CIO July 15 2008 Issue by Sreekanth Sastry

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From The ediTor

When the country’s second largest private sector bank HDFC scouted around for

Driving Change You don’t have to be a CEO to drive business change.

a replacement for its outgoing IT head C.N. Ram, it appointed Anil Jaggia as its new IT leader. Jaggia was the chief operating officer at the Centurion Bank of Punjab, which recently merged with HDFC. “If CIOs and IT managers are not taking on the role of business or product evangelists, we could see more business managers becoming CIOs,” a finance professional who now manages IT at his organization told me last week. However, one could also argue that HDFC appointed the Centurion Bank COO as its CIO because it recognized IT as a strategic function, and entrusted a top business executive with the job. But shouldn’t organizations also be seeking to develop IT leaders who understand the business well? We do find IT managers and vice presidents at large enterprises handling specific IT functions such If you drive change as an as applications and infrastructure but IT leader, it will help IT are they being evolved as business achieve the recognition it champions with IT background? truly deserves. While it could be argued that many IT leaders at enterprises such as Bharti Airtel and Asian Paints are already playing an instrumental role in transforming their businesses by triggering both product and process innovation, we continue to seek more CIOs who are leveraging IT beyond its ‘enabler’ role. The head-IT of the Mumbai International Airport is an example. He is helping the airport become self-reliant through IT-powered revenue streams. Our cover story this fortnight talks about how the airport is betting on unified communications to help it make its IT organization a profit centre. So, we might want to rephrase the earlier question to: can CIOs become business leaders? And I am not referring to whether a CIO can become a CEO. It’s more about leading a business change, by helping it (business) explore innovative ways of sustainable profitability — exactly the kind of initiative Mumbai airport has embarked upon. You do not necessarily have to be a CEO to drive a business change, in fact if you do it as part of your IT leader’s role, it will help IT achieve the recognition it truly deserves. How are you driving a sustainable business change at your organization? Do write in and let’s keep this dialogue alive.

Pankaj Mishra Executive Editor pankaj_m@cio.in

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T.P. Anantheswaran, Head-IT, MIAL, wants to generate profits using unified communications

Unified Communications

COVER StORy | pROFIt ChARtER | 20 Faced with losses, airlines are throttling back on the number of flights they operate — affecting airport bottom lines. Mumbai airport’s CIO says he can help: by using unified communications on a scale unheard of in India, he plans to make profits and future-proof the airport. But can UC do the trick? COVEr: dESI gn bY bInES h SrEEdharan

Feature by Kanika Goswami plus:

Executive Expectations VIEW FROm thE tOp | 38 With BIAL’s take off, Albert Brunner, CEO, Bengaluru International Airport, is now looking ahead and is setting into motion plans for the next phase of the new airport. Interview by Kanika Goswami

Vendor Management thE ARt OF thE NEW DEAL | 44 Despite the current slowdown, now is the right time to push vendors for a better deal. Feature by Kim S. Nash

Security

UC can change the way you do business. Start by looking at what fits your enterprise and what you can leverage.

hOW tO GEt yOuR CIOs tO LOVE yOuR CSOs | 54 What’s good for the CIO, isn’t always good for the CSO. But the relationship between them must find balance — only in that partnership can security and innovation grow.

Feature by Brian Bourne

Feature by Jon Brodkin

WhEN uC WEDS ROI | 28

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Essential Technology | 56 Business Intelligence | Run Fast with BI

Feature by Thomas Wailgum pundit | Open Source Governance

Column by Bernard Golden

From the Editor | 2 Driving Change

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 Bpm mEDICINE | 30 BPM doesn’t have to be a bitter pill. By putting business process ahead of technology, a drug giant laid the groundwork for BPM success.

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Feature by David F. Carr

peer-to-peer GEttING Out OF NumBER tWO | 18 CIOs from FedEx, Campbell’s Soup, Carlson and other top companies share the counsel that helped them get ahead. Column by martha heller

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ADVISORY BOARD

Advertiser Index

Abnash Singh

Publisher Louis D’Mello Associate Publisher Alok Anand

President, IT Operations & Center of Excellence, UCB Pharma

Cisco

39, 40 & 41

Alaganandan Balaraman

Editorial Editor-IN-CHIEF Vijay Ramachandran

executive Editor Pankaj Mishra

Resident Editor Rahul Neel Mani assistant editors Balaji Narasimhan , Gunjan

Trivedi, Kanika Goswami

Alok Kumar

Emerson CIO2CIO

Global Head-Internal IT, Tata Consultancy Services Anwer Bagdadi

HP (IPG)

4&5

HP (TSG)

IBC

Senior VP & CTO, CFC International India Services

Chief COPY EDITOR Sunil Shah Copy Editor Shardha Subramanian

Trainee Journalists Sneha Jha, Saurabh Gupta Des ign & Production

Creative Director Jayan K Narayanan

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Lead Designers Vikas Kapoor, Anil V K

Vinoj K N, Suresh Nair Girish A V (Multimedia)

Arun Gupta Customer Care Associate & CTO, Shoppers Stop Arvind Tawde VP & CIO, Mahindra & Mahindra

Unnikrishnan A V Sani Mani (Multimedia) Designers M M Shanith, Anil T, Siju P

P C Anoop, Prasanth T R

Photography Srivatsa Shandilya

Production Manager T K Karunakaran

DY. Production Manager T K Jayadeep Mark eti ng and Sales VP Sales (Print) Naveen Chand Singh VP Sales (Events) Sudhir Kamath GENERAL Manager Nitin Walia Assistant Manager Sukanya Saikia Marketing Siddharth Singh, Priyanka Patrao, Disha Gaur Bangalore Mahantesh Godi, Kumarjeet Bhattacharjee B.N Raghavendra Delhi Pranav Saran, Saurabh Jain, Rajesh Kandari Gagandeep Kaiser Mumbai Parul Singh, Hafeez Shaikh, Kaizad Patel Japan Tomoko Fujikawa USA Larry Arthur; Jo Ben-Atar Events VP Rupesh Sreedharan Managers Ajay Adhikari, Chetan Acharya Pooja Chhabra

Btw 8 & 9

Ashish K. Chauhan President & CIO — IT Applications, Reliance Industries

IBM

Nortel

Rittal

C.N. Ram

SENIOR Designers Jinan K Vijayan, Jithesh C C

HP Innovation

Chinar S. Deshpande CEO, Creative IT India Dr. Jai Menon Group CIO Bharti Enterprise & Director (Customer Service & IT), Bharti Airtel

Sigma Byte

IFC

Manish Choksi Chief-Corporate Strategy & CIO, Asian Paints

Wipro

M.D. Agrawal Chief Manager (IT), BPCL Rajeev Shirodkar CIO, Future Generali India Life Insurance

This index is provided as an additional service. The publisher does not assume any liabilities for errors or omissions.

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 S.R. Balasubramnian Exec. VP (IT & Corp. Development), Godfrey Phillips Satish Das CSO, Cognizant Technology Solutions Sivarama Krishnan

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Executive Director, PricewaterhouseCoopers Dr. Sridhar Mitta MD & CTO, e4e S.S. Mathur GM–IT, Centre for Railway Information Systems Sunil Mehta Sr. VP & Area Systems Director (Central Asia), JWT V.V.R. Babu Group CIO, ITC

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new

hot

unexpected

I T B u d g e T While CIO’s in India have been clamouring for an increase in IT budgets for years now, only the manufacturing industry seems to have taken note. According to a report published by IDC, IT spending in the manufacturing vertical for the Asia Pacific region, excluding Japan, is expected to reach Rs 132,000 crore by 2012 and India is expected to be second only to China. Sanjeev Kumar, country head-IT, Philips Electronics India says, “IT spending in our company has gone up by almost 100 percent as my department has undertaken major projects to meet market demands and challenges.” He says that the areas benefiting from the money being pumped into manufacturing are ERP, BI, SOA, manufacturing execution systems, and warehouse management

systems. “For the CIO, bigger budgets automatically mean professional satisfaction, an increased stake in the company and an empowerment to give IT functions a complete facelift.” S.R. Balasubramanian, executive vice president-IT, Godfrey Philips says that IT has enabled manufacturing industries to meet business pressures and margins as companies have been trying to decrease inventory costs. Balasubramanian says, “IT has helped manufacturing companies to develop their responsiveness to the market and improve the efficiency of their internal supply chain management.” Daya Prakash, head-IT, LG Electronics India points out that the increase in IT budgets are a direct result of IT implementations being able to achieve a reduction in product development. LG has achieved almost 90 percent

IllUStratI on by MM Shan I th

Manufacturingg Gets Richer

automation in its business practices and this gives the company a competitive advantage. “For CIO’s this is a welcome situation,” says Prakash. —By Saurabh Gupta

Quick take

J. Shivshankar on Innovation Flourishing companies relentlessly pursue innovation to provide an enduring competitive advantage to their business. Deploying IT-enabled innovation is a sure fire recipe for top line growth. J. Shivshankar, VP and Head-IS, Infosys Technologies, spoke to Sneha Jha and here is what he had to say:

I n n o vaT I o n

In what areas of your organization has innovation played a role? There are a few focus areas: BPM-driven SOA, grid computing, mobility, knowledge management, analytics. We have about 100 patent filings and numerous tools to improve operational efficiency and help our customers with better software. How has innovation given your organization a competitive edge? We have developed new products and services like InFlux™ that enables our consultants and software engineers to translate business requirement and its language to engineering specifications with great accuracy and completeness.

Does innovation lie in using existing technology or in the development of a new one? It is both, but our focus is on leveraging existing technologies to meet our customer requirements better. This is more of applied research and development where we partner with companies like Microsoft, Oracle and SAP to develop new solutions that can be best leveraged to meet our clients' future requirements. Does your CEO ask the IT team to deliver IT-enabled innovations? As our business focus is in information and communication technology (ICT) our innovations also follow a guideline of leveraging ICT better to create new intellectual property. For example, Magic Mirror is an interactive touch-screen computer designed for trial rooms to improve customer experience in selecting clothes and accessories. With RFIDtagged clothes, complete information on the apparel and its associated accessories are made available to the customers.

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Should CXOs Stop Saying They Dont Know Technology? a w a r e n e s s As IT continues to play a more and more critical role in business processes and pervades all layers of business, understanding technology is increasingly becoming a critical aspect in a CXO’s portfolio. Is it time to stop allowing CXOs to say that they don’t understand IT? Saurabh Gupta asked your peers and here is what they had to say:

“Yes. All work streams or verticals are dependent on IT infrastructure even if it is as simple as an e-mail or larger applications like ERP.” TrendlInes

ajay B Masur CIo, hIrCo

“CXOs have to understand IT as it impacts and touches business at all levels. I think they have the power to turn IT into a magic tool while making business decisions.” sanjay aggarwal Chief technical t officer, yamaha Motor Solutions y

“Most CXO’s know about IT through education and interaction with their peers. They are expected

to operate their businesses on PCs themselves and almost all wield PDAs." anil punjwani head It, Philips Electronics India

lend your

Voice

Write to editor@cio.in 10

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IM to Overtake Business E-mail I n T e r n e T Instant messaging is set to overtake e-mail as the preferred form of business communication by the second half of 2010, according to research by IDC. The research, found that this is because hyper-connected individuals are becoming addicted to the instant gratification of IM and text messaging. The research white paper The Hyper-connected: Here They Come is based on a global study involving some 2,400 working adults in 17 countries. It focused on quantifying the state of today's connectedness, tracking its acceptance and use across devices and applications as well as determining the pace of its growth and impact on the enterprise. The research found that 16 percent of the global information workforce is already ‘hyper-connected,’ and another 36 percent will soon be joining them. It said that hyper-connectivity varies by industry, from nine percent of respondents from healthcare to 25 percent in high tech industries and 21 percent in finance industries. The IDC report said that "the migration to hyperconnectivity will create a profusion of devices, applications, and new business processes" and, already, "the average hyperconnected individual uses at least seven devices to access the network and nine connectivity applications". Researchers said this profusion will create the need for a strategy and architecture for unified communications across the enterprise if an orderly migration is to occur. "The boundary between work and personal connectivity for the hyper-connected is almost non-existent," the IDC researchers report. "Two-thirds use text or instant messaging for both work and personal use. More than a third use social networking for both." The researchers warned that connectivity tools in the hands of employees may increase productivity, but they also increase the risk of the release of sensitive information to the outside world. "Already some 25 percent of hyper-connected respondent companies use blogs and wikis to communicate with customers and other outsiders," the report stated. "Obtaining the benefits and avoiding the risks of hyper-connectivity will require unprecedented cooperation between CIOs and their business counterparts."

—By Ross O. Storey

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Data Centers Innovate To Cut Energy Use

Increased compensation 27% Don’t know 11% None 7% Other 1% Company stock or options 2%

center without creating heat spots that could damage equipment. The set-up can reduce cooling energy costs by 25 percent, said Christina Page, head of Yahoo's energy and climate strategy. The containment systems must not interfere with sprinkler systems. Yahoo used flame-retardant PVC connected to the racks with 'fusible links' that would collapse at 130 degrees Fahrenheit in the event of a fire, allowing the sprinklers to operate, Mitchell said. Dean Nelson of Sun said data centers should consider raising their overall temperatures. Sun tested modular cooling systems on five-year-old servers and they operated without any problems even when aisle temperatures reached 85 degrees Fahrenheit. "It makes me wonder," he said, "why are we running our cold aisles at 18.33 centigrade?" Accenture is publishing the results from the case studies on its Web site, along with an overview that compares their effectiveness.

—By James Niccolai

Money talks when it comes to keeping IT staff in the fold but it’s not the only employee-loyalty tool, according to a survey of CIOs by Robert Half Technology. Training and flex time are also important retention tools.

18% Flexible schedules 21% Professional development or training

7% Telecommuting 6% Extra vacation Infograp hics BY pc anoo p

What Improves Retention?

Bill Tschudi of the Lawrence Berkeley National Laboratory. Many data centers use alternating hot and cold aisles to keep warm and cold air separate, but that method is only partially effective because the air mixes in the spaces above the aisles, Tschudi said. Oracle tested 'hot-aisle containment' at a data center in Texas, which involves building an enclosure around server racks so that the hot exhaust can be siphoned off. Cooling systems account for as much as half the energy consumed by some data centers, said Mukesh Khattar, who heads Oracle's energy efforts. The hot-aisle containment allowed Oracle to reduce the fan speed in its cooling system by 75 percent, which reduced the fan's power consumption by 40 percent, Khattar said. It installed a variable frequency drive to control the fan and got payback for the investment in nine months, he said. Yahoo tested cold-aisle containment, and then installed a wireless sensor network to monitor temperature and humidity around the room. The sensor network allowed Yahoo to gradually increase the temperature in its data

trendlines

Putting data centers on decommissioned ships and reusing hot water from cooling systems to fill the town swimming pool were among the wackier ideas floated at the Data Center Energy Summit. Data center operators came together to compare notes about the best ways to tackle rising energy consumption at their facilities. Ideas ranged from the exotic to the more down to earth, like improving air-flow management and using outside air in colder climates to cool equipment. Subodh Bapat, vice president for energy efficiency at Sun Microsystems, described a perfect storm of factors that are forcing data centers to become more power efficient. One large healthcare center is looking at reusing hot water expelled by its cooling systems to do its laundry, Bapat said. A hosting company in the Northeast is freezing water overnight, when the cost of electricity is cheaper, and then blowing air over the ice during the day to provide cold air for cooling systems. One of the most effective solution is better air-flow management, so that cold air pumped in to cool equipment doesn't mix with hot exhaust air coming out, said

d ata c e n t e r s

days or time off

Source: CIO Research

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Web 2.0

scores success in the enterprise

TrendlInes

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no green Signal e n v I r o n m e n T Green is in, right? Maybe, but a large number of IT shops aren't willing to sacrifice performance even if it would help the environment, according to a new survey. Hosting provider Rackspace surveyed 3,000 customers this year and last year, and found some results suggesting businesses are losing interest in green technology. Sixty-three percent of customers this year said they are not willing to sacrifice any server performance to lower carbon emissions. Last year, only 41 percent of Rackspace customers were unwilling to sacrifice performance to reduce global warming emissions. In last year's survey, 8 percent of customers were not willing to pay a premium for green products and services, such as renewable energy, recycling, conservation or carbon offsets. This year, 30 percent were not willing to pay a premium for such environmentally friendly products. In addition, although last year more than half of respondents said they would pay 5 percent to 10 percent more for services from a 'green' vendor, only 41 percent were willing to do so this year. Eleven percent of businesses said they are not concerned about their impact on the environment â&#x20AC;&#x201D; and doubt they ever will be. Rackspace CTO John Engates was surprised by how many people aren't willing to sacrifice any server performance for environmental gains. What wasn't surprising, he says, is that people seem less willing to pay premiums for green services this year. "Last year, people were willing to make some sacrifices and pay a little more," Engates says. "Today, with the economic times and the cost of energy and fuel, green has taken a back seat," he says. That might seem short-sighted, given that environmentally friendly technologies theoretically should help customers save money by improving energy efficiency. Engates suspects, however, there might be a similar unwillingness to adopt green technologies among people who run their own data centers, because IT managers typically aren't responsible for energy costs. Another recent survey, conducted by BPM Forum, found that 86 percent out of the 150 IT pros surveyed are concerned about their impact on the environment, but only 41 percent had any specific green plans in place.

â&#x20AC;&#x201D;By Jon Brodkin

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IllUSt ratIon by Un nIKrIShn an aV

n e T w o r k I n g Incorporating Web 2.0 social networking concepts into enterprises offers great benefits but also challenges, implementers of these technologies, including best buy, Serena Software, and oracle, said during an industry event in Silicon Valley. Social networking in the enterprise, also referred to as Enterprise 2.0, increases collaboration and idea sharing amongst employees as well as customers and can even lower employee turnover, panelists said at a Churchill Club presentation entitled, from Dilbert to Dude: Succeeding with Web 2.0 Within the Enterprise. best buy has set up a social networking site for employees called blueshirtnation.com, which has attracted 20,000 users, said Steve bendt, best buy senior manager for social technology. Persons can participate in activities such as using audio files or blogging. the impact has been pretty huge, enabling the company to listen to and better understand employees, he said. barriers are being broken down. "It was about giving up control right away," bendt said. "now, they have the means to connect with people they've never met before," such as a store in las Vegas talking to a store in north Carolina. an employee can put an idea on the site and get funding for their idea anywhere in the company. the site does not challenge the hierarchy but complements it, bendt said. turnover appears to have been impacted as well as employee t morale. the overall turnover rate at the company is 60 percent while turnover of people using the site is just 8 to 12 percent. Serena Software has taken a different approach to social networking, conducting its collaboration on f facebook. While seeking a better way for communication than the company's intranet, the company pondered rebuilding it but instead looked toward 'millenials,' the 20-something people and how they communicate, said rene bonvanie, a senior vice president at Serena. Serena officials made f facebook the new corporate intranet, resulting in improved communications. Employees speak with each other and with customers more openly. Customers know where to find representatives and technologists. avenue a/ razorfish has added a wiki built on the Wikipedia platform, said Shiv Singh, vice president for social media and global strategic initiatives at the company. Users can find an interesting article, bookmark it using del. icio.us tags, and have it appear in the wiki. "Companies need to rethink how they motivate and how they reward. It needs to be based on teams and collaboration," Singh said. â&#x20AC;&#x201D;by Paul Krill socIal

Hinging on the unpredictable organization's outcomes more predictable, and It professionals polled identified Six Sigma and ItIl l as the most common frameworks used for process standardization. and 80 percent of respondents said they believed automating It t functions frees up time and budget for innovation, while 72 percent said automation of It t change management makes results more repeatable. yet 68 percent reported they still use manual methods for tasks y such as identifying application security issues, and 28 percent of respondents described their application security process as mature with formal policies and tools in place to manage security from development through operations. the survey also shows that a majority of companies — three out of four polled — couple their organization's enterprise risk management with It t risk management, which indicates business will suffer when It t experiences an outage. y yet if It change is appropriately managed, the business could see less of an impact when problems arise, EUI says. "Companies that can manage these issues properly will have a distinct competitive advantage," Witchalls said in a statement. —by Denise Dubie

TrendlInes

m a n a g e m e n T Unexpected changes and increased system complexity within It t put business performance and security at risk, according to the results of a survey. "the key findings from the Economist Intelligence Unit (EUI) study show that the majority of business disruptions are linked to It t changes," said David gee, vice president of marketing for hP Software. the survey showed that the more unchecked changes It t environments incur, the more likely an outage or security breach will impact the business. y yet a majority of It professionals polled continue to rely on manual efforts to track changes across large, distributed environments. "the data clearly shows that predictability is an issue for many It t organizations. given that It t and business risk are so tightly linked, a lack of predictability for It t equates into a lack of predictability for the business," said Clint Witchalls, senior editor, EUI, which conducted the survey of 1,125 It t professionals on behalf of hP. for instance, one out of four respondents said that 50 percent f of their outages were caused by change. More than two-thirds of those surveyed said process standardization has made the It IT

biggest storage trends

Major issues and trends in storage technology are injecting added complexity to storage strategy. Industry experts identify some of these influencing factors on the enterprise.

IllUStratIon by MM Sh an Ith

sTorage

VIRtuALIzAtIOn: Virtualization is the big story right now as it pushes a transformation in organizations' storage infrastructure, where direct-attached storage is gradually giving way to NAS and SANs, says Philip Barnes, senior analyst for the storage market, IDC Canada. Adopting network storage, says Barnes, means organizations can take advantage of the mobility features of virtualization,

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and the increased resiliency given that disk is no longer associated with a single physical machine.

and retrieval faster. Enterprise customers are increasingly using disk for performing operational recovery.

10-gIgAbIt EthERnEt Vs. fIbRE ChAnnEL: The 10-gigabit Ethernet network threatens to challenge fibre channel, according to John Sloan, senior research analyst with Info-Tech Research Group. While fibre channel is a faster medium for datacentre storage, Sloan says "that differentiation will become a race" as Ethernet gains in the capacity it didn't offer before, and becomes increasingly affordable.

DE-DupLICAtIOn: The process of de-duplication entails eliminating redundant blocks of data by saving only data that changes. De-duplication is often used with virtual tape libraries that emulate storage and function in a similar fashion except backups and recovery can be performed much faster, says Sloan.

DIsk Vs. tApE: Whether it's a large data centre or one that's just running a couple dozen servers, backing up from server to tape presents similar issues, says Sloan. Businesses have begun to convert to disk backup in the past couple of years, choosing a virtual tape library to help reduce the storage space by a fraction, and also perform the task of backing up

fLAsh-bAsED stORAgE: EMC began shipping flash-based disks offering better performance and response time, a technology that the company believes will influence future storage product design. Although in its infancy and still costly, flash-based storage will, in a short time, comprise a large portion of the data centre.

—By Kathleen Lau REAL CIO WORLD | j u ly 1 5 , 2 0 0 8

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Chris Potts

Expert View

Don't Let IT Budgets Hypnotize You When you focus on how much money is in your IT budget, you're wasting your time. To get the most from your IT investments, you need to consider what you're spending to reach your business goals.

Il lustratio n by ANIL T

ne of the many diamonds of wisdom that come from working with people running companies is that a corporate strategy needs a constraint or two. While the strategy sets the ambition and context for business decisions, constraints drive us to make them. Two things, however, are vital: a constraint must be genuine, not imagined or contrived, and people must know how to use it in ways that execute the strategy rather than undermine it. With much talk of global economic challenges in the air, it’s a good time to reflect upon what we’ve learned about the value of IT spending constraints to the success of the CIO’s strategy. First, a CIO’s departmental budget is rarely the same as the company’s total IT spending. Constraining that budget is no guarantee that we are constraining the company’s overall costs of IT because there are almost always IT expenditures in business unit budgets. So, let’s not focus on the IT department budget until we’ve understood the wider IT spending picture. Second, constraining IT costs in isolation from the business decisions that create them, breaks the first principle of IT investment (which is that technology, on its own, delivers no value). IT budget constraints potentially impact all the people using IT to create business value, and all the business decisions that cause IT costs to exist. So let’s also understand, and utilize, the business causes of IT costs and the business impacts of constraining them in order to define how much to spend on IT.

Defining the IT Budget Rachael is the CIO of a major transportation company, with a staff of 400. Her departmental budget for this year is Rs 14

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Chris Potts

Expert View

A CIO’s budget is rarely the same as the company’s total IT spending. Constraining your budget is no guarantee that you are reducing the company’s overall costs of IT. 980 crore, 17 percent more than last year. Most departmental budgets are likely to be frozen or cut. However, her executive colleagues know what is causing the increase; that Rachael’s departmental budget is a variable proportion of the company’s total IT spending. Rachael is leading the corporate strategy for IT. Its promise is that the company will create maximum value from all its investments involving IT. That would still be the promise of the corporate strategy for IT even if there were no IT department. The IT numbers that most concern Rachael and her colleagues are not her departmental budget and the specific range of IT services it covers, but the company’s total IT costs. The two numbers they always want to explore are total cash spending on IT and the total cost of IT to P&L. Cash spending is the money that goes out the door, whereas cost to P&L is how much IT costs the profit of each business unit and of the company as a whole. The two numbers are always different and are usually managed by different people. Rachael’s strategy relies on transparency of both the total numbers and the business decisions that cause them. So, the last thing that she and her colleagues need is for people to hide IT costs, call them something else to get around constraints on IT spending, or call non-IT costs ‘IT’. Besides blinding their strategy to the truth, such behaviors also undermine their tactics for using IT costs to influence business decisions and make nonsense of their IT benchmarking. Because Rachael is transparent with her colleagues about her department’s costs, her colleagues are equally transparent with her about the IT-related costs that come within their budgets. So, they are all confident that they are working with the bona fide total IT numbers within an immaterial margin for error. As a result, Rachael can prudently estimate that the company will spend a cash total of Rs 1,264 crore this year on IT, 27 percent less than last year. While her departmental budget is increasing, total IT spending is expected to decline. However, Rachael also has to tell her colleagues that the total cost of IT to the company’s P&L is expected to increase by 15 percent to Rs 1,140 crore. What are the main causes, her colleagues ask, of the movements in these numbers, and what can we do to reduce how much is spent on IT? This is where exploring the IT costs in isolation has to stop and the business context for those numbers must begin. Rachael explains that the total cash spending on IT is mainly expected to reduce this year because the company is planning to invest less in business projects, and that a lower proportion of those projects’ total business investment is planned to be spent on IT. However, she cautions, the actual total may be 16

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different from current provisions because many projects have yet to be initiated or even conceived.

Cut Spending the Right Way If the executives want to reduce total cash spending on IT what options do they have? There will be some scope to prune total operational expenditure on IT. This will be paying for services that are used by the company’s employees and customers to create value throughout the organization and beyond. These expenses are also covered by contracts with suppliers and IT employees. Furthermore, CIOs like Rachael have focused relentlessly in recent years on finding operational efficiencies and economies of scale. More likely, the main room for maneuver will be in business projects involving IT (what we used to misguidedly call IT projects). Now, with everyone looking at the IT numbers they might be tempted to prioritize the IT costs within projects to meet a new, lower, IT total. This is the right process, but is looking at the wrong numbers. The cash that executives are planning to spend on IT is only one element of the total project investment necessary to deliver the promised benefits. If the executives want to prioritize investments in projects involving IT they need to consider the entire project, not just the IT elements. They can choose not to invest in projects that promise the least bang for the business buck. But a better process is to explore how they can achieve the same bang by spending less, or even nothing, by better exploiting existing systems. Turning to the total IT costs to P&L, again, where is the room for maneuver? Therefore, to significantly influence future costs of IT to P&L we’d better start now. Constraining future IT costs to P&L needs to be an integral part of our project approvals process, solution designs, sourcing decisions and project management. If our projects portfolio is going to impact our future IT costs to P&L by more than we can afford, then we need to re-craft the business changes that plan to exploit technology, with no loss of business value, so that the future IT costs stay within our constraints. Business decisions that cause the company to spend money on IT make the total IT costs what they are. If we get those decisions right then the most appropriate total IT spending, and then IT budgets, will emerge. That's worth remembering when we’re looking at IT costs, whether times are hard or not. CIO Chris Potts is director of Dominic Barrow, an IT strategy consultancy. Send feedback on this column to editor@cio.in

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Martha Heller

Peer-to-Peer

Getting Out of Number Two CIOs from FedEx, Campbellâ&#x20AC;&#x2122;s Soup, Carlson and other top companies share the counsel that helped them get ahead.

s CIO, you have doled out your share of advice to the people you mentor. But at this stage in your career you probably feel confident enough in your own counsel that you rarely seek advice from others. But regardless of the title we bear, we are all on a career path and could all benefit from the perspective of those who have traveled a similar course. To that end, I asked several successful CIOs for a piece of career advice that they received along the way and that has served them well. Their experiences can help as you consider your own role â&#x20AC;&#x201D; or provide new material when you're coaching others.

Illustration by MM Shanith

Get uncomfortable. I was a young technology manager and had a job that I absolutely loved. Everyone was my friend and the work really appealed to me. I was on a management development plan and was sponsored to interview for a job in a large scale systems development area of a different division of the holding company. When they made me an offer, I turned it down. My VP called me up to the 37th floor and told me how disappointed he was with me. He told me that he had been working hard to advance my career and that I was being a chicken by sticking with my comfort zone and not stretching my skill set. He put his foot in the middle of my back and kicked me out the door. Turns out, he had intercepted my rejection, so I had the chance to reverse my decision and take the job. I learned a completely different skill set and was promoted twice within the next 18 months. That job really launched my career, and the opportunities it gave me are why I get to sit in this amazing job today. Robert Carter, CIO, FedEx 18

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Martha Heller

Peer-to-Peer

Carpe diem. A colleague once told me that the key to success is not to worry too much about long-term career plans and just spot and seize upon great opportunities. It's about being brave enough to go for opportunities that do not necessarily fit into the career path you set for yourself. I was managing director of trust operations at Bankers Trust. The IT organization was implementing a $50 million (Rs 200 crore) trust accounting system. The systems leader became ill and had to leave. So, after a major battle over getting funding for the project, we had no one to lead it. With no real technology experience, I went to the vice chairman of the bank and said, "I can do this." He was skeptical, but I told him that I could figure it out, and he gave me the project. I wound up leaving my operations management career path for senior IT leadership roles at Banker's Trust, Prudential Insurance and then to my first CIO role at Nabisco. Doreen Wright, CIO, Campbell's Soup Fall on your sword. Very early in my career, a mentor advised me that it is far better for your career in the long term to admit responsibility for failure than minimize it or defer accountability. In the late 80s, I was championing a companywide project and determined at a pretty advanced stage that it was unlikely to be successful. Instead of trying to save it, I made the decision to throw in the towel and tell my boss, the CIO, that the project was a failure. When my boss decided to promote me later, the integrity I showed on that project weighed heavily in his decision. Peter Solvik, MD, VC firm Sigma Partners Don't play it safe. During the late 90s, a colleague gave me a great tip: go for the projects that everyone else is afraid of. It's a great way to get noticed. This entered into my decision to lead my company's Y2K project and this was how I went from a business to a technology role. The Y2K project was behind the curve and everyone had been staying away from it. I raised my hand to lead the project, gained enterprisewide recognition and earned the CIO job. Bill Wray, CIO, Citizens Financial Group Go with your gut. The best career advice was given to me by a peer when I was at GE and it had to do with starting up a CIO role in a different company. Whenever you begin a new role, you do a lot of listening, receive a ton of input, and learn as many facts as you can about the current situation. But after you've received all of that data and opinion, you need to follow your own instincts. When I took the CIO role at Medtronic, I was its firstever CIO. As a result, I got a lot of input about what my first priority should be from the people who hired me. I took all of that input in, but I knew that the very first area to focus on was the team and organization because it was not set

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In the long term, it is far better for your career to admit responsibility for failure than minimize it or defer accountability. up the way it needed to be. Had I acted on the priorities of others, I might not have been as successful. Jeff Balagna, CIO, Carlson What interests your boss should fascinate you. My mentor, Edith Kelly-Green, was VP of Sourcing at FedEx, when she said this to me many years ago. When Edith arrived at FedEx, she learned that the big deals happened on the golf course. As an African-American woman, this was new territory for her. Rather than risk being pushed to the sidelines, she took golf lessons and learned the game. I had little knowledge of hockey, and the Stars had just won the pennant. I knew that if I wanted to build relationships in the company, I had to follow Edith's lead and get smart enough about local sports so that I could participate in that dialogue. Jeff Campbell, CIO, BNSF Railway Get dirty. Early in my career, I was a manager of engineering support for AIS, a division of Raytheon. The IT department did not have the respect of the business. Systems were not working and needed major upgrades, people were not held accountable for their work. My boss said to me, "I'm going to have to fix this problem. Will you help?" I was not certain that I was up to the task, but I dove in. He promoted me to director and over the next 19 months, we restructured the organization, got pay increases for the staff, made large systems modifications and turned the organization around. Doug Debrecht, CIO, Chemtura Love it or leave it. Years ago, an author named Beth Milwid was working on a book of career advice for women, and I had an opportunity to interview her. She said that you should love what you do and if you don't, move on. I took this to heart and have applied it throughout my career. At one point, I went to a new company as global technology infrastructure leader in order to round out my resume and prepare for a CIO role. But when I got there, I assessed the IT environment and wound up outsourcing much of the infrastructure. I felt like I'd learned what I wanted to learn and didn't see my career growing by staying where I was. So, when a great opportunity at a new company came along, I took it. Jody Davids, CIO, Cardinal Health CIO Send feedback on this column to editor@cio.in

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7/18/2008 2:57:00 PM

By implementing unified communications, T.P. Anantheswaran, Head-IT, MIAL, seeks to generate profits and make IT self-reliant.

Reader ROI:

The challenges and issues in deploying UC How UC can streamline airport operations and make IT self-reliant The importance of UC in increasing productivity and reducing cost 20

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Cover Story | Unified Communications

Profit is the order of the day — especially if you run an airport. Faced with huge capital costs and losses from airlines throttling back operations — airport earnings are diving. mumbai airport's Cio says he can help: by using unified communications on a scale unheard of in india, he plans to generate revenue. but can it do the trick? by kanika goswami

against the privatization of major airports in the country, the Mumbai's Chhatrapati Shivaji International Airport became part of a global fraternity of airports run by private stakeholders. The airport is India’s busiest, with 22.2 million passengers and 480 tons of cargo passing through its doors in 2006-2007. Among other decisions that were made at the time was to set up an IT department at the operations center of the new terminal. It was a decision that stakeholders of Mumbai’s airport may well be thankful for in two years. That the new terminal would need innovative communication technology was a foregone conclusion. Airports around the world were gearing up for the future and the Mumbai International Airport (MIAL) was presented with a chance to do some catching up. “The Indian economy has been growing at a phenomenal pace over the last few years...An airport is the face of a city. So it is critical that India, as one of the largest economies in the world, is be able to [create] a first impression," says Sanjay Reddy, MD, MIAL in an interview. Vol/3 | ISSUE/17

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Photo by SrivatSa Shan dilya iMaGinG by anil t

In 2003, after endless rounds of political maneuvering and countless agitations

Adopting an evolving technology brings with itself some amount of risk but when it comes to unified communications, the aviation sector does not seem to be thinking twice. The newly launched Bengaluru International Airport (BIAl) is geared up for growth. The swanky new airport is not equipped with unified communications at this stage. However, in the near future, the airport plans to embrace the technology for augmenting workforce efficiency, asset reusability, operational and delivery efficiencies. “BIAl l site spans an area of 3,900 acres and has around 550 employees spread across various locations. In order to improve collaboration and employee productivity, the company adopted a unified communications strategy. But the technology is restricted to internal use,” says S. Francis Rajan, head ICT (Information & Communication Technology) of BIAl. Explaining the nature of technology that the airport has deployed Rajan says, “our communication strategy includes e-mail, voice mail, VoIP and IM. While Exchange 2007 provides messaging services, IP PABX systems (Ericsson and Siemens) cater to VoIP services.” The airport’s IT team has implemented IM that has the ability to make and receive VoIP calls from user’s workstations. This service is currently made available to all BIAl IP support groups. This will be extended to all employees by midAugust and to partners before the end of the year. Mail access using mobile devices will also be available. The organization has plans to implement unified messaging services that allow users to access voice mails from their mailboxes. Using the same network, it is proposed to deploy Web cameras for webinar. Rajan is also interested in extending the technology so that their clients can use it. This plan will be implemented by the fourth quarter of this financial year. — By Sneha Jha

“The company has adopted a unified communications strategy. But the technology is restricted to internal use.” — S. Francis Rajan, Head ICT, BIAl

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Studying other international airports like those in Munich and Montreal, the newly appointed head of IT, T.P. Anantheswaran decided he could do better. The challenge, as far as he was concerned, was not to rub shoulders with the rest but to stand head and shoulders above them. He decided that he could do that by stoking his communication system to generate revenue. But whatever he planned also needed to ensure that the airport would be set to meet the needs of the next two decades and maybe even longer. “It (the communication backbone) had to accommodate the traffic we will see on this network going forward,” he says. The challenge, he adds was to cater to increased passenger traffic — from 18 to 40 million — and increased cargo from four lakh tons to 10 lakh tons annually. As Anantheswaran ticked off everything that would be required from the system, one observation emerged: the airport’s communication infrastructure needed to meet the needs of a service provider — a large step away from its traditional role. “Once, airports were just space providers. Airlines put in their own IT. But, with the massive growth in passenger numbers and with airports facing a major space crunch, the need for common-use infrastructure has become epic. Today, airports have to be an unifying service provider,” he says. Unified communications (UC) seemed a logical fit largely because it would allow airport planners to merge and streamline services — an apt philosophy when you’re embarking on a huge project. “This (need for common infrastructure) made the management team at MIAL decide that everybody needed to ride on a single infrastructure,” Anantheswaran recollects. "As an infrastructure service provider at the airport, a robust IT network plays a key role," says Reddy. But the common infrastructure/service provider approach had one hitch: the airport needed to ensure as close to zero downtime as possible. If, for example, a lack of connectivity disrupted check-ins, it would have a telescopic effect down the entire line operations, delaying everything. Going UC would need bold decision making. But the time was ripe for bold revenue-making decisions.

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Cover Story | Unified Communications

Turbulence ahead To say that the Indian aviation industry is going through some turbulence would be a euphemism. They have been in so much trouble and have received so much media coverage that ATF has become water cooler conversation. The rising price of airline fuel, about 30 percent of an airline’s cost, is hurting more than just the airlines. As managers at airlines battle to keep their business afloat, they’re beginning to up prices, consolidate, and trim the number of destinations they fly to. Air Deccan recently withdrew 18 flights, SpiceJet cut the number of its flights by about a sixth. Go Air went from 1,000 flights a month to 800. Jet Airways has stopped flying routes like MumbaiNagpur and Mumbai-Ahmedabad. These cutbacks affect even hot destinations like Mumbai airport, which used to handle about 740 flights a day before the fuel crunch, and is now down to about 650. Since airports make a substantial amount of their revenues from these flights, airports are beginning to feel the pinch. Anantheswaran saw a way to help. With UC he would have 100 percent network availability for applications such as a single backbone for voice, video, CCTV, data and radio. He could charge airlines for many of these services. He also envisioned wireless hotspots, self-service portals, and video conferencing booths, which he could charge passengers. Additionally unified communications could help streamline airport processes and infrastructure — and reduce cost. Anantheswaran looked at others who had trod the UC path before him. There were none in India — not at the scale he was attempting. The Halifax Stanfield International Airport was a possible role model. The airport had implemented UC in 2006 to run a network of voice, video, data and wireless communications on a single, airport-wide system. It took Halifax two years to achieve full ROI and it also saved $15 million (about Rs 60 crore) in space. Toronto’s Lester B. Pearson International Airport, which handles over four lakh passengers everyday and is among the world’s busiest airports, also worked with UC. For this airport, UC added value in terms of enhanced passenger, baggage and network security. It also improved operational

efficiency and flexibility, lowered overhead costs, introduced revenue opportunities; and improved network reliability. Munich International Airport, Athens International Airport, and Sydney International Airport, Anantheswaran found, were all on their way to completely unifying their communications. But Anantheswaran was not looking to copy these airports. He wanted more. “We were clear that we wanted to leapfrog and put in the best technology.” His plan would also need to meet the additional requirements that eventual expansion would bring. For example, by the end of 2008, the airport plans to bump up its 3,600 CCTV cameras to 6,000. With each camera requiring at least one Gbps of bandwidth, Anantheswaran knew he should prepare now or pay later.

Rubber hits the runway Ground zero looked bleak. To begin with, when Anantheswaran took over, he didn’t even have a team. Neither did the airport have structured cabling, or IP network infrastructure, which meant that everything would have to be started from scratch. In terms of technology, Anantheswaran was clear of two things: the network he was building must have 99.999 uptime and it had to be created so that it could be used by multiple airlines and their passengers. The choice of technology partner was an important issue. It came down to two giants: Nortel and Cisco. But as Anantheswaran points out, MIAL found a better fit with Nortel. “We evaluated both Cisco and Nortel,” he says, “but we wanted to be a service provider rather than an enterprise, and while both were ok technology-wise, Nortel understood our requirements much better.” It also helped that MIAL got access to Nortel labs, he adds, which helped the airport develop some customizations that were unique to MIAL’s requirements. "Whatever [we] did not have, [Nortel was] willing to commit resources, time and money to develop it. So that tomorrow… we can claim that we are the best in the world," remembers Reddy. The infrastructure that the IT team finally chose uses a Metro Ethernet Network portfolio’s Optical Metro 10G

Without UC, airline counters cannot be used interchangeably, which means that every airline will need three or four counters to itself — occupying large amounts of valuable airport space.

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Cover Story | Unified Communications DWDM (Dense Wavelength Division Multiplexing) fiberoptic backbone, a multi-service platform and Metro Ethernet Routing Switch 8600 platform with Provider Backbone Bridges (PBB) and (Provider Backbone Transport) PBT solutions. The backbone allows 10G Ethernet and storage connectivity, and should significantly reduce the airports capital expenses while simplifying network management and optimization. The PBB/PBT technologies are used to provide VPN and point-to-point Ethernet transport services for the airlines. PBT enables carrier-grade reliability and ease of management with great efficiency and control. Because of stringent security requirements the IT team at MIAL decided against IP-VPN. “These are not secure enough,” says Anantheswaran. “What we are building is a L2 VLAN, which means that even as an airport, even as a provider, I cannot sniff into the network.” Using this, each application and device on MIAL’s network is identified, and only these devices can send traffic. This way no one can introduce or remove devices from the network. It’s a provision that no customer has yet asked, which shows how far ahead MIAL is.

On ThE WIngS OF PROFIT But more importantly, the UC network introduced the airport to a space saving mechanism it desperately needed. With one of the highest property costs in the world, the space that every additional check-in counter ate up hurt. "[This airport] is right in the heart of the city of Mumbai. Space has always been a constraint because it is an island," says Reddy. The common check-in counters — referred to as Common Use Terminal Equipments or CUTE — will go a long way in helping solve this space crunch. UC’s single communication platform allows any airline to use any counter — not a fixed counter like airlines are traditionally used to. By just logging into the network, an airline’s check-in staff can access the various devices that they normally used. So, no matter which counter they use, their telephone extension, for example, follows them. Without UC, airline counters could not be used inter-changeably, which meant that every airline needed three or four counters to itself — necessitating large amounts of valuable airport space. Crucially, the UC-enabled CUTE system also enabled airports to expand the number of counters an airline used to meet sudden surges in passenger traffic, since empty counters could be deployed quickly. This helps reduce the crowd in a pre-check in holding area. The network can also support Common Use Self Service (CUSS) kiosks for passengers who would like to check-in

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themselves. On the airline staff front, employees could employ VoIP for their use — an area that was targeted for revenue generation. In addition, the network will leverage advanced UC communication services like SIP-based presence, IM, collaboration, conferencing and messaging and RoIP (radio over IP). MIAL also plans to use the network to create revenue in different ways. These include passenger processing services, telephonic services (including VoIP), data services and data center services, which are all given out on rent to airlines. Since the airport is a network provider, all ports are charged. So, if an airline wants to take a port, they are

“Our technology mindset is very advanced so we wanted an airport that was technology intensive.” — Sanjay Reddy MD, Mumbai International Airport

not allowed to do their own cabling, but can plug into a port for a monthly rental. For passenger processing, MIAL has a concession agreement with Sita, where Sita maintains operations, invests capital, and offers to tie up with all airlines. Sita then pays a fee to MIAL. “Our target is to make more than Rs 15 crore in 2009-10,” says Anantheswaran, “Currently, the airport spends around 1.5 percent of its revenues on IT. By offering new services to external users (airlines and travelers) the airport wants to bring this down to zero, and create a selfsustained IT organization.” If the figures add up, the logic that these services could turn MIAL’s IT department into a self-sustaining business enterprise — putting MIAL on the same platform as a Bharti Airtel — could work. But if you want to play Bharti, you have to deal with Bharti’s REAL CIO WORLD | j U ly 1 5 , 2 0 0 8

Cover Story | Unified Communications operators committee. We gave them presentations on what we wanted to do. They have been exposed to international airport operations and systems, especially those in Europe, so they were quite open. Slowly, we started getting people on our side,” says Anantheswaran. "We spent some time educating airlines on the benefits of this technology because this is certainly a paradigm change, what with the airport becoming a service provider. They understand and appreciate the convenience of such services: they had never had the luxury of 24x7 network support," echoes Phillip Cash, airport director, MIAL. And it made sense for the airline offices. Take for example, when an airline has to shift office (as is likely to happen as MIAL breaks down and constructs new terminals as part of its airport upgrade plan), airline staff only need to move their stuff. The rest, including access and infrastructure, is done for them. It also cuts cost. “The airport as a service provider lends flexibility. It reduces a tenant’s (airlines) capex; the current infrastructure will ensure that they do not need to invest in more infrastructure over time,” says Cash. It also helped, says Anantheswaran, to have support of the The network cost MIAL Rs 10 crore and will require Rs 7 managing director, Sanjay Reddy, who crore more over the next three years. is totally convinced that airport should Anantheswaran concedes that the UC function as a service provider. deployment costs much more than Starting from scratch, with no IT running three separate networks for team and no network, worked both voice, radio and data. But he is convinced ways. The advantage was that there the benefits far outweigh the costs. “One was no legacy to bother with. “Since thing is very clear,” he says, “since we I didn’t have a legacy riding on my were building such a massive network, we shoulders, I could build whatever we wanted voice on it too. Although the cost wanted,” says Anantheswaran. is higher, manageability and operational the amount that The biggest infrastructure challenge efficiency from UC is far higher.” MIAL's IT team that the IT head faced was laying the But he knew it would require something expects to make off the fiber optic network across the airside. more than ‘efficiency’ to get the expensive UC deployment by It is difficult to get permission to lay the technology past management. Clearly, 2009-2010. network on flying areas but it was done he would have to make revenue-cost in nine months. Fortunately only parts of comparisons. the airport that were being refurbished “On the first phase of the UC network, were taking in the network, which meant no breaking and we spent about Rs 12 crore. In a traditional network, we would reconstructing was required. The downside was that IT have spent about Rs 8 crore. Sure, UC is more expensive schedules to match the construction timetable. upfront but I will save a crore or two on operational efficiencies each year,” says Anantheswaran. “Since this is our first year for revenue generation, we are not setting very aggressive targets. But from year two, we are targeting about Rs 12 crore The IT team’s work has paid off. MIAL now has a UC network to Rs 13 crore a year,” he states. that will see to their communication needs for the next 15 It helped that the management was open to IT innovation. to 20 years. “We sized it so that we almost never run out of "Our technology mindset is very advanced so we wanted an bandwidth,” says Anantheswaran. “We installed 48 cores of airport that was technology intensive," says Reddy. fiber, which is looped into two sets of 24 cores each. This is Convincing users like airlines and carrier lines was a equivalent to almost 15 TB per second.” challenge. “They were not used to seeing the airport as a And it’s also scalable. Anantheswaran says that he can get service provider, so it was a kind of a struggle for us. For the 32 lambdas more if they attach another cable and add some most part, we managed this through our commercial team but components on the backbone. we went for meetings with airport managers and the airline “From the beginning, we realized that this is a service problems, one of which was ensuring uptime with redundancy. MIAL's technology backbone took care of that. “Every fiber backbone has a dual route: from a data center to each hub room there are two fiber routes. This ensures that if one cable is damaged, the second route is taken up automatically within 15 milliseconds, unlike traditional technology, which takes between two and three seconds. If a user is in the middle of a telephone call, he or she will not even realize a fiber has been cut,” Anantheswaran says. Another problem that came with being a service provider was the size of infrastructure. The hub rooms, which distribute cables to every VoIP phone, data port, check-in counter etcetera, were 50 meters in radius – and MIAL had 16 of them. Sparing huge amounts of space for data center and the hub rooms, was a daunting idea. “Unless we clearly show revenues coming out of the space we were taking up, it is going to be very difficult to justify the move,” says Anantheswaran. And that wasn’t where the costs ended.

buSInESS TICkET

crore:

nEW ChARTER

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From hype and RoI to system requirements and quality control, communications convergence can be a complex road to navigate. Here are five things you need to know before you begin. Traditional (Analog) PBXs are going the way of the dinosaur. IP-based phone systems bring capabilities for new functions and will enable unified communications (UC). You need to know what those features are as part of your selection process for a PBX replacement You need to be ready to address business RoI opportunities for UC technologies once they are identified, or confidently tell business partners that there is no RoI, at least for now.

Consumer phone options are delivering e-mail-enabled voice mail already. This can either delivered as an audio file to e-mail, or as speechto-text. You need to know that those expectations will come into play in the organization. other technologies, such as IM, call routing options, consolidated phone numbers (wireless and wired), wireless IP phones, and conferencing options will drive future innovation. You need to manage innovation and new technology in a planned way.

provider class network. Within the campus, we are nothing less than a Bharti Airtel. And that was the premise of putting the network in. The investment and the size of network was also based on this parameter,” he says. And while not all of the 57 airlines that operate from the Mumbai airport have signed up, nine are already live and 21 more are currently in the process. The rest are expected to join as they move to their new offices. So what are the other privatized international airports in India put in? Anantheswaran says, “They have not invested in full UC. They have chosen to go with telephony and data network separately. They have gone about 50 percent down the path.” (see Reaching New Heights) But having said that he also thinks that it is not possible to set up a unified communication network at a later date. Over the next few years, Anantheswaran plans to have more applications that will ride on the network. More immediately, MIAL plans to activate some applications that were designed to work on the network like a public address system and a fire alarm system. “We are testing out radio over IP, which means our own ground communication can be moved from walkie-talkie to UC. We are still in testing and we’d need to clear a lot of security issues before we take it up,” says Anantheswaran. Other things on the cards are applications that help identify security hazards. This includes an x-ray system that will work over the network. Like the CUTE counters

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Microsoft and Cisco are in a pitched battle to become heir apparent to the Avayas, lucents, Nortels and Siemens of the world. You need to be familiar with what is hype and what is real in order to be an informed IT buyer. You need to ensure any innovation happening in the phone/telecom space does not impact voice service levels, which in many ways is regarded as the gold standard of reliable technology. —Jack Santos, Executive Strategist, Burton Group

‘inline baggage scanning’ will help free up more space in the airport by introducing pre-check-in x-raying. Passengers will no longer have to pass their baggage through an x-ray machine before checking in. They will hand over their bags at the check-in counter. UC enables the airport to do this because the integrated network makes it possible to pass on information of suspect baggage quickly — without delaying a flight. “This is a major advantage, since all those lines for scanning and screening will be gotten rid of and this will save space,” Anantheswaran explains. Already the airport’s communications backbone is sized so that entire communications and security systems (CCTV and the like) can work on a single backbone. "The quality of security systems can be greatly improved and it gives us the flexibility of set up control centers like an Airport Operations Center anda Security Operations Center wherever we want and shift whenever we want," says Cash. Anantheswaran’s plans of getting Mumbai International Airport on the world map have got a fillip from UC. And the face of Mumbai in the eyes of its visitors will never be the same again. "This is just the beginning," promises Reddy Reddy. CIO

With inputs from assistant editor Gunjan Trivedi Kanika Goswami is assistant editor. Send feedback on this feature to kanika_g@cio.in

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Cover Story | Unified Communications

UC can change the way you do business. Start by looking at what fits your enterprise and what you can leverage.

by brian bourne

Today's CIOs must focus on developing

buILDIng A CASE FOR uC

more effective strategies to take connectivity and messaging to the next level. There's no denying that unified communications (UC) is an IT issue that all CIOs should carefully consider. IP-based solutions operating over a converged voice-and-data network are heralding a new world of communications. Successful organizations recognize that improved collaboration translates into ‘faster answers and better teaming’ — connecting teams so that they can communicate and work together, whether in the office, telecommuting or on the road. And as technology continues to converge, CIOs will need to develop effective strategies to update aging communication systems to be more productive.

Discovering value in UC comes from understanding how it can potentially change the way we communicate, collaborate and get work done. Certain UC components are very mature (for example, dropping a voice mail or fax into an inbox). From a planning perspective, an effective UC approach will first implement those communications pieces with the highest return. It is also imperative that training is planned that will slowly get users accustomed to new technology. It's important to remember that as traditional PBXs reach end of life, IP-based communication can potentially deliver extended functionality. And many solutions exist to tie older PBX systems into the IP-enabled world. Integration and convergence are key, not system-wide replacement. What's important is to develop a long-term strategy to improve internal and external communications. To do this, it's important to account for the support and complexity requirements involved. Adding voice capabilities to the network often represents the initial step, extending into other types of real-time communications. While cost savings are indeed a crucial part of the decision, any UC business case should also mull over the broad range of financial and strategic improvements, including more effective communications, enhanced user and IT productivity, greater operational resilience and improved customer service. With UC slated to be as ubiquitous and essential as conventional phone services, CIOs should carefully consider UC as the best way to extend an existing communications infrastructure without having to uproot legacy environment. Today's CIOs should recognize that UC can provide definite competitive advantages not just in collaboration, but also in attracting and retaining forwardthinking knowledge workers. Ultimately, UC is more than just technology; it represents an entirely new way of company communication and collaboration. CIO

ThE nEW WORLD OF buSInESS While unified messaging integrates disparate communication tools — including fax, voice and e-mail-into a centralized repository available from a variety of different devices — UC takes it a step further, automating and merging existing communication modes in a manner that optimizes business operations. UC effectively connects disparate technologies into an infrastructure that allows people to connect with team members and work collaboratively using a variety of technologies seamlessly. As adoption of IP telephony reaches critical mass, CIOs are recognizing that UC is becoming not only more practical but a potential competitive driver. UC can improve the productivity of network staff and accommodate network growth with the same staff. It also enables geographically dispersed personnel to function as if they were in the same location. Given all the communication technologies, today's knowledge workers now use on a daily basis, the potential to quickly and seamlessly shift between voice, IM and videoconferencing is fast becoming more than a ‘nice to have’ — it's becoming the shape of business in the 21st century. 28

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Brian Bourne, CISSP, is president of CMS Consulting. Send feedback on this column to editor@cio.in

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Case File

BPM doesn’t have to be a bitter pill. By putting business process ahead of technology, a drug giant laid the groundwork for BPM success. By DaviD F. Carr

Reader ROI:

How BPM can help you define business processes Why BPM can identify unautomated process How BPM can aid in better decision-making

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or a pharmaceutical company like Wyeth, no function is more important than research and development — the process of finding new drugs that will lead to patents and profits. And for the information systems group that supports R&D, business process management (BPM) is emerging as a key technology and management strategy to make that function more efficient. In fact, R&D’s early success at using this technology and methodology to cut software development time in half has sparked interest from other divisions of the company that are looking to start their own BPM projects. But for Wyeth, the real payoff lies in BPM’s potential to help the company define business processes and unify its information systems to break down barriers between organizational and geographic divisions and to improve collaboration and innovation. “The demand is very high for connecting what used to be stovepiped systems,” says CIO Jeffrey E. Keisling. That demand is driven in part by the global nature of the pharmaceutical industry, in which virtual teams from different business units around the world work together to develop new drugs and related innovations. “As we develop products, that development is happening on a worldwide scale,” says Keisling. For example, one current BPM project targets the process for developing medication labeling documents, which involves collaboration across many stakeholders and approvals that have to be obtained from regulators worldwide,

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Case File

IllUSt ratIon By BInESH S rEEDHaran

Put Business First

Keisling says. The process is almost as involved as the application for a new drug approval, he says. Wyeth has to detail the composition of the medicine with molecular diagrams, explain restrictions on its use and document known drug interactions — all to produce the folded piece of paper you find inside each package. The application, which is still under development, will need to reach across R&D, clinical trials, and legal and regulatory review. The fact that Wyeth would trust such a critical, regulated process to BPM is a vote of confidence in the approach, says Keisling. So far, Wyeth seems to have avoided the technology and governance pitfalls that have dogged some other implementations. Keisling says the main governance issue he sees is connecting the BPM expertise emerging within the company with the projects that will deliver the greatest return on investment. “Right now, our biggest challenge is portfolio management,” he says. BPM is definitely a to-do list item for companies today. But many CIOs and businesses have struggled to make it work. Wyeth’s experience offers a window on what makes a successful BPM initiative.

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Part of the reason for Wyeth’s success is that its BPM projects have been defined with an emphasis on the business process rather than on the technology. They are driven by a business mandate, either born out of a regulatory requirement or an internal need, Keisling says. “Our business partners have absolutely no bias in terms of the tool we use, but they have a strong bias toward seeing that we deliver results,” he says. Wyeth’s BPM initiative aims to fill in the gaps between systems, promoting smooth hand-offs from one to the next, and shifting more of the responsibility for defining processes to business analysts, rather than programmers. Although the emphasis is as much on the business processes as the technologies to enable them, products such as the Metastorm BPM Suite (which is used at Wyeth) help by offering a combination of visual process modeling, process modeling, workflow, automation and integration tools. The BPM software can orchestrate processes that cross multiple computer systems, taking advantage of Web services and other integration technologies to route transactions from one system to the next. Another important goal of implementing BPM is to identify parts of a business process that aren’t automated. Often, these are choke points where an employee is responsible for taking the information from one system, performing a manual task or analysis requiring human judgment, and then kicking off a process in another system. In these cases, the BPM tool itself can provide e-mail notifications and reminders, in combination with Webbased forms, to prompt workers to perform those tasks and keep things moving. This layer of workflow automation also provides visibility into processes that otherwise would occur away from the watchful eyes of corporate information systems. Since Wyeth is in the highly regulated drug development business, having better documented processes and auditing of how they are carried out could help the company in its dealings with regulators. BPM is also helping Wyeth improve the efficiency of routine administrative processes. For example, one of its BPM initiatives is related to research projects that Wyeth REAL CIO WORLD | j u ly 1 5 , 2 0 0 8

Case File

Bust Silos and Tie Processes Together

conducts with the help of physicians. Rather than dealing with regulated medical data, it is focused on improving the interactions For Wyeth, the decision to focus on BPM between Wyeth Medical professionals and the emerged from an analysis of where the clinicians they work with around the world. research systems group was putting its SNAPSHOT The BPM solution provides significantly energy. “The group I inherited had a big Wyeth improved levels of management, collaboration emphasis on software development, with Pharmaceutical and timeliness of managing these clinical the idea that we should build software from Founded: 1926 research studies. Previously, Wyeth R&D scratch where possible,” says Tobaccowalla. Headquarters: personnel used a variety of systems and tools Tobaccowalla shifted the emphasis to Madison, New Jersey to track the activities of clinical investigators, buying and adapting commercially available including the number of patients seen and software. Yet the classic ‘build versus buy’ Presence: +100 countries whether their reports on those patients met trade-off was only part of the story. He also the requirements of the research protocol. came to the conclusion that there was too much Employees: 47,500 Clinical grant payments were also handled emphasis on the transaction systems and too Revenue: $22.4 in multiple ways by the research teams at little on those that enabled the processes that billion* (about Rs 89,600 crore) Wyeth, leading to a payment request in SAP. were valuable to the company. “Development Using the BPM tool, Wyeth can now introduce was focused on siloed, transaction systems. *2007 business rules to initiate the workflow for We had integration technology that moved seeking approval for payments. data from one system to another, but we did not necessarily “The value is in the process consistency. Rather than tie the processes across these systems together. What we relying on individual knowledge to make sure things really needed was for the process to flow with the data,” get done, we can rely on an automated, documented Tobaccowalla says. process,” says Jazz Tobaccowalla, Wyeth’s vice president of In the R&D division particularly, “there’s certainly a information services, the technology group that supports the greater emphasis on efficiency,” Tobaccowalla says, “so R&D division. “This is particularly important as we’re going consistency and process and clarity of who is doing what more global with our workforce and trying to leverage every is important.” For example, the BPM system can include hour available in the clock. It gives us a consistent way of process-monitoring rules that detect when a required doing things and a way to capture knowledge — everything approval is taking too long — perhaps because the responsible that we can lose when people leave or people forget.” person is out sick — and notify another manager. One of the first benefits Wyeth saw from R&D’s BPM initiative was that software development time was cut in half. Tobaccowalla says that on the average project, the actual software development that would have required six months of traditional programming work can be accomplished in about three months with a BPM tool. (This does not include the up-front time spent defining how the process should work, which is sometimes the bigger part of a project.) So while he had only planned to tackle three BPM projects in 2007, he wound up with eight underway by the end of the year. Even so, Tobaccowalla says he has not found that BPM completely eliminates the need for a software development effort on his projects. While a business analyst can do more of the up-front work of defining a business process, there is still “a little bit of classic IT effort” to integrate the systems that must work with the BPM software. “The demand is very high for Wyeth has also relied on consultants with expertise connecting what used to be at configuring the Metastorm software to produce the stovepiped systems. Product actual process models, which is still a little too much like develpment is happening at a programming for the average business user. However, worldwide scale.” Tobaccowalla says Wyeth is planning to purchase — Jeffrey E. Keisling Metastorm’s ProVision tool, which is designed to be a more CIO, Wyeth business-user-friendly tool for visual process design and 32

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BPM Can Cut In-House Software Development By 50% Is a lack of information wasting your organization’s time? Wyeth Pharmaceutical found that BPM allowed it to keep information circulating and let them breathe easier. It also allowed them to: INTRODuCE workflow automation, resulting in faster approvals for critical needs

reengineering, with the ability to generate models that can be imported into the BPM environment. “Maybe with that, some of the hand-offs will become easier, and some of the simpler automations we’ll be able to do with the click of a button,” he says.

Success Speeds adoption The R&D group’s success with BPM has attracted attention from other parts of Wyeth. In fact, Tobaccowalla is in the process of establishing a BPM Center of Excellence (COE) as a way for his staff to advise their business peers how to use the technology effectively. That’s significant because “we don’t establish COEs very easily,” he says. In other words, the company doesn’t devote those resources to every new technology fad that comes along, only to things it believes are strategically important. IDC analyst Maureen Fleming wrote a research report on Metastorm that included a case study on Wyeth. She says some companies who adopt BPM start with a grand vision for gaining better control over all their business processes. Others, like Wyeth, start with a specific application that happens to be a good match for BPM. What can happen then, if all goes well, is that the approach goes ‘viral’ and starts marketing itself. “When you have a good experience with a deployment, and it’s on time and on budget, the uptake is very good. The heads of other departments start looking at it and saying, ‘we want one of those’,” Fleming says. “And I think that’s what happened here, where the outcome was viral demand inside Wyeth.” Tobaccowalla says that Wyeth originally hesitated over the decision of whether or not to license the Metastorm suite. An internal technology review committee questioned the need for the suite, given that the company already had

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STANDARDIzE business processes across the globe

DEvELOP and publish regulatory submissions for new drugs faster

several other products such as Documentum and SAP at its disposal with workflow capabilities. Ultimately, the project team was able to make the case that BPM went beyond traditional workflow to manage processes that have to span multiple systems and that the tools had enough potential applications to be worth adding to the company’s existing technology portfolio. Wyeth’s BPM initiative beginning in R&D is surprising to Pramod Sachdeva, managing director of Princeton Blue, a systems integration firm that targets the pharmaceutical industry. “This is starting on the R&D side? I think that’s tremendous,” he says, explaining that R&D technology groups are often too focused on specialized informatics technologies to pay attention to BPM. And that’s too bad. “There’s so much value to be created on the R&D side in pharmaceutical companies” where BPM could make a difference, he says. Potential customers tend to be skeptical of claims made for BPM that “sound too good to be true,” Sachdeva says. “It’s only in the last two to three years that I’ve felt these products have reached the level where they can truly bring value to the business — and not just be another tool for IT,” Sachdeva says. Still, the tools can only do so much. Implementing BPM can be a way of identifying and addressing the gaps in a process that cuts across divisions. But those in charge of the different divisions still have to agree on how the new, automated process should work, Tobaccowalla says. Lacking that, the result is likely to be “a layer of bureaucracy that nobody is interested in,” he says. “So the real magic is getting the business process right.” CIO

InfograPHIcS By Unn IkrISHnan aV

INTEgRATE It systems enabling a seamless flow of information, and better decision-making

Send feedback on this feature to editor@cio.in

REAL CIO WORLD | j u ly 1 5 , 2 0 0 8

With BIAL’s take off, Albert Brunner, CEO, Bengaluru International Airport, is now looking ahead and is setting into motion plans for the next phase of the new airport.

The Sky is the Limit By Kanika Goswami Nobody likes change. Especially when the media’s looking over your shoulder and your project needs to meet deadline. But when you’re Albert Brunner change and expansion seem to come with the territory. Take for example, the role he played in the planning and realization of Zurich Airport’s expansion program, a $2 billion (about Rs 8,000 crore) project. And more recently with the Bengaluru International Airport. He was forced to expand the airport significantly — when it was already a third complete — with the opening date telescoping into view. The airport veteran of 17 years took these bumps in his stride and even got the additional Rs 1,000 crore required for the expansion. But the larger challenge of setting up a greenfield airport — his first — and ensuring that it was scalable would test him. Expansion and change have underlined the importance of scalability for BIAL. And they take scalability seriously. Take for example, how the airport has created shared check-in counters — allowing them to be used by multiple airlines and scale to meet peak-hour traffic. Scalability is a lesson that will go a long way as BIAL starts planning its second phase and it's a lesson new airports would do well to heed.

CIO: What challenges did you face building a greenfield airport? View from the top is a series of interviews with CEOs and other C-level executives about the role of IT in their companies and what they expect from their CIOs.

j u ly 1 5 , 2 0 0 8 | REAL CIO WORLD

View from the Top with AD.indd 38

Albert Brunner: Building a private greenfield airport in India is much more than a construction project. It requires setting up a new legal framework, coping with the huge pressures that arise out of deadline,

and recruiting and training personnel from a talent pool that has limited experience in airport management. It also means selecting partners like caterers, ground handlers, retailers, etcetera, who can provide service in par with the highest international standards. It isn't possible to realize such a project on time without the full dedication and support of thousands of people and the authorities.

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View from the Top

Can you be more specific? We had to redesign the airport while it was under construction. When the project was designed, we anticipated approximately five million passengers in our first year. However, by the time we started construction we had already hit this figure. The big challenge was to increase the project significantly — while it was under construction — without jeopardizing the initial opening date. The redesign process — with all the formal approvals — took over nine months. By the time the increased project was approved almost one-third of the construction was complete. Completing the redesigned project within the original deadline of 30 months was even more of a challenge. Then there is the cost. Due to the redesign, the project’s cost rose from an initial Rs 1,412 crore to Rs 2,470 crore. And this is just the first phase of the project.

What about partners? Choosing the right partners was also important. BIAL pioneered a partner selection process. BIAL believes that competition among airport service providers like cargo, ground handling, food & beverage, fuel, etcetera, is the best way to achieve quality, efficiency and continuous innovation. Therefore, we focused on selecting the right partners and ensuring healthy competition among them rather than offer in-house services. We had to do this while simultaneously building the BIAL organization. Less than three years ago, we were just a six-member team, today we have grown to over 500

View from the Top with AD.indd 39

Albert Brunner expects I.T. to: Better passenger experience Help increase cargo volume Increase passenger security

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View from the Top

employees. You must remember that the expansion of air transport in India is amongst the fastest in the world and there is a scarcity of experienced personnel. The challenge was not just to find appropriately-educated people, but appropriately-educated people with loyalty, dedication and, most importantly, with experience in airport operations and airport marketing.

Now that you've gotten BIAL off the ground, how will you take advantage of the 3,884acre plot BIAL is built on? Just to clarify, the airport that you see today is only in it’s first phase. There is a master plan for this land. The new Bengaluru International Airport is being developed to fulfill the need for an operationally-efficient and passengerfriendly airport. The master plan ensures that the size and capacity of the airport can be expanded gradually. The land at our disposal allows us to develop the airport up to about 40 million passengers a year. Coming back to your question, revenue from the airport is divided into aeronautical and non-aeronautical streams. Since the airport is only a month old, it is a bit early to comment on how these two will be split. However, approximately 15 percent of BIAL’s revenues are expected to come from non-aeronautical avenues. This percentage will increase as we realize the future phases of the airport, which includes an airport city. On the aeronautical revenue front, a very important revenue stream is the User Development Fee (UDF). The Concession

View from the Top with AD.indd 40

“IT led us to create [ selfservice] counters, which allows airport infrastructure to be optimized.” — Albert Brunner Agreement (signed between Government of India and BIAL) specifies that BIAL will be allowed to levy UDF from embarking domestic and international passengers to provide amenities, services and facilities. The UDF will be used to develop, manage, maintain and operate the airport. While international passengers flying out of BIAL pay UDF, domestic passengers will not be charged this fee for the first three months.

When do you think BIAL will break-even? With the current situation on UDF, we are uncertain about determining a break-even period. UDF is an important revenue stream.

You also need to take into account the fact that the new airport will need to be expanded very soon, in fact we are already planning the next stage. For this, additional investment will be required long before we break-even.

Is BIAL optimized for lowcost airlines? In India, the tax structure for all airlines is the same. But, as an airport operator, BIAL has always taken an airline’s perspective into account and has been sensitive to providing long-term business advantages to them. An example is the partner selection process we've pioneered. We conducted an open and transparent tender process for various services provided at the airport. World leaders in airport services formed partnerships with renowned local companies to participate in the tender process. We chose this route to achieve competitive price structures and maintain quality and service levels for fuel facility, cargo handling, ground handling, duty free & retail, food & beverage, flight catering and other services.

Will you follow Hong Kong airport’s example and introduce RFID tags for baggage identification? No, we won’t. Our current baggage identification system, the SITA Baggage Reconciliation System (BRS), is very efficient. SITA BRS, which tracks baggage in 220 countries and territories, has developed an integrated, end-to-end baggage reconciliation

7/18/2008 3:07:41 PM

View from the Top

system which combines barcodes, WLAN and highly-redundant, IP-based global connectivity to ensure baggage gets to its destination on time.

What is IT's role at BIAL? Good IT infrastructure is the backbone of any first-class airport. At BIAL, technology has been utilized effectively. Some of the pioneering IT apps within the Indian context include the baggage reconciliation system, CUSS (Common Use Self Service), free Wi-Fi in the terminal and automated parking. Besides having 53 CUSS check-in counters, the new airport has 18 CUSS-enabled self check-in kiosks because we took into account a growing trend of self check in the aviation. IT has allowed us to create CUSS counters: this facility ensures that no airline has dedicated counters, a standard practice in other airports. At BIAL, an airline occupies a certain number of counters for the duration of a particular flight. Once that flight’s check-in process is complete, the airline leaves the counters for the next airline. This allows for the optimal use of airport infrastructure. The benefits of CUSS counters include speedy check-in and decreased waiting in lines (because more counters can be opened depending on the need). This approach also reduces congestion in the check-in hall, decreases demand for additional counter space and offers savings in hardware and software development. And then there is the automated parking system. BIAL's car park can fit 2,000 cars. It is fully automated with an efficient and transparent management system, provided by

View from the Top with AD.indd 41

SKIDATA, a global provider of car park systems at airports. The car parking system is managed by Central Parking Solutions, India’s largest car park operator.

What are the benefits of using GPS on taxis?

SNAPSHOT

BIAL

Founded:

April 2008 Cost:

Rs 2,470 crore Total area:

3,884-acre

Number of flights a week:

ourselves to establishing BIAL as India’s leading airport in terms of quality and efficiency and set a benchmark for future Indian airports.

Do you have a dream airport in mind?

1,120 The airport's taxis, Meru While we have not Cargo Capacity: Cabs and Easycabs, are benchmarked ourselves 350,000 tons/year equipped with GPS to ensure against any particular airport, Passenger safety and transparency. The we aim to make BIAL one of Capacity: 11.5 million annually / system helps round-the-clock the best airports in India. It is 2,700 at peak hours availability of cabs and is important to understand that Check-in backed by a 24x7 customer airports across the world are Counters: service center. This gives us built to meet various objectives; 53 a quicker pickup and faster they are all different in size and Head ICT: response time to passenger in investment. S. Francis Rajan calls for cabs. Clubbed with Our aim is to be truly tamper-proof digital cab passenger focused and we have meters, GPS ensures that every fare is showcased this in our current facilities. For tracked ruling out the possibility of a driver example, passengers can transfer between overcharging passengers. GPS also helps us domestic and international flights under one track the location of a cab in real-time in case roof. Further, we are one of the first airports of an emergency. in India that will have a first-class business hotel within walking distance of the terminal. We also have a leisure and entertainment What has BIAL done in area. Passenger experience should combine showing the road to other business and leisure, therefore it is part of our private airports? vision to develop 215 acres of commercial real estate for an airport city. CIO BIAL is the first greenfield airport in the country to be built under a private-publicpartnership (PPP) model. The groundwork BIAL has done will ease the uphill task for Kanika Goswami is assistant editor. Send feedback on other such PPP projects. We’ve committed this interview to kanika_g@cio.in

7/18/2008 3:07:42 PM

Vendor Management

by Kim S. NaSh

Take it from the masters of vendor management: despite the current trend of vendor consolidation, now is the right time to push vendors for a better deal. 44

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he last time the world sweated through an economy as harsh as today's environment â&#x20AC;&#x201D; back around 2002 â&#x20AC;&#x201D; the technology market looked very different. CIOs, fresh off a multi-year technology buying spree fueled by the dotcom boom, were trying to justify their spending in an uncertain post-9/11 economy. Vendors such as PeopleSoft and Business Objects were selling strong against Oracle, Microsoft, SAP and other big rivals. Influential financial companies, such as Merrill Lynch and E-Trade, had just begun committing to Linux. Sure, the economy stunk. But CIOs could negotiate better deals, thanks to a competitive vendor landscape. Today, CIOs have mostly mastered the case for ROI but are under new pressure to come up with ways IT can generate revenue for their companies. Open Source Linux is Reader ROI: now an established standard; lessWhy now is the right time to tried computing models such as push vendors for a better deal virtualization are the current risky How to make industry bets. Meanwhile, MS, Oracle and consolidation work for you SAP have snapped up dozens of other Ways to deal with the issue of high maintenance fees technology companies, shrinking

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Vendor Management

CIO choice in the enterprise vendor market. And the economy stinks. Again. But you're wrong if you think a slowdown , combined with big-time consolidation in the software market, has stripped CIOs of all bargaining power. Now is the right time to push technology vendors for a better deal than the one you have, even if you've recently signed contracts, say CIOs and their heavy-hitter negotiators. If you manage vendor relationships with strength and subtlety. "Everyone understands we're facing recession. The vendor doesn't want to lose you," says Jeff Muscarella, managing partner at NPI Financial, a spend management consulting firm in Atlanta. Know that, he advises, and use it.

Don't Fear Consolidation

Guth, however, wanted no part of the enablement fee. Meanwhile, Oracle had begun circling Hyperion, sparking acquisition rumors. Guth knew NRECA wasn't going to install System 9 immediately, so he decided to wait and see what might happen. He's a lawyer with four certificates in contract management, purchasing and procurement and 15 years' negotiation experience. He's steely. In April 2007, Oracle bought Hyperion for Rs 1,320 crore and Guth took up talks with his old Hyperion sales representative, who continued to ‘demand’ the fee, Guth recalls. But when that rep was replaced by one from Oracle, Guth argued against the fee and, ultimately, he paid none. "For some reason, when it comes to software vendors, people get squirrely, thinking, 'If a vendor has hooks into me, then I'm not going to be able to negotiate good deals,'" he says. Oracle has since dropped the fee altogether.

Between them, Microsoft, Oracle and SAP have bought at least 76 software companies since 2005. PeopleSoft? Gone. Siebel? Gone. Business Objects and Pilot Software? Gone The LessOn: Even big vendors that acquire lots of other and gone. Fewer vendor choices, goes the conventional companies can't ask for the moon every time, says NPI's wisdom, means the CIO loses leverage. Muscarella. He sat across from oracle, SAP, Microsoft Not so, says Stephen Guth, director of the vendor and other powerhouses, representing companies such as management office for the National Rural Electric Boeing, lands' End, Hilton and Tupperware. A recession Cooperative Association (NRECA). Guth, who is in charge hurts tech suppliers as much as anyone else. "Nobody is of dealing with IT vendors, helps buy software for the not feeling the pressure," he says. "Vendors make claims association's 900 electricity co-ops and trains them to that sound immovable. But in reality, that's not the case." negotiate with vendors on their own. All told, the annual software spend is about Rs 400 crore. "Consolidation isn't bad. I've never experienced that," Guth says. For example, he remembers being outraged at first by Hyperion's ‘enablement fee’ — a levy the vendor assessed whenever any customer wanted to upgrade to System 9 of Hyperion's financial analysis software. Hyperion reasoned it had so drastically rewritten parts of System 9, and added new business intelligence features, that it was like a new product, not a typical upgrade. Therefore, the maintenance fees customers had been paying didn't cover a switch, according to Hyperion's statements at the time. Guth didn't see it that way. The enablement fee was, in his opinion, "a sign of desperation to drive revenue" at a time — 2006 and 2007 — when Hyperion's profit margins were slipping. Like Guth, many Hyperion customers complained, prompting IT research firm Gartner to warn last year that for the company to continue as a leader La in business intelligence, it "will need to waive, or Verne Council, CIo, Johnson & substantially reduce, the fee." Johnson, expects Some customers balked and negotiated better vendors to live up to the deals for themselves. The University of California company's credo around respect, fair profit, and at Berkeley, for example, paid an enablement fee managing ethically to earn of Rs 67 lakh to move to System 9 — 35 percent of partner status with the Hyperion's initial Rs 192 lakh gauntlet, according to health-care giant. the college's fiscal 2007-2008 IT budget proposal. 46

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Vendor Management

beware the Word ‘Partner’ An easy patois floats in the conditioned air inside many companies. You've no doubt spoken it. "How was your weekend?" "Send me a note on that." It's more light chat than meaningful conversation. To this, now add any phrase containing the word ‘partner,’ used as either noun or verb. There's not a technology sales rep breathing who doesn't want to be the CIO's partner. And certainly, a CIO should expect and coax key vendors to work side by side to reach common goals. But people so wantonly toss the P-word around, it can mean nothing. Johnson & Johnson, the Rs 244,000-crore manufacturer of healthcare products, has for 65 years operated according to a ‘credo’ that outlines J&J's responsibilities to customers, employees, local community and stockholders. The credo, which is on the company's website in 32 languages, talks about respecting individuals' dignity, managing ethically and giving suppliers the chance to make a fair profit while J&J does as well. It's a how-to guide for becoming a Johnson & Johnson partner, actually, though some slick vendors fail to see it. Employees at all levels live the credo, according to LaVerne Council, Johnson & Johnson's CIO. The company has received piles of awards for diversity, leadership, opportunities for working mothers and equality in the workplace. That makes for a nice place to work, Council says. But vendors John sometimes misinterpret the Doucette, CIo, United Technologies successfully pushed back with vendors and negotiated them down on the cost of software maintenance fees. "I know I am five times more productive than years ago."

conviviality they encounter. Some assume too quickly that they are partners — or they think they can pretend to be. "J&J is a very collegial company," she says, "and people read that as weakness, frankly." Ouch. A bigger mistake one cannot make with Council. Before joining Johnson & Johnson as CIO in 2006, she was global vice president of IT at Dell and before that a partner at Capgemini. She was also a consultant at Mercer Management and Accenture and holds an MBA in operations management. She knows the game and wastes little time calling someone out. For example, if a vendor's developer or consultant working onsite perhaps doesn't live up to the credo, Council talks to that person's manager. "To give them the opportunity to understand the disconnect and give them a chance to step up," she says. What that manager does then affects the life of the engagement. Council declines to name names, but says that she recently faced a situation in which a vendor continued to tell two divisions within Johnson & Johnson different stories about its product and pricing. Council cited the credo to that person and said she expects her suppliers to act the same way. "You end up disappointed in certain folks' actions and behaviors. But it doesn't mean we will tolerate it," she says. Things didn't improve. She doesn't do business with that vendor anymore. The performance of another vendor last year also fell short, but the way that company handled it won Council's favor. The vendor missed deadlines for a key project. Then a leader on the vendor's team made an appointment with Council to talk about the problem. "It wasn't a hostile conversation," she recalls. "He acknowledged the mess and it wasn't about trying to save face. It was about trying to make it right." They worked out a plan. The vendor didn't run away or ask for more money to bring more people on to fix the project, she says. Come next review time, the vendor had met the mark. That's the behavior Council expects before calling anyone ‘partner.’ "We're all really nice people," she says. "But we want really nice people who deliver." The LessOn: Partnerships are built on the quality of work delivered, not on personalities and hale handshakes. Define your expectations. And don't use the term partner until you see the vendor produce work that meets the goals — your goals.

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Vendor Management

Fight back on maintenance Even when the economy froths with prosperity, the one negotiating point guaranteed to provoke both parties is the price of software maintenance. It takes special skill to argue straight-faced that the maintenance fees vendors devise are scientific. The wiggle back and forth on those fees can get contentious, says John Doucette, who has spent the last seven years as CIO of United Technologies, a Rs 240,000 crore conglomerate that includes Pratt & Whitney, Sikorsky, Otis Elevator, Carrier, UT Fire and Security, and Hamilton-Sundstrand. Lately, Oracle has asked Doucette for annual maintenance fees equal to 22 percent of license costs, while SAP wants 17 percent to 20 percent. Both are too much, Doucette says. Microsoft calls its product care plans different names, such as ‘software assurance,’ and asks for about one-third the cost of the software, Doucette says. But it all looks like maintenance to him — and expensive maintenance at that. "Thirty-three percent!" he rails. "Repaying for your software every three years? It's frustrating." So far, Doucette has pushed back and negotiated his vendors down. What aggravates him, he says, is that he knows vendors are developing big chunks of their product lines offshore, where labor is cheaper. United Technologies itself hires offshore outsourcers for some programming. "I know I'm five times more productive than several years ago, so [the vendors] have to be, too," says Doucette. "But my price from Oracle and these other companies has not gone down at all." Average

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software maintenance costs amount to 26 percent of the total cost of ownership for the software, which IT managers say is too high, according to a recent Forrester Research survey. A ‘fair’ maintenance cost would fall between 10 percent and 12 percent of the cost of ownership, according to the poll of 215 business and applications professionals. "We get pressure from our CEO and CFO every day about productivity," Doucette says. "We don't think we're getting any price productivity from software providers." The LessOn: object to high maintenance fees as many times as it takes. Then find a way around them if necessary. one way to avoid getting locked into high maintenance fees is to hire third-party service providers to do the job, says Forrester analyst Ray Wang.

Stir the Pot

UniGroup, a Rs 9,200 crore transportation and relocation services company, keeps a stable of key vendors: IBM, Verizon, Microsoft and Cisco, among others. But CIO Randy Poppell regularly puts out requests-for-proposals seeking bids from those vendors' competitors. He's been able to shave costs this way and gain more services for the same money, he says. IBM, for example, recently lost some of UniGroup's IT business; Poppell gave it to another smaller vendor, but he declined to provide details. Pitting one vendor against another to keep your incumbent lively and responsive is a classic vendor management tactic. Classic for a reason: it works. But there are more creative ways to harness angst. A few months ago, Mitchell Habib, executive vice president of global business services at The Nielsen, asked his vendors — including those with whom he doesn't do much business — a question: if you were competing with me, how would you set up your ideal IT infrastructure? In his challenge, he gave the vendors 30 days and 30 of his own people to work on the project. Habib is now considering some of the ideas dreamed up by Oracle, Accenture, Sun and others as he picks his way through a major reconstruction of how Nielsen manages technology. Habib — Stephen who has been a CIO at Citigroup, General Guth, Director of Electric and Ryder — was hired a year ago vendor management, National Rural Electric to plan and oversee the IT overhaul at the Cooperative Association Rs 100,000 crore information and media was able to ultimately company. At Nielsen, he's introducing new resist paying Hyperion's enablement fee, just by software platforms and last October signed waiting, knowing that he will not lose leverage.

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ReprogramYour Reactionto A Slow Down

slow down in business hovers and the usual corporate response is a rush to cut spending. The pink papers are already reporting how large corporations are cutting back on new projects. It could soon be IT's turn. But such Pavlovian management of IT spending could bring trouble by limiting the competitive moves a company can make at a time when agility counts, says Howard Rubin, CEo of consultancy Rubin Systems, a Gartner senior adviser and CISR associate. Too many senior executives see technology almost schizophrenically, Rubin says. "They know it is a key to competitive advantage, they know it has value, but they view it as a cost." The implication

being that when a slow down hits, IT and finance managers start to pull back on technology projects to save money. This is "shooting yourself in the foot," Rubin says, because investing in IT should save more money than the IT project costs, or generate revenue. Plus, he adds, you can bet that while you're hesitating on IT projects, some of your competitors are not cutting, and some are spending more on IT— which only opens up the gap between you and them even more. "Spend into the skid," Rubin advises. Ed Hansen, a lawyer with Morgan, lewis & Bockius who specializes in IT contracting, offers another way to free up money: don't wrestle with your vendors for discounts. Instead aim to get more product or service for the money you do pay.

a 10-year, Rs 4,800 crore outsourcing deal with Tata Consultancy Services. Each vendor brought back ideas to Habib that showed off their own technology, of course. But because they worked closely with technology and business analysts from Nielsen to come up with those ideas, they were tailored to the company. The best part? It was all free. The vendors are so hot for Nielsen's business, they volunteered their time and people. It doesn't hurt, either, that Habib is on a first-name basis with the CEOs at those suppliers. "People want to help. They just don't want to be taken advantage of," he says. Too often, CIOs move quickly to throw a vendor proposal out on price, says Ed Hansen, an attorney who specializes in negotiating technology deals at Morgan Lewis & Bockius in New York. Habib, however, was shopping not for lower prices but for high concepts. He was probably able to learn a lot more about how those vendors work and what their capabilities are, Hansen speculates, than if he were out looking to scrape a few percentage points off his costs. The LessOn: Don't get tangled in dollar signs. "Eliminating someone on price without knowing what's behind the price — that will kill you in three years." Ed 52

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For example, telecommunications deals are commonly viewed as tactical and sending bits through a pipe is a commodity transaction, Hansen says. Really, though, telecom is becoming a strategic technology, he says. "look at all the content being delivered over the Internet, look at your wide-area network to other countries, your voiceover-IP systems." Rather than trying to cut your provider to the bone on pricing, work in some extra guarantees on uptime or the amount of traffic that moves on a daily basis, Hansen advises. "If you think you're going to cut 10 percent of the IT budget, that's nice. But the world advances," he says. "Get more for that same money." —K.S.N.

Hansen says. "That's when a new challenger comes along and you've got the old, uncreative, cheap vendor in there that you have to rip out at high cost."

manage for Tomorrow So take a breath. Don't let this slowdown talk scare you into making mistakes in how you manage vendors and advise CIOs and negotiators. History shows that slowdowns typically end within one year. That's a short period of time in the life of a technology deal. A five-year contract for telecommunications services that buys you savings this year but escalates costs in 2009, 2010, 2011 and 2012 isn't smart. Nor is forgetting that you and your vendors both must navigate economic downturns. As Hansen puts it: "Be very, very careful not to do things that have long-term impact that you'll regret simply for a short-term gain." CIO

Kim S. Nash is senior editor for CIO. Send feedback on this feature to editor@cio.in

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Security

What's good for the CIO, isn't always good for the CSO. But the relationship between them must find balance â&#x20AC;&#x201C; only in that partnership can security and innovation grow. By Jon Brodkin

Get your CIos to love your CSos Any chief security officer can tell

you there's a fine line between managing risk and fostering innovation. And the CSO's relationship with the company's CIO largely determines where that line is drawn. "By definition, the CSO would like things to be more stringent than a CIO would practically allow," says Marc Hoit, interim CIO and professor of civil and coastal engineering at the University of Florida. Some argue a CSO should not report directly to a CIO, as happens at the University of Florida and many other organizations. Just as you wouldn't want a financial controller reporting to an auditor, a company's chain of command should give the CSO somewhere to turn when the CIO takes on too much risk, argues Andreas M. Antonopoulos, senior vice president and founding partner of Nemertes Research. "The job of the CIO is to maximize return on investment, which by definition requires taking risk," Antonopoulos says. "The job of the CSO is to maximize the amount of risk a company can take safely without going over the company's [preferred level of] risk tolerance." When CSOs see too much risk being taken, "they can't report to the person who's creating risk," he says. "The thing is, it's the job of the CIO to create risk. That's what innovation is."

Fundamental ConFliCt Even CIOs and CSOs who report having amicable relationships with their security or technology counterpart acknowledge there is a fundamental conflict between the roles. "The goal of the CIO is to get the application deployed today," says Joseph Granneman, chief technology and security officer for the Rockford Memorial Hospital in Illinois. "When you add security analysis to the front end of a project, sometimes it can delay it. Or if you do find security risks, that's not good news for the CIO." 54

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Reader ROI:

Why CSOs should not report to CIOs The importance of getting the CIO-CSO relationship right for innovation

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Security

Granneman, who reports to his CIO, says they have developed a strong working relationship over the past decade. CSOs must accept that businesses are in the business of accepting risk, Granneman says. Compromise is essential: "There's always a way to get them what they need to make the business run," he says. "That's what you're really there for. You're not there to say no. You're there to say, 'No, but'." At the Caregroup Healthcare System in Boston, CIO John Halamka says the CSO — who reports to him — would prefer to have very few Web sites available on the public Internet. Before making data available on the Web, Halamka says he and the CSO evaluate the potential risk and classify into one of four categories, which range from no risk at all to a risk that could compromise many patient records. "We do a risk assessment of each Website, and then engineer a security solution that is appropriate for the level of protection needed. The balance between ease of use and the need for security is ensured using this objective approach," Halamka writes in an e-mail. The University of Florida's Hoit acknowledges that having the security officer report to the CIO makes life simpler — for the CIO. Ruling with an iron fist, however, isn't the right approach, Hoit says, and it wouldn't work at the university. Big decisions involve a governance committee consisting of IT staff from each school — and then they must be considered by a faculty committee, deans, administrators, and a faculty senate. The university is trying to find a proper way to ensure the security of student data, as federal law requires, while giving professors easy access to files they need for grading. "Open, transparent conversation" involving input from multiple parties is the key to finding a good compromise, Hoit says. Beyond securing applications and the personal information of customers and employees, businesses must comply with regulatory standards, such as Sarbanes-Oxley, the Payment Card Industry data security standard, and the Health Insurance Portability and Accountability Act. Antonopoulos argues that when a CSO must report to a CIO, the business is more likely to pursue too-risky technologies and skirt the edges of compliance. "The CSO should have the equivalent powers you would give to an auditor or audit department and should report, ideally, to the board," Antonopoulos says. "That's actually higher than a CIO, quite frankly. We believe the CSO should be an officer of the company. His duty should lie with the shareholders. The CSO is controlling the risk of the company so as not to expose the shareholders to the most risk." The CSO also should not be allowed to take only risk into consideration, he says. The best way to avoid risk, he notes, is

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to close a business entirely. Antonopoulos recommends tying the financial compensation of security officers to their ability to balance risk and innovation. The location of the CSO in an organization is what "largely impacts the dialogue and potential conflicts you have," says Lloyd Hession, CSO of BT Radianz. Hession reports to his CEO, making the CIO his peer, he says. This has pros and cons, he notes. Being outside the technology group, Hession must make a concerted effort to understand the needs of IT. But it also gives him a better view of what is happening in the business at large, he says. "You self-police to the point where you only try to achieve what you know makes sense for the business," he says. Hession says he also faces additional pressure to reach agreements with department heads because nobody wants to waste the CEO's time with an unresolved conflict.

to whom should a Cso report? In a very small minority of companies, the CIO reports to the CSO. This happens in financial services and other companies where regulatory compliance poses a huge burden, Antonopoulos says. Making a rough guess, Antonopoulos says the CSO works for the CIO in perhaps 30 percent of companies. If that's the case, there are probably 15 other types of reporting relationships in the remaining 70 percent of businesses, he adds. One approach has the CSO reporting to the security team. Sunoco has considered this, but CIO Peter Whatnell says he is concerned security executives will not understand the needs of IT. Currently, the CSO works for Whatnell. "We have talked several times about, should our CSO move into the security organization," Whatnell says. "We're not opposed to that, but we just think there's a level of maturity on their side to understand what's the difference between somebody scaling a barbed-wire fence as opposed to trying to access our accounts-payable system." At WebEx Communications, CSO Randy Barr reports to the general counsel. Barr used to report to a CIO, but WebEx hasn't had one since it was acquired by Cisco. "It's actually better [reporting to legal counsel] in my opinion," Barr says. "There is a lot of work we have to do which may impact regulatory requirements. [The legal team] can immediately confirm what it is we need to do to meet regulatory concerns. They don't make a lot of decisions on the IT or operations side that would present a conflict.” CIO

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Essential

technology Now that both established vendors and upstarts offer BI applications as on-demand services, more customers are saying yes to SaaS – gaining faster deployment, and speedier access to reporting data.

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From Inception to Implementation — I.T. That Matters

Run Fast with Business Intelligence By Thomas Wailgum Business Intelligence | Ask Dennis Hernreich, COO and CFO of Casual Male Retail Group, what his life was like before he switched to an on-demand business intelligence reporting application, and he remembers the frustration all too easily. Casual Male Retail Group, a specialty retailer of big and tall men's apparel with Rs 1,856 crore in annual sales, was using a legacy on-premise reporting application for its catalog operations. (The company also has 520 retail outlets and e-commerce operations.) But the reporting features built into the system were "extremely poor," as Hernreich describes them: "Visibility to the business? Terrible. Real-time information? Doesn't exist. How are we doing with certain styles by size? Don't know." "It was unacceptable," Hernreich says. And viewing those ‘canned' BI reports (which lacked features such as exception reporting) could happen only with trips to the printer for a stack of printouts. "It was hundreds of pages," he recalls. "That's just not how you operate today." It's not like Casual Male didn't have all this information; it just didn't have an intuitive and easy way to get at its catalog business's sales and inventory trends in real-time. But that changed

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essential technology

in 2004, when Casual Male began using a on-demand BI tool from vendor Oco, which takes all of Casual Male's data, builds and maintains a data warehouse for it offsite, and creates "responsive, real-time reporting dashboards that give us and our business users information at their fingertips," Hernreich says. Today, Hernreich and Casual Male's merchandise planners and buyers have access to easy-to-consume dashboards chockfull of catalog data: "What styles are selling today. How much inventory are we selling today. Where are we short. Where do we need to order. How are we selling by size. What are we out of stock of," he says. "All of these basic questions, in terms of running the business â&#x20AC;&#x201D; that's what we're learning every day from these reports."

On-Demand Fears Linger Casual Male Retail Group is part of the small (but growing) percentage of businesses using software-as-a-service (SaaS) BI tools, which can be deployed at a much faster pace and with much less initial cost than traditional on-premise software installations. "To go from nothing to a fully automated system in a matter of weeks is an incredible

quickly we could move forward and do so at a low cost and automate as much as possible," Cohenford says. "And that's what pushed me into the SaaS world's BI tools." But a nagging majority of companies don't share Cohenford's sentiments, despite loads of hype and the success of SaaS pioneer Salesforce.com. A Forrester Research survey of 1,017 technology decision-makers found that adoption of SaaS and on-demand applications in large enterprises is now at just 16 percent. Aberdeen Group research showed that just 10 percent of all-sized companies used some form of BI analytics tools through third-party service provider, says David Hatch, research director of BI at Aberdeen. The Forrester survey noted the oft-cited barriers to higher adoption rates, including concerns around integration, customization, security and total cost of ownership. Of course, those concerns don't go away for on-demand BI applications, but several recent macro trends have pushed companies to take another look. One is the long-term effects of software industry consolidation and BI vendor upheaval in 2007, which has affected the plans of more than 100,000 customers of the established BI vendors, according to

In companies of all sizes,the pressure to aggregate,synchronize and deliver clean and actionable data to business users has never been more intense. sell for any company â&#x20AC;&#x201D; large or small," says Scott Cohenford, a senior analyst at RapidAdvance, a provider of cash advances to small and midsize businesses, who led his company's efforts to purchase Business Object's OnDemand platform. Note that Cohenford is not an IT person by title or pedigree (he has an accounting background): ease of use (setup, integration, training) is a major selling point to on-demand BI customers. "I was tasked with reviewing the different options out there, seeing how 58

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Hatch's research. "This has opened the door to new, innovative BI technology developers and marketers," Hatch writes in a recent BI report, "who see an opportunity to capture the attention of established BI customers with low-risk offerings that address questions resulting from all of the M&A activity."

The Need for Speed Even traditional on-premise vendors, like Business Objects and Cognos (now owned by IBM) are starting to offer on-demand

No. 1

The position BI and analytics took in a survey to find which technology would have the greatest impact on business in the next two to five years. Source: Aberdeen

solutions, responding to the rise of several pure-play on-demand BI vendors. "The increasing speed, power and availability of on-demand solutions are narrowing the performance gap between on- and off-premise application implementations," Hatch notes. Business Objects leads the on-demand BI space, with 70,000 subscribers. But smaller vendors, such as Oco, SeaTab, LucidEra, Dimensional Insight and OnDemandIQ, are nipping at its heels â&#x20AC;&#x201D; offering customers both on-demand suites of reporting and analytic tools as well as highly targeted applications that solve specific customer needs and are delivered in weeks, not months or years. Hernreich describes Oco's integration work with Casual Male's systems as "unobtrusive," taking roughly six to eight weeks to complete. "And it worked on day one," he says. BI vendors are also hearing a lot of pain from current and potential customers who need a quick fix: inside companies of all sizes, the pressure to aggregate, synchronize and deliver clean and actionable data to business users has never been more intense. A recent Aberdeen survey of 4,300 companies found that the number-one technology that could have the greatest impact on the business during the next two to five years was BI

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essential technology

and analytics. (SaaS initiatives grabbed the second spot.)

It's Not Just for SMBs Vendors offering on-demand and SaaS applications have made names for themselves by serving midsize and smaller companies, which typically don't have the IT resources to dive into a full-fledge on-premise rollout. The partnership makes a lot of sense for both parties, say analysts. "Mid-market companies lack the sunk costs that large enterprises have already invested in a BI infrastructure. They have

and logistics for Welch's. "We dump them all into one data warehouse [maintained by Oco], and we can mix-and-match and sliceand-dice any way we want." Coyne says that Welch's tries to ship its products five days a week out of its distribution center. "But we found ourselves just totally overwhelmed on Fridays," he says. "We would complain, 'How come there are so many orders on Friday?'" It turns out that Coyne's team was doing it to themselves. The data aggregated into Oco's data warehouse and sliced-and-diced by Coyne's team revealed their errors,

With on-demand apps,IT's role as gatekeeper is minimized.But even the most enterprising business executives have to realize they need IT's buy-in and support for on-demand BI apps. similar requirements to integrate, report and analyze data from numerous systems, but they don't have the staff or infrastructure to pull it off," writes Gartner Research Director Kurt Schlegel in a February 2008 report on BI self-service options. "Plus, mid-market companies are often in volatile business cycles where revenues could grow quickly or come crashing down." But larger companies are also starting to test the on-demand waters with targeted applications. Welch's, the Rs 2,616-crore consumer-packaged goods manufacturer known for its jams, jellies and juices, recently installed an on-demand BI application from Oco. In January, Welch's rolled out a transportation logistics BI application that serves up analytic insights from Welch's systems and its distribution partners' in a way that its Oracle BI software (installed in 2007) could not. "We're essentially capturing every element â&#x20AC;&#x201D; from the customer orders we receive, to bills of lading on every shipment we make, as well as every data element on every freight bill we pay," says Bill Coyne, director of purchasing

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which they have now fixed. "Just trying to steer away from Fridays provides us a huge benefit," Coyne says. "We can look at the number of orders per day, the number of orders by day per customer and overall customer order patterns." Welch's spends more than Rs 200 crore each year on transportation expenses, and the Oco BI application and reporting features have become critical in a very short period of time, he says. "We literally can't go any amount of time without knowing this stuff," Coyne says. In addition, training users on the new application is "the equivalent of training someone to use Google," he notes. As to the payback, it's been "almost instantaneous."

On-Demand Changes IT's Role The oft-cited concerns regarding on-demand and SaaS applications (integration, customization, security) typically don't emanate from the business side of an organization. Typically, they come from IT groups already under intense pressure from project backlogs and a lean number

of staffers, who most likely don't have BI development skills. "The IT and BI skill sets that are required to meet this demand are in limited supply," notes Aberdeen's Hatch. With easy-to-install on-demand applications, IT's role as gatekeeper is minimized, say analysts. By 2012, Gartner's Schlegel predicts that emerging technologies such as on-demand and SaaS BI tools will make users "less dependent on central IT departments to meet their BI requirements." However, even the most enterprising lineof-business executives have to realize they need IT's buy-in and support for on-demand BI applications. Welch's had just finished the four-year, Rs 124 crore project installing Oracle's ERP applications in-house, which included a BI application, and IT was understandably "concerned" about Coyne's new external application needs, he says. "They wanted to make sure we were doing the right thing," Coyne says, "but even they said that this particular area of Oracle does not have a solution for it. It wasn't much of a debate at all." One major sticking point for IT usually involves the security of corporate data as it moves outside of IT's control. But executives and analysts say that the potential business benefits of quicker access to BI data, coupled with the robustness of third-party providers' security may outweigh concerns. Casual Male's Hernreich says he was initially "nervous about the information being offsite," but that the final analysis showed the business benefits of a SaaS BI solution were too big to ignore. And for SMB companies like RapidAdvance, well-established vendors' security controls are a benefit â&#x20AC;&#x201D; not a concern. "For a small company to leverage and piggyback off the firewalls and data protections [of a vendor like Business Objects] was a big selling point," Cohenford says. To many companies, the future of on-demand BI applications is already here. Says Hernreich: "It's essential to operating the business." CIO Send feedback on this feature to editor@cio.in

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Pundit

essential technology

Open Source Governance Does Open Source roam freely in your enterprise like it’s theWildWest? It’s time to play sheriff before someone gets hurt. By Bernard Golden Open Source | I recently analyzed a conversation between Sun Microsystems President and CEO Jonathan Schwartz and an unnamed CIO, who professed that no Open Source was used in her organization and then was surprised when Schwartz noted that 1,300 downloads of MySQL had gone into the organization in six months. I described the legal risks this invisible Open Source presents: if you don't know you're using Open Source, how do you know whether you're complying with its license obligations? However, as I said, there is a bigger problem: how do you offer SLAs, ensure proper support coverage, and develop

the need for new software. He consults with a manager, who builds a business case and talks with finance, legal, and procurement. The manager obtains a budget, the procurement team creates a RFP, the company obtains the software and the software engineer can implement the solution. There are many steps and organizations involved in this process. And while it takes time to execute, the time provides people a chance to become aware that new software is coming and no one is no surprised. Now consider the flow of obtaining OS software: a software engineer recognizes need for new software, so he downloads an

IT organizations have to put policies in place to move OS use from invisible to visible so that they can be sure they have addressed the risks associated with OS. I would go even further. Unless policies are tied into organizational processes, it's difficult to impossible to know whether policies are being observed. The critical thing is to marry policy with process and integrate OS management into overall IT processes. Only then can you be sure that the organization is using OS appropriately. It might seem daunting to try and figure out how to move forward with implementing OS governance. Where to

It's critical that CIOs find out more about Open Source governance or remain potentially liable for serious hurt. appropriate employee skills when you don't even know what you're running? I often hear that people don't understand why OS should be handled any differently from any other IP. What about OS is different from proprietary software? After all, both are copyrighted IP distributed under a license, so they must be the same, right? The reason OS requires implementing a new set of processes reflects the fact that existing processes are configured around the practices and assumptions of proprietary software, which are not present due to the unique licensing and availability of OS. Consider the usual flow of obtaining proprietary software: software engineer sees 60

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OS component and implements a solution. The ease of downloading OS fixes a major complaint about IT: everything takes too long. Using OS enables IT to be far more nimble and creative. Unfortunately, if you compare this process with the proprietaryfocused process, you can see what it lacks: the opportunity for other important groups to become aware that new software is going to enter the company's infrastructure. So, OS decisions never enter the established process because no permission, and, crucially, no budget is required to obtain it. Since the established processes are typically triggered by the budget process, OS use is essentially invisible to the organization.

start? How to know if you've identified all the OS currently running in your infrastructure? How to ensure you're complying with OS license conditions? Well, one way to start is to do some Internet searching on the topic. No matter how you decide to find out more about OS governance, it's critical you do so — and soon. Otherwise, you run the risk of being in the shoes of the CIO described in Schwartz's anecdote: unaware of what software you're responsible for, and potentially liable for serious hurt. CIO

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7/18/2008 3:12:37 PM