bigger and smarter — an Internet-based social-expression and personal-publishing service. Shutterfly still prints customers' photographs from old-style 35mm cameras as well as digital equipment, but now the site also offers a range of personalized products and services that fit its new strategic vision. Customers can get personalized greeting cards, scrapbooks, collage posters, photo books, calendars, personalized stationary, and much more, plus a range of services that make it easy to upload, edit, enhance, touch up, share, and store their digital photos. By transcending the product boundaries of an online photo finisher, Housenbold could not only survive trends in the photo industry that were decimating some of his competitors, but he also could turn those changes to his advantage. And he could use his new status to exploit larger trends that touched only incidentally on photography. Housenbold had found one of the prime secrets of business growth: changing his business's frame of reference to expand its identity and compete on a new and much larger field.

Know What Customers Really Want to Buy Talking with Housenbold reminded me of a company that hired me early in my consulting career. Hallmark was one of my early process — reengineering clients. The company's executives told me that Hallmark was not a greeting-card company, but a social-expressions company. Changing the frame of reference had enabled Hallmark to expand the range of products with which its customers could convey their messages. Hallmark wasn't just about cards anymore; now it offered stuffed animals, porcelain figurines, books, pens — any product that could convey feelings between people. Housenbold used the same phrase, 'social expressions,' but he expanded it brilliantly: Shutterfly's

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new frame of reference stretched beyond consumer goods to include the concept of an online community. Housenbold's insight called for a complete makeover of Shutterfly, which led to a sales explosion. In fiscal year 2007 alone, revenues are projected to increase 45 to 50 percent, to more than Rs 552 crore. Housenbold discovered the makings of a solid community at Shutterfly. Its clients are amazingly loyal — 77 percent of the company's revenue has come from active customers, who currently number more than 2 million. With that information in hand, Housenbold re-imagined the company's frame of reference, expanding it from photo finishing to a full range of products and services to facilitate taking photos, editing and packaging them. These days, photo printing isn't even the company's main revenue source. Housenbold recognized a major consumer trend and adapted his company's strategy and business model to exploit it. Americans have never been hungrier for individual expression. In 2006, Americans spent an estimated Rs 2,400 crore just to equip cell phones with special ring tones. People are blogging, podcasting, YouTubing, and MySpacing by the tens of millions. Neilsen/Net Ratings reported a 47 percent year-over-year

Housenbold had the foresight to see how people's need to connect with others in personalized settings could reinvigorate the business.

increase, to 68.8 million users, at the top10social-networking sites in April 2006. People are also flocking to sites where they can list items they own and products they wish they owned. Housenbold understood what was going on, and he had the foresight to see how people's need to connect with others in personalized settings could reinvigorate the photo business. Accordingly, he introduced dozens of ways in which Shutterfly customers could turn their photos into personalized objects of expression. But even as he widened his lens, Housenbold stayed focused on his primary business.

Keep Innovation Coming Many of Shutterfly's innovations have sprung directly from Housenbold's finely tuned sense of community. Customers can create two personal webpages, where friends and relatives can view and upload photos for everyone to enjoy and even make comments about them. To build community, Housenbold has introduced numerous photo contests involving pets, family reunions, hometowns, and school spirit, with Shutterfly products as prizes. But instead of offering big money and risk commercializing the experience, he shrewdly decided to keep the prizes modest. Housenbold's sense of community extends to his employees. Anyone with an idea is encouraged to submit a simple business-case presentation. Each idea is judged in terms of potential economic return and resource requirements. High-level screeners meet regularly to choose the winners. When I spoke with Housenbold, he was about to join one such meeting to consider 13 ideas that had been winnowed from 85. He explained the workings of the process this way: "Let's pretend someone proposes to roll out a new photo product, a picture on a tie for Father's Day. We'll ask, ‘would it help us differentiate? Is it on brand? Will it be in tune with our quality? What kind of REAL CIO WORLD | j u ly 1 , 2 0 0 8

Book Excerpt investment would be required? Would it help smooth out our seasonality? How much demand would there be? How much would it cannibalize our other products?'" Having this process in place has enabled the company to tap the fresh ideas brought by new people hired during the expansion of the last two years. Housenbold told me,"There's a shared belief that focusing on three to five ideas which will allow us to truly differentiate is the right approach to winning in the marketplace." Housenbold acknowledges that his leadership style requires a greater investment of up-front time and energy than a less formal approach would demand. "But I think it makes for better decisions," he says, "and it allows decisions to be communicated and buy-in to happen in a much deeper way throughout the organization." It also means that Housenbold has to build flexibility into his budget, allocating 10 to 15 percent for 'trying things' such as a new go-to-market strategy or a new partnership. A certain number of failures are to be expected, he says, but "it's the portfolio of those experiences that hopefully will lead us to learn and grow."

The Right Partnerships In the first half of 2007, the company forged agreements with Yahoo, Sony, Delta Airlines, Target, and David's Bridal stores that include mutual promotional efforts and special customer offers. Target, for instance, will display Shutterfly photo books and greeting cards, and customers will be able to order prints online and pick them up at the stores an hour later. When Baum and Manolis started Shutterfly, most of their start-up money came from Jim Clark, who had presided at the creation of Netscape, Healtheon, and Silicon Graphics (where Baum and Manolis had worked). But the new venture struggled for years, weighed down by a sour economy, the high-tech bust, and the inroads made by competitors such as Snapfish and Ofoto. When asked what kept Shutterfly going, Clark replied, "I did. It was a matter of money. I kept 52

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Housenbold has to build flexibility into his budget, allocating 10 to 15 percent for 'trying things.' A certain number of failures are expected. reinvesting. I don't like to give up." Shutterfly began turning a profit in 2003, but by then the digital photo-printing market was splintering. Offline retailers such as Wal-Mart and Walgreens had jumped into the act, along with online giants AOL and Google. Meanwhile, older rivals Snapfish and Ofoto were acquired by two deep-pocketed expansionists, HP and Kodak. The future looked pretty bleak when Housenbold arrived with his wide-lens vision that would shift the frame of reference from photo finishing to social expression and community. Housenbold's performance was not a one-man show, of course. But it was Housenbold's ability to view the company in a broader context that encompassed societal trends and provided the springboard for Shutterfly's hugely successful reincarnation.

Five Tips for Rethinking Your Business Model SEE thE bIg pICtuRE. In some industries, business leaders, perhaps distracted by brand fame and a false sense of ownership, have lost touch with their customers' needs. The magnitude of the opportunity in the auto industry was brought home to me recently when a group of Japanese auto executives discussed their corporate strategy. Their design, manufacturing, marketing, and business processes are all driven by

one simple idea â&#x20AC;&#x201D; building cars that consumers will love. buILD A COmmunIty, but tend to business. The Internet is awash in businesses that built communities to feed the emotional or practical needs of their members. Too often, though, these businesses fail to follow through on the second half of the equation. You can't earn a profit unless you have a differentiating strategy and an efficient business model. Shutterfly has both, which is why it is among the few online communities that earn their keep by selling real products and services. A less risky business model includes marketing some of the thousands of products and services that can be sold to Internet communities. The ultimate proof of the value of a product or service is that someone is willing to pay for it. WIDEn yOuR LEnS, but narrow your focus. Housenbold and I agree that the Internet favors a pure play, a company devoted to only one line of business. Compare Monster.com's recruiting success to that of your local newspaper, where job openings are advertised along with dozens of other services. A narrowly focused organization can channel its resources and energies more efficiently. ORgAnIzE fOR IDEAS. Just because ideas are ephemeral doesn't mean you can't apply the same kind of rigorous management attention to idea generation that you apply to product packaging. Shutterfly has created a culture that puts a high value on employee suggestions. bE pERSIStEnt. It takes courage to move out of your familiar boundaries and play on a new field. Success belongs only to those with the courage to stand by their convictions and risk failure all the way. After you've thought deeply about a big idea your company can execute, don't let anyone talk you out of charging ahead. Pursuing big ideas requires persistence. CIO

Excerpted from Outsmart! How to Do What your y

Competitors Can't by jim Champy. Send feedback on this feature to editor@cio.in

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technology Goodbye big data centers, hello applications running in the cloud? Behind the hype around cloud computing, CIOs are figuring out when and how to use cloud options wisely.

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From Inception to Implementation — I.T. That Matters

Cloud Computing: Not Just Pie in the Sky By Bill Snyder

| Writer Nicholas Carr will earn the enmity of even more tech veterans with his newest prediction: cloud computing will put most IT departments out of business. "IT departments will have little left to do once the bulk of business computing shifts out of private data centers and into the cloud," Carr writes in his new book, The Big Switch: Rewiring the World, from Edison to Google. An exaggeration? Of course. But there's a kernel of truth beneath the hyperbole. Cloud computing, once a concept as murky as its name suggests, is becoming a legitimate emerging technology and piquing the interest of forward-looking CIOs. Out-of-control costs for power, personnel and hardware, limited space in data centers, and above all, a desire to simplify, have encouraged significant numbers of startups — and a still small number of enterprises — to move more infrastructure into a third-party provided cloud. "The concept of cloud computing makes enormous sense, says André Mendes, the CIO of Special Olympics. “It helps the CIO abstract another layer of complexity from the organization and concentrate on providing higher levels of value." Mendes, who's now

Cloud Computing

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moving much of his data center outside his enterprise via conventional hosting services, says he expects to move toward the cloud in the next few years. Why now? Enabling technologies, including nearly ubiquitous bandwidth and widespread server virtualization; plus the lessons learned from the rapid ascent of SaaS, are encouraging CIOs to think further outside of the data center. To be sure, it's still the early days of cloud computing. Concerns around security and application latency, to name two of the issues most commonly raised by the IT community, are real. Also, providers have not fully formulated their business and pricing models, which is one reason that some CIOs who did not reap the desired ROI from SaaS now look at cloud computing skeptically. Yet another issue: transparency. Entrusting mission critical applications and data to a third party means the customer has to know exactly how cloud providers handle key security and architectural issues. How transparent providers will be about those details remains an open question.

ANew Level of Scalability Unlike many ‘next big things’ cloud computing didn't just spring fully-formed from the brain of a Silicon Valley whiz kid.

pin down an exact definition. Keep in mind, too, that different vendors will spin cloud computing differently. Salesforce.com's vision of the cloud looks much like the SaaS you know today; IBM's vision includes mashups of massive customer data sets on the fly. "The cloud is basically a combination of grid computing, which was mostly about raw processing power, and software as a service," says analyst Dennis Byron of Research 2.0. "In effect the cloud is network virtualization." Dennis Quan, CTO of IBM's High Performance On Demand Solutions, says, "We've designed the cloud around virtualization. You have a data center with many servers and they are all turned into virtual machines." However, cloud computing is different from a multi-tenant SaaS model, in which numerous clients access a provider's application. Cloud computing environments also allow the customer to run his own applications on the provider's infrastructure. At the provider level, the goal is to dynamically assign computing workloads as customer jobs come in, notes William Fellows, an analyst with The 451 Group. That approach helps the vendor maximize its resources and lets the customer ask for more computing power on the fly. That's a key

Providers have not formulated their business and pricing models,which is why some CIOs who did not reap the desired ROI from SaaS,now look at cloud computing skeptically. "It's the logical corollary of what happened in computing over the last 30 years. In a sense, it's a return to the past; time-sharing on steroids," says Mendes. True enough, but it's easier to get analysts and IT insiders to talk about the features and goals of a cloud than it is to 54

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point. A big goal of cloud computing, whether IBM's Blue Cloud or Amazon's EC2 (Elastic Cloud Computing), is rapid scalability. But elasticity is probably a better term, says Barney Pell, founder and CTO of Powerset, a San Francisco-based startup company building a natural language

Top three reasons IT fears the clouds: almost nonexistent SLAs, few customer references and security concerns. Source: Forrester Research.

search engine. By elastic, Pell means the ability to stretch out when needed — and then snap back. His company is attempting to index an enormous chunk of the Web, and that compute-intensive task goes on most of the time. The work involves major spikes by users that would exceed the company's normal computing capacity. Powerset became an early customer of Amazon's EC2 and S3, Amazon's related storage service. Powerset pays for the resources as it uses them, freeing up significant amounts of cash, Pell says. Pell suggests that IT executives considering cloud services start by closely examining which resources their data center uses all the time — and which are only needed during periods of peak demand. What's more, the use of an elastic service gives IT time to establish a baseline, that is, the minimum level of resources needed to run the business at all times. Groups or departments within enterprises often have the need to prototype or handle a specific project, but don't have the budget or desire to buy the needed infrastructure. Indeed, IBM itself is using its internal cloud to supply the resources needed for prototyping new applications or services, says Quan. Not every project uses

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that internal cloud, but more than 100 have. The New York Times, for example, used Amazon Web Services (EC2 and S3) to generate PDFs of 11 million articles in the paper's archives in less than 24 hours. It used 100 instances of EC2, instead of buying hardware for the project, Derek Gottfrid senior software architect for the Times, wrote in his blog.

Flexibility Up,Costs Down For some enterprises, cloud computing can help a CIO tackle several problems at once, as was the case for Schumacher Group CIO

and provisioning new regional offices was taking months. As Menefee settled into his new job, he realized that running at least some of his applications outside Schumacher's data center would solve a number of problems. Menefee decided to combine a custom application built by Apptus, an ISV, with a Salesforce.com CRM application to handle thousands of contracts among his company, the hospitals and the doctors. Those moves, which involved about half of the company's IT infrastructure, avoided the expense of his hiring an additional three to five full-

Security,latency and service availability are concerns,but CIOs will find benefits from cloud services,including scalability,faster deployment times and a simpler data center. Doug Menefee. Upon joining the Lafayette, Louisiana-based company three years ago, Menefee had to tackle a disaster-planning gap and find new ways for IT to keep up with rapid business growth. Headquartered two hours west of New Orleans and 35 miles north of the Gulf of Mexico, Schumacher staffs emergency rooms for 150 hospitals across the US. It only takes a glance at the map to see how close it came to being hit by hurricanes Katrina and Rita. "It was an eye-opener," says Menefee. "We didn't have disaster recovery and business continuity capabilities. Had our headquarters gone down, it would have taken all of the regional offices down with it." At the same time, Schumacher's IT group was struggling to keep with the demands of a company whose revenue was growing 20 percent to 30 percent a year — even faster when measured by the number of complex contracts it needed to manage. "We can go out and turn on five or six hospitals tomorrow. We need the flexibility to move data quickly," Menefee says. But setting up

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time IT staffers, at a cost of Rs 16 lakh to Rs 32 lakh a year, plus a large outlay for additional hardware, he says. Security, of course, poses an issue. "Single sign-on service and password management were the biggest pain points," says the CIO. While very upbeat about his experience in the cloud, Menefee says his data center isn't going away anytime soon. The company deals with very large image files and charts scanned into the system, which means that latency becomes an issue. So for now, that type of work stays in house. There's also ‘a beast’ of a legacy billing system to deal with that wouldn't fit well into a hosted environment, he says. Is Schumacher utilizing cloud technology, or is it really SaaS? "There's a lot of gray area around that term [cloud computing]," Menefee says. "But for me, the idea of us using an infrastructure that isn't our own, that is managed outside makes it a cloud. But I'm not looking to be part of a trend. I find a problem and look for a solution."

Control Fears Security, latency, service levels and availability are issues that rightly concern IT executives when the talk turns to cloud computing. Vendors will have plenty of work to do in the next few years to resolve them to IT's satisfaction. But there's also a less concrete, but important, issue on the cloud computing table: culture. "Some people still view this as a loss of control," says Adam Selipsky, Amazon's vice president for product management and developer relations. "They're starting to come to terms with the idea of data leaving their four walls, but we're not there yet." Indeed, when asked what advice he has for other CIOs considering cloud computing, Schumacher's Menefee says, "Your traditional IT staffer is going to be resistant. Enlist the guys who have experience developing for the Web." More caveats: although it's not a common issue, some applications call for specific hardware. If that's the case, says Forrester principal analyst James Staten, forget about running the application in the cloud. And database performance in the cloud can still be problematic, says John Engates, CTO of Rackspace, an IT hosting company based in San Antonio, Texas. On the other side of the ledger, though, CIOs will find benefits from cloud services, including more scalability, faster deployment times, and a simpler data center. There's no rush, but while you keep your feet firmly on the ground, it's time to take a peek into the cloud. There’s a lot more to cloud computing than hot air. There’s flexibility, scalability and cost cutting. CIO

Send feedback on this feature to editor@cio.in

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Pundit

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Halt,Who GoesThere? Does Open Source lurk in your IT shop? Just because it’s open, it doesn’t mean you don’t need rules. By Bernard Golden Open Source | In a recent interview, Jonathan Schwartz president and CEO of Sun Microsystems said something that should be a wake up call for every CIO regarding the pervasiveness and challenge that Open Source represents to their jobs and organizations. Here is the anecdote they cited, which provides dramatic evidence of the role Open Source plays in today's IT landscape: "I was with the CIO of a very traditional financial institution, recently. At the end of our meeting, I said, ‘By the way, we've just announced the closing of our acquisition of MySQL.’ The CIO looked at me, and she

"So now we're in the midst of negotiating a license, and they'll wind up saving, like everybody else, $5 million (Rs 20 crore) or $10 million (Rs 40 crore). And that, in a slowing economy, is a very helpful thing." Schwartz recounts this incident as an example of how Sun is going to prosper with its Open Source strategy, and I'm pleased with their happy outcome, but the true meaning of this incident is far more profound and illustrates what a challenge Open Source represents to IT organizations' business-as-usual. In this company, Open Source is being widely deployed; however, none of the

portion of the company's IT infrastructure. How can you confidently plan for SLA commitments when you're not sure of what software you're running, its maturity, supportability, and so on? Furthermore, as a CIO, you face the very real potential of being unable to adequately map out your workforce skills planning, since you are unaware of what development and operations commitments accompany these invisible software implementations. Finally, it's hard to attest to important regulatory requirements (if you're subject to regulations like recoverability and so on, as financial institutions are), when

The initial response by many CIOs is to ban Open Source,but it's too late to bar that gate. Over 90 percent of all enterprises will be using open source by 2010. said, ‘Well, that's nice, but we really don't use MySQL here. We're a proprietary software shop.' A very eager Sun sales rep was with me. He had checked in with his buddy at MySQL and found out that this organization had downloaded MySQL 1,300 times in the last six months." "[The CIO] was stunned by that. A couple of their technology folks who were also there said, 'Actually, it's the No. 1 database all of us use. It's just that we don't have a commercial license because we've been told we're a proprietary vendor shop.'" 56

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existing processes are tuned to address this fact. They are completely blind to the presence of Open Source in a large number of the company's IT projects. Think about the risk exposure this represents. Obviously, there are questions regarding whether the company is complying with the license obligations of the Open Source software, so the company's attorneys are likely to be concerned. To my mind, though, legal risk is only a small part of the overall risk this CIO faces. The far larger risk is that there is no visibility into the makeup of a significant

you don't know what will need to be recovered. The initial response by many CIOs is to ban Open Source, but it's far too late to bar that gate. As Gartner has noted, over 90 percent of all enterprises will be using Open Source by 2010. Given that, the critical action item for CIOs is to set up policies and processes to manage the use of Open Source and ensure that its benefits are retained while risks accompanying its use are reduced. The common term for this is ‘Open Source Governance’. CIO Send feedback on this column to editor@cio.in

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