CIO April 1 2009 Issue

leadership

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Business

Technology

anuj gulaTi, says enterprise architecture is more important now than ever.

Drawing On agility How ICICI Lombard’s enterprise architects keep it nimble in the face of the slump. page 20

April 1, 2009 | rs100.00 www.CIO. I N

VieW FrOm the tOP Kris Gopalakrishnan on thwarting the slowdown.

Virtual arithmetic How a pharma distributor divided cost.

page 32

page 36

From The Editor-in-Chief

Keep the Dots Connected How good is your information supply chain?

We buy only enough to fit into the plan of production… if transportation were perfect and an even flow of materials could be assured, it would not be necessary to carry any stock whatsoever.

— Henry Ford When Henry Ford wrote the lines above in My Life and Work in 1922, he was describing what decades later was referred to as a just-in-time inventory strategy. A strategy, which cuts down waste, aligns production with demand, and dramatically improves efficiency and ROI for an organization. And, the best part about it is that it works just as well whether the economy’s booming or in a depression.

Over the years, many organizations The culprit is the data gap typically in the manufacturing sector, within the supply chain have adopted it in some form or the other which makes a mockery of — from the Piggly Wiggly supermarket all forward planning. chain’s re-stocking policy to the iconic Toyota Production System that it inspired in turn. And, of course, the acronyms and jargon that have accompanied it are legion: stockless production, continuous flow manufacturing (CFM), world class manufacturing (WCM), lean manufacturing...

The benefits are undoubtedly high. And, yet, there are issues that can derail the system, particularly during a slowdown. The major problem with just-in-time operations is any large change in supply or demand leaves both suppliers and downstream consumers vulnerable.

Among other terms, this is referred to as the ‘Bullwhip Effect’ — when distorted information within a supply chain causes excessive inventories, lost revenues, messed up production schedules and bad customer service. I wonder how many organizations are groaning under stock pile-ups or missed delivery schedules or customers that are refusing to pick up orders. The culprit, quite obviously, is the data or information gap within the supply chain which makes a mockery of all forward planning.

When we spoke with Infosys CEO & MD, S. ‘Kris’ Gopalakrishnan recently (Page 30), he envisioned organizations that will not only see the slump through but will also thrive. He added only one caveat: they will need to have in place systems that would give them near real-time information and control.

While not advocating spending on technology for its own sake, Kris said that the priority has to be on increasing business efficiency. “In today’s world, where reaction times are so important, creating these capabilities is extremely important. It gives companies confidence, flexibility and can save cost, which will pay for these investments,” he observed.

How is your organization geared to maintain information flow? Write in and let me know.

Vijay Ramachandran Editor-in-Chief vijay_r@cio.in 2

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Anuj Gulati, Director, ICICI Lombard General Insurance, says enterprise architects are at the heart of his organization.

Enterprise Architecture

Case File

COVER sTORY ThE CAsE FOR ThE EnTERpRIsE ARChITECT | 20

ThE MATh In VIRTuALIzATIOn | 34 Buried under a set of dying servers and their whopping costs, Lextron was desperate. It needed to subtract costs and add efficiency before or succumbed. Its problem solver: a simple equation and virtualization.

Feature by kim s. nash, sneha Jha and sunil shah pLus:

hOW TO EnsuRE YOuR nEW ARChITECT’s suCCEss | 28 An architect can help your company make connections throughout your organization’s technical and business communities. But only if you understand how to set the stage for effectiveness — and that begins before his first day of work.

Feature by J.p. p. Morgenthal p Vol/4 | ISSUE/10

Feature by Joanne Cummings

IT Management TAkIng OFF ThE TRAInER WhEELs | 42 Some organizations are finding balance with less expensive options for rising enterprise software maintenance and support costs.

Feature by Tom sullivan

The CIO Role sTARbuCks’ nEW CIO | 48 Bold changes are brewing in IT with the advent of new Gen-X leadership from Starbucks’ CIO Stephen Gillett.

Feature by Thomas Wailgum

more » REAL CIO WORLD | A P R I L 1 , 2 0 0 9

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CoVEr: dESIgn by b InESH SrE EdH aran PHoto by SrIVatSa SHandIlya

The architect is key to aligning business and IT. In tough times, this hard-to-define position is more important than ever.

content

(cont.) departments Trendlines | 7 Survey | Asian CIOs Mean Business Quick Take | R.I.S. Sidhu on Fraud Detection Voices | Where is DR Now? Energy | Your Datacenter’s Driving Force Saas | Running a Security Test Survey | Budget Cuts Beat Y2k Research | Cheap Scanners ‘Fingerprint’ Paper Virtualization | Green Olympics Cloud Computing | Moving to the Cloud Study | Outsourcing Gains Popularity in

Asia Pacific

Essential Technology | 54 Storage Virtualization | Hitting the Jackpot

Feature by Cindy Waxer Pundit | Clouded Economics

Column by Bernard Golden

From the Editor-in-Chief | 2 Keep the Dots Connected

By Vijay Ramachandran

NOW ONLINE S. Gopalakrishnan, CEO and MD, Infosys Technologies, on what companies need to do to find their way out of the slowdown.

Executive Expectations view from the top | 30 S. Gopalakrishnan, CEO and MD, Infosys Technologies, says that only IT can deliver the the true control over business that companies — including Infosys — need to live through the current storm .

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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

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Interview by Sunil Shah

Applied Insight The Adventurous CIO | 14 Who you are and what you’re made off is determined by how much risk you take and your learning agility.

Column by Gordon Watt and Brinley Platts

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Governance BOARD

Advertiser Index

Alok Kumar

Publisher Louis D’Mello Associate Publisher Alok Anand

Editor ial

Editor-IN-CHIEF Vijay Ramachandran

Anjan Choudhury

Ashish Chauhan CIO, Reliance Industries

Correspondents Snigdha Karjatkar, Sneha Jha, Chief COPY EDITOR Sunil Shah Copy Editors Deepti Balani,

Shardha Subramanian D esign & Production

Creative Director Jayan K Narayanan

Lead Visualizer Binesh Sreedharan

Lead Designers Vikas Kapoor, Anil V K,

President Corporate IT & Group CIO, Aditya Birla Group

BC

Microsoft

IFC

Oracle

IBC

Gopal Shukla VP Business Systems, Hindustan Coca Cola

Designers M M Shanith, Anil T, Siju P

P C Anoop, Prasanth T R

Canon

Dr. Jai Menon

Group CIO, Bharti Enterprises

Sani Mani (Multimedia)

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CIO, HSBC India

Director Technology & Customer Service, Bharti Airtel &

Unnikrishnan A V

Avocent

Donald Patra

Girish A V (Multimedia) SENIOR Designers Jinan K Vijayan, Jithesh C C

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Atul Jayawant

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ADC Krone

CTO, BSE

Executive Editor Rahul Neel Mani assistant editors Gunjan Trivedi,

Kanika Goswami

VP & Head Internal IT, TCS

Photography Srivatsa Shandilya Production Manager T K Karunakaran

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Mark eting and Sales VP Sales Sudhir Kamath

GENERAL Manager Nitin Walia

Senior Mananger Siddharth Singh,

Assistant Manager Sukanya Saikia

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Delhi Aveek Bhose, Gagandeep Kaiser, Punit Mishra

Mumbai Parul Singh, Hafeez Shaikh, Suresh Balaji, Dipti Mahendra Modi

Japan Tomoko Fujikawa

USA Larry Arthur; Jo Ben-Atar

CIO, Tata Motors

Events VP Rupesh Sreedharan

Senior Manager Chetan Acharya

Managers Ajay Adhikari, Pooja Chhabra

Manish Gupta Director-IT, Pepsi Foods Muralikrishna K. VP & Head-CCA, Infosys Technologies Navin Chadha CIO, Vodafone Pravir Vohra Group CTO, ICICI Rajesh Uppal Chief General Manager IT, Maruti Udyog Sanjay Jain CIO, WNS Global Services Shreekant Mokashi Chief-IT, Tata Steel Sunil Mehta

All rights reserved. No part of this publication may be reproduced by any means without prior written permission from the publisher. Address requests for customized reprints to IDG Media Private Limited, Geetha Building, 49, 3rd Cross, Mission Road, Bangalore - 560 027, India. IDG Media Private Limited is an IDG (International Data Group) company.

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Sr. VP & Area Systems Director (Central Asia), JWT T.K. Subramanian Div. VP-IS, UB Group V. K Magapu Chief Executive, Larsen & Toubro Infotech V.V.R Babu

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

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AsiAn CiOs MEAn BusinEss ss business-savvy than in North America," said McDonald.

According to the survey, CIOs in Asia expect their IT budgets to grow this year, despite challenging operating conditions.

CIOs will need to utilize their IT budgets to restructure the organization, McDonald said.

"Enterprises expect IT to contribute results in an uncertain economy. This is more true in Asia, where CIOs plan to allocate 24 percent of their budget to growing the business and 20 percent to transforming the business. " CIOs in Asia listed business process improvement, cutting enterprise costs and improving enterprise workforce effectiveness as their top business goals for the year.

"CIOs today are going back and fundamentally rethinking and

restructuring what IT is about," said McDonald. "And the reason behind this need to restructure and change IT is because the challenges we all face can be summed up in two very important words: volatility and uncertainty."

Asian CIOs ranked business intelligence applications, enterprise applications (ERP, CRM and others) and collaboration technologies as the top three technology investments to make for the year.

IllUStratIon by anI l t

S u r v e y Analysts from research firm Gartner expect CIOs in Asia to play a more integral role in transforming their companies' business processes with the use of IT this year, compared to their counterparts in North America.

Mark McDonald, group VP and head of research, Gartner executive programs, said such a scenario would likely occur due to the relatively compact corporate hierarchies in Asia. Results from a recent Gartner survey showed 54 percent of CIOs in Asia report directly to the CEO, compared to just 38 percent worldwide.

Seventy-five per cent of CIOs in Asia also reported having responsibilities outside of IT. "In Asia, it's not unlikely to find a CIO who comes to the job from some other part of the business," said McDonald.

"Executive teams here have the tendency to know each other very well, and we find that CIOs in Asia Pacific are much more

—By Melissa Chua

Quick take

R.I.S. Sidhu on Fraud Detection From identity theft to phishing, cybercriminals have broken codes, cracked passwords and trespassed private territory.

With the slowdown hitting financial institutions in India, Indian banks cannot afford to fall prey to online credit card frauds. Shardha Subramanian spoke to R.I.S. Sidhu, GM, Punjab National Bank, to find out how he was tackling the issue:

Security

How are you combating online credit card frauds?

We are in the process of setting up a security operations center which will be completely technology-driven. This will take a closer look at large value transactions.

What should your customers do to avoid identity theft?

They should definitely be more conscious. In fact, we are providing our customers with dynamic keyboards on our website, which will help them transact in a secure environment, even from cyber cafes.

How is your fraud detection system different from other banks?

Most banks are struggling with core-banking. I think we are ahead of the curve, in terms of what our fraud detection system can offer. We are equipping it with second factor authentication system for online transactions.

What is the future of fraud detection?

It is a busy business for both parties — fraudsters and us.

The practise is only going to increase with time. As fraudsters equip themselves with better ways to beat the system, we should equip ourselves with systems to beat them. We should always stay a few steps ahead of them.

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Is your fraud detection system capable of dealing with insider threat?

Yes. We are waiting to see a proof of concept from our vendor, but it would have a sufficient mechanism to tackle insider threat. We will provide our employees with special identity tokens.

R.I.S. Sidhu

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Should DR be Put on the Back Burner Just Now? d i s a s t e r r e c o v e r y Research firm IDC estimates that spending on disaster recovery will triple by 2011. But, hit by the slowdown, IT organizations are busy cutting costs. Does DR fall in that category? Snigdha Karjatkar spoke to your peers to find out and here's what they had to say:

“Disaster recovery and the slowdown are two different and independent things. DR is an essential business need — not an exhibitional asset.”

trendlines

Dr. Sridhar Mitta MD & CTO, E4E LABS

“No. We will definitely speed up our DR project. We will create a business continuity and DR solution and policy for enterprise-wide data protection through a tiered implementation.”

Vikram Saxena Sr. GM-IT, Emami

"A disaster can be the last nail in

an organization’s coffin so it won't be put on the backburner. But, a DR project will be questioned by business at every step."

Tamal Chakravorthy CIO, Ericsson India

Your Datacenter’s Driving Force Like it or not, energy is the yardstick by which datacenters are now measured — and many are coming up short.

Between 2006 and 2007, the energy required by datacenters jumped more than 13 percent, according to IDC. In fact, the cost to power and cool installed servers has doubled since 2000 and is expected to reach almost US$40 billion (about Rs 200,000 crore) annually by 2012, predicts IDC. But the need to save energy forces companies to change how they handle their data requirements, says Rich Lechner, VP of energy and the environment for IBM. Energy requirements will not slow with the economy: the demand for datacenters is growing, even in the current downturn."Customers are not decelerating their investments in this area, they are accelerating their investments, because of the payback," Lechner says.

The message is to build more efficient facilities, renovate the existing facilities with efficiency in mind, or outsource datacenter needs.

Energy is only becoming more expensive and the fear of another spike in energy prices has many companies considering ways to make their datacenters more efficient, said Rhys Amarilli, director of managed services for Tata Communications' European global services division.

His company currently has datacenter facilities taking up almost 1 million square feet of space. "Datacenters consume a lot of power," Amarilli said. "I known efficiency is high on people's agenda."

And location problems continue. Because of a datacenter's energy requirements, finding the ideal location can turn into a riddle. The energy infrastructure has become overtaxed in many parts of the world. The problem extends to current data facilities as well. More than half the companies polled in a recent study suffered an outage in 2008 due to a power or operational issues, Lechner says.

Carbon restrictions are a fear, too. While there is no cap-andtrade system yet, some executives fully expect one. "Everyone is looking at a reduction in carbon footprint," says Abid Qadiri, VP of datacenter services for Tata Communications. "It just depends on where they are on the evolutionary spectrum."

Even without a tax on carbon production, business executives are focusing on going green for its public relations value.

In addition to reducing energy costs, green initiatives at companies sell well with customers, says IBM's Lechner.

"There is lots of room for improvement," Lechner says.

ENER G Y

Lend Your

Voice

Write to editor@cio.in 8

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—By Robert Lemos

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SaaS: Running a Security Test

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S e c u r i t y Security issues have to be examined before diving into software as a service (SaaS), warns Burton Group analyst Eric Maiwald. SaaS can offer cost savings and speed in platform deployment, compared to a business trying to acquire and install software internally. Businesses eager to race into the cloud typically say "they can measure the cost savings the first couple of years," said Maiwald. "But I think they're leaving something out."

Beyond the hard cost considerations, there are myriad security questions a business should ask, Maiwald said. These include: Which of the SaaS employees has root and database access, and will anything prevent them from accessing corporate data?

Is data held encrypted? How? Is the data separated between clients or is it all stored on one huge database out there? How is data separated?

How will the legal question of e-discovery be addressed should it arise as a business concern?

Is the data flowing between the business and the vendor's cloud computing infrastructure secure in some way?

What controls would prevent vendor insiders from downloading your data onto a USB stick and walking out the door?

In terms of service availability, can you get your vendor to sign an SLA? Is their datacenter in a location prone to hurricanes or earthquakes? What are their back-up plans?

What information is captured in the audit logs?

Are there ways to limit where SaaS vendors go within the corporate network?

Despite his critical remarks, Maiwald acknowledged in some instances SaaS and cloud computing vendors may offer better availability than their business clientele could achieve due to the investments vendors can make to scale up their services.

He noted that a few years ago SaaS-styled vendors would be vague in discussing their security controls, but just recently he found vendors much more forthcoming than before.

One aspect of SaaS to be mindful about is that vendors prefer to provide a common set of services in order to take advantage of scale, Maiwald pointed out. So that means "vendors may not be willing to change internal policies as their economies of scale will suffer," he said. Many businesses may want to ask if the SaaS vendor they're considering has passed a so-called SAS 70 audit, Maiwald said.

There are two types of SAS-70 audits, he points out, and Type 2 is much more stringent.

The larger question of how SaaS may impact the business in general can't be ignored since companies may be sacrificing IT skills and competence when they choose SaaS. Maiwald said his basic recommendation would be to limit the number of SaaS vendors to a few strategic partners.

—By Ellen Messmer

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Perfect Case Study

Ends Here Finding the perfect case study on technology implementation just got simpler. Visit the Case Studies section at the all new CIO.in to find hundreds of case studies searchable by industry or technology. The easy navigation is enhanced with Executive Summaries, 1-page condensed versions and clear Reader ROI spelt out, so you can derive maximum value.

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While the restructuring of the American financial services industry and the accompanying economic downturn is sure to have farreaching effects on offshoring activities worldwide, outsourcing will remain the primary tool that enterprises will use to maintain growth in bad times. And to meet global customer requirements, service providers will need the help of certain technologies.

In the Contact Center Outsourcing Trends in the Asia Pacific Market, 2008-2011 study, Frost & Sullivan analysts said that the key technologies that will improve operations of outsourcers are: automation and selfservice; IP and unified communications; and agent performance optimization Frost & Sullivan analysts said that, in 2008, the outsourced contact center landscape witnessed a movement from agent presence to automation. The year saw increased use of self-service applications, such as IVR and speech

trendlineS

reSearch

technologies as part of the inbound portfolio. The report noted that Malaysia, India, the Philippines and China also experienced an increasing demand for IVR and speech technologies. "However, the price premium associated with these products often put them out of reach of the SMB sector," said Frost & Sullivan analysts. "As development of robust and accurate speech engines for regional language variations and dialects is still in progress in these countries, adoption at a domestic level remains low."

Indian developer, Talisma, has made considerable headway in the development of various Indian dialects, and is currently working with multiple IVR vendors to offer a total solution for companies tapping the domestic Indian market.

Unified communications is particularly emerging as a key in the contact center industry. In the context of the outsourcing industry, outsourcers are looking for tools

that can make the agents more productive and hence cost-effective, and improve overall customer satisfaction ratings — a key performance indicator for all players.

Frost & Sullivan analysts said unified communications can play a key role in these two aspects by delivering solutions that can enable agents to get access to client expert resources outside a contact center, or even supervisors and other experts in other delivery centers to resolve customer queries at the first call. While the talk of extending the contact center into the enterprise has been around for some time, with UC this can become a reality. —By Melba-Jean V. Bernad

Budget Cuts Beat Y2k the economic downturn may accomplish what y2k never did: disrupt datacenter operations.

In the late 1990s, businesses spent tens of thousands of dollars, sometimes millions of dollars, re-mediating lines of code to ensure that their systems didn't succumb to the year 2000 date glitch. but this time, it is the lack of spending and a relentless drive for cutbacks that may be the biggest threat facing some datacenters today, according to aFCoM, an association of datacenter managers.

It predicted that in a five-year period, one out of every four datacenters would experience a serious business disruption, which could involve anything from an entire datacenter to a few pieces of equipment. but leonard Eckhaus, founder of the orange aFCoM and its past president, says this threat of disruption is increasing as the economy declines. "We believe it will worsen," he says. nearly half of the datacenter managers in an aFCoM survey say cutbacks were, but the survey also cited some specific reasons why there might be a disruption in services, and two had to do with security: 6.1 percent are cutting physical security S u rv ey

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and 4.5 percent are scaling back data security. nearly 12 percent said budget cuts generally would lead to disruptions. aFCoM officials believe the economic downturn is exacerbating the datacenter skills issue. Most people who move into datacenter management have worked in other areas and usually get a lot of their training on the job. there isn't much in the way of specific job training for datacenter workers. as part of budget cutting, many of these workers are being offered buyouts, which is increasing the pressure to find people with the right skills to replace them. aFCoM said the economy has actually "sped up" the skills problems. rick Sawyer, a managing principal at EyP Mission Critical Facilities, says he sees clients who can't fill positions for extended periods of time. the workforce has become less mobile because of the housing market, and companies are not willing to spend the money to pay for a relocation that might involve helping an employee sell his home. but companies are more willing to house employees in apartments, allow them to work out of their homes and fly them in an out on a periodic basis, he says. —by Patrick thibodeau

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outsourcers love uc

Cheap Scanners ‘Fingerprint’ Paper think two blank sheets of paper are the same? look closer. researchers at Princeton University and University College london say they can identify unique information, essentially like a fingerprint, from any sheet of paper using any reasonably good scanner. the technique could be used to crack down on counterfeiting or even keep track of confidential documents.

"We've found a way to identify documents even when there was nothing additional printed on them," said alex halderman, now an assistant professor at the University of Michigan, who was part of the Princeton team. "this is like an invisible serial number printed on every piece of paper ever made." two blank pieces of paper may look identical, but if you hold t them to a light, you can see that in fact they're unique mashups of fibers. the researchers say that they can measure this unique texture using a standard 1,200 DPI scanner and some custom software they've written. by turning the page to 90 degrees and scanning it again and again, the researchers can pluck out subtle distinctions in the paper's texture and create a unique digital map of its surface. "you y you scan it four times and then the software is able — from these four scans — to figure out what the surface texture of the document looks like," said William Clarkson, a Princeton graduate student. "then it can extract essentially a fingerprint of the document." this isn't the first time these researchers have found interesting data in unlikely places. Four of the paper's six co-authors, including Clarkson and halderman, helped develop what's known as the cold-boot attack, which showed how to get information out of a computer's memory, even after it has been turned off. this technique could be used to skirt some hard-drive encryption systems. With a well-preserved sheet of paper, the researchers say that their fingerprints are pretty close to 100 percent accurate.

If the paper is soaked or marked up, things become trickier, but with error-correction software it's still easy to make a definitive ID, Clarkson said. "you you have to significantly modify the document to y make it unidentifiable." the researchers believe their technique could be used to identify counterfeit money, tickets and even packaging containers. a drug company like Pfizer, for example, could take fingerprints of their labels when they are shipped, and this data could be verified later by a government or company representative in order to spot fakes. "there are limitations and need for precautions that we might not have been aware of before," he said.

—by robert McMillan toolS

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v i r t u a l i z a t i o n The London 2012 Olympic Games will be the "most green and sustainable" games to date, and IT will play its part. That's the message of Gerry Pennell, CIO for the London organizing committee of the Olympic and Paralympic games (LOCOG), and IT services partner Atos Origin.

Pennell and Atos Origin highlighted green technologies, such as server virtualization, that could help the organizing committee control costs and reduce waste. Michele Hyron, chief integrator to the 2012 Games at Atos Origin, the company leading the consortium of IT suppliers that designs, builds and operates the huge technology infrastructure in support of the Games, said the team will cut hardware and software in a bid to reduce emissions.

"We are looking to reduce the amount of hardware, cooling, power, air conditioning and equipment that the London organizers have to buy," said Hyron, who was

operations manager at the Beijing 2008 Olympic Games, integration manager at Athens 2004 and quality manager at Salt Lake City 2002. Derek Ward, executive VP for UK markets and strategic relationships at Atos Origin, added: "At the front of our mind is always sustainability because this way we can minimize the use of hardware and power."

The games will use an estimated 900 servers, around 1,000 network and security devices and 8,000 computers. On top of this, Hyron said, Atos will ensure all applications and equipment has undergone 200,000 hours of testing.

"We are keeping an eye and conducting due diligence regarding the financial robustness of our suppliers, as you would expect us to do. At the moment we are not seeing any problems," said Pennell.

The Olympics CIO said that construction crews building the Olympic Park are early adopters of server virtualization —

by using IT applications inside a hosted environment with a shared service desk for crews and Games organizers. London 2012 will also improve the remote capabilities of its commentators' information system, streaming real-time results, athlete information and coverage to broadcasters' around the world and offering a single feed of all Olympics news. The idea is to reduce unnecessary travel and to use less paper than the 2008 Beijing Olympics, where 50 million sheets were printed out.

But the merits of virtualization are still being investigated, as only proven robust technologies will be adopted. LOCOG and Atos cannot risk system failures, explained Adiba. "Managing risk is the key factor for us," he said.

—By Siobhan Chapman

Moving to the ClouD It t infrastructure and services delivered over the cloud will be ubiquitous within five years, and vendors that ignore the shift from on-premises software to Internetdelivered technology will be left in the dust, IDC analyst Frank Gens predicted.

"If you are not thinking about and acting on delivering your own offerings through the cloud [within five years], you won't be in the mainstream anymore," Gens said. avoiding the cloud "won't really be an option."

Cloud services break down into six main categories, according to Gens — applications, collaboration tools, storage, servers and processing, It t management, and platforms.

IDC surveys show 26 percent of businesses using the cloud for It management, 15 percent to bolster server and storage capacity, a quarter for collaboration and business applications, and 17 percent for application development and application deployment. a common perception is that most customers embrace cloud services because of the cost. While that is certainly true, Gens said cloud computinG

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IDC surveys show the no. 1 attribute driving people toward cloud services is the ease and speed of deployment.

Users are telling CIos they want faster delivery of services, and the cloud helps achieve that goal. "that alone guarantees that over the next several years the cloud model will be very important for CIos," Gens said. other big selling points identified in user surveys include lessening the need for in-house It t staff, paying only for what you use and when you use it, the standardization of It t systems, and access to the latest functionality. the top concerns identified in IDC user surveys are security, performance, availability and barriers to integrating cloud services with in-house It t systems. "We're going to have to do a lot of work around service-level assurance to move this market into the mainstream," Gens said. recession will be a change agent in the technology world, forcing customers and vendors to adapt to new realities, IDC chief research officer John Gantz said.

—by Jon brodkin

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LOndOn 2012: Green Olympics

Outsourcing Gains Popularity in Asia Pacific

trendlineS

S t u d y A survey has revealed that the current financial crisis has brought about an increased tendency for IT heads in the Asia Pacific to move away from the mainframe and outsource aspects of their enterprise IT operations.

The survey covered 490 business and technology executives across the globe, between December 2008 and January 2009. More than 100 (128) respondents were from countries in the Asia Pacific, such as Australia, China, India, Japan and the Philippines. Survey results showed that 29 percent of the Asia Pacific respondents indicated they were likely to move away from the use of mainframes. This figure is higher than the 22 percent result showed for the United States and Canada.

Reasons given for moving away from mainframes were mainly associated with the high costs associated with maintenance and licensing. "Mainframes are more expensive than today's servers," said a respondent from the Asia Pacific.

"The mobility of mainframes is not satisfactory. Every movement would product extra significant expenses.

Therefore, our company must control some unnecessary costs during the global economic downturn," said another respondent from the region.

Cost was also cited as a driver behind companies' decisions to outsource aspects of their IT operations. More than half (52 percent) of respondents in the Asia Pacific found outsourcing to be an attractive option, given the current financial crisis, while just more than a third of respondents from North and Latin America found outsourcing attractive.

Other factors influencing the decision to outsource include the quality of service and solutions, increased flexibility, manageability, efficiency or projects which require a set of specific skills.

"Owing to our insufficiency in technical strength, we need the help of outsourcing companies, and their resources, to complete some upgrading or optimising tasks," said an Asia Pacific respondent. "To us, outsourcing can save costs, and their technical strengths are higher as they have specific professions in specific fields, hence, their end-products or results are usually better than doing [it] ourselves."

Respondents from Europe and the Middle East registered the lowest interest in outsourcing, with only 30 percent of respondents looking upon the concept favourably.

—By Melissa Chua

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Gordon Watt and Brinley Platts

Applied Insight

The Adventurous CIO Who you are and what you’re made off is determined by how much risk you take and your learning agility.

I

Illust ration by un nikrishn an AV

s IT commanding the attention it should? You'd be hard pressed to find anyone who will argue that IT isn't increasingly important to business, and following on from this it would be natural to assume that IT leaders must be becoming more influential in business. But, as many recognize, this is not necessarily the case. A spate of surveys conducted towards the end of last year, such as those

by Capgemini and recruitment firm Harvey Nash, all seem to point in the opposite direction: CIOs seem to becoming generally less influential.

How can you buck the trend? Prompted by this paradox, we delved deeper through a research project, undertaken for the thought-leader network CSC Leading Edge, that was entitled Expanding the CIO Mandate. Eight years earlier Michael Earl and Philip Vivien identified trends in expectations of CIOs and defined the future role of the 'new CIO'. This transcended the then-dominant technology focus to include contribution to organizational transformation, as 'change master' and business strategy direction. We set out to discover how the minority of new CIOs, who in our language had an expanded mandate, achieved this status and made some surprising discoveries.

We worked with CIOs who had an expanded mandate and retraced their diverse careers to discover two interesting and unexpected patterns. They seemed to share a largely common set of attributes, many of which are uncommon in the general IT population, and they all followed a similar, atypical career route.

To pick just one common attribute, an almost universal characteristic of CIOs with an expanded mandate is adventurousness. They were all on a constant quest for new

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APPlied insiGht

challenges to the extent that they would sacrifice security to test and stretch themselves, typically committing first and then working out how to deliver afterwards.

Perhaps because of this, their common career route was not the normal linear progression through IT. Although they served a (usually accelerated) apprenticeship in IT, they soon turned their attention elsewhere in order to find new challenges. These were typically in general management roles in mainstream business units.

When they returned to IT, it was in order to take a strategic stance. Neither their adventurousness nor their heterogeneous career progression is typical in IT. If these are the keys to success then it is not so surprising that relatively few make it.

Learning Agility Is this more than an extraordinary coincidence?

Current general theories of leadership rank emotional intelligence and 'learning agility' as essential attributes for success. Inclusion of emotional intelligence probably will not cause any raised eyebrows, but what is learning agility? Learning agility is essentially the speed with which you can take charge in an entirely new situation: orientate yourself, assess the situation, see a solution and put it into effect. As Warren G. Bennis and Robert J. Thomas say in their book Geeks and Geezers, "The ability to process new experiences, to find their meaning and to integrate them into one's life, is the signature skill of leaders..."

The way to develop learning agility is through practice. Is the adventurousness of the CIOs we interviewed (which may appear to be recklessness to traditional IT professionals) their instinctive affinity with challenges which developed their learning agility?

It seems so.

How can this insight be exploited? The opportunity it offers depends upon how you see IT in your organization.

Is IT a reliable service provider, a necessary overhead?

Or has IT more to offer as a partner showing the way in technology-led innovation and transformation? If you are still reading this, it must be the latter.

To step up to this aspiration, one necessary change will be to nurture learning agility, by allowing the selfselecting rising stars to pit themselves against new challenges and to test and stretch their leadership muscle. This means awarding assignments for drive, determination and ambition rather than prior experience and proven expertise. It means supporting and recognizing those courageous enough to take on the most demanding and potentially dangerous challenges rather than rewarding success irrespective of the degree of difficulty entailed. It involves ensuring

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regular rotation of roles rather than preserving longterm continuity in position.

Also key to developing IT leaders is encouraging and enabling interchanges with other business units rather than positioning IT as impenetrable. Finally, it means promoting IT as a talent source to the rest of the business rather than a sink in which talent is trapped.

Will it work? An incidental observation from our investigation was that, in identifying CIOs with expanded mandates as prospective subjects of their research, we noticed that a disproportionate number had worked in particular organizations. Intrigued by this, we contacted these organizations to try to discover why. One was snacks and pet-food maker Mars, a company well known for the quality of its general management development. What is perhaps less well known is that IT management is regarded as general management, just the same as the management of any other business unit or function.

IT managers at Mars are recruited, developed and appraised against the same competency set as the whole of the rest of the business and one of the key competencies is learning agility. IT managers are encouraged and expected to have the same diversity of experience, across functions, organizations and countries, as any other general manager, and vertical progression in IT is very rare. This approach has proved extremely effective in producing the highest caliber IT leaders.

Is it worth it? In the last Harvey Nash CIO Survey, 85 per cent of respondents thought that a shortage of skills in IT could impact the growth potential of their businesses. By far the greatest concern was the lack of commercial understanding, customer awareness and interpersonal skills being exhibited by the next generation of technology leaders.

Almost three-quarters of respondents (74 per cent) ranked "building and maintaining relationships with the business" as the most important capability, but only just under a quarter (22 per cent) of respondents thought their current team were excellent and more than half (52 per cent) thought they were below the acceptable standard. The severity of the situation is clearly being recognized and it requires urgent action. CIO Gordon Watt was an IT leader in international blue-chip companies for over 15 years, and is recognized for transforming IT organizations. He is now an independent researcher, consultant and coach and is a visiting research fellow at Cranfield University, and an associate of the Adair Leadership Foundation. Brinley Platts is chair of CIOdevelopment.com and the founder of the IMPACT program for IT leadership. Send feedback on this column to editor@cio.in

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Gail Farnsley

Peer to Peer

The IT Kitty Party Finding a group you identify with can lead to immeasurable career and personal gain.

W

Illustrat io n by pc ano op

hen I started college at Bowling Green State University in the fall of 1978, I was among a large group of women majoring in computer science. Although today there are far fewer women nationwide who choose that field, at the time, about 40 percent to 50 percent of the students in my class were female. The women's movement was alive and well, and the demand for computer programmers was so high that employers didn't care what gender you were. The year I graduated, computer science programs nationwide reported record numbers of female graduates.

The climate for women in IT remained strong as I entered the field as a computer programmer in the early 1980s. As I worked my way up the IT chain, however, things began to change. I discovered that I was among only a handful of women in the top ranks, and it wasn't uncommon to be the only woman in a meeting. I began to notice that I didn't have the same type of camaraderie with my male co-workers that I once shared with my female co-workers. I could still share ideas with men, but there were some topics I didn't feel comfortable discussing, such as juggling child care responsibilities or finding time to work out at the gym. I figured this was just one of the prices that had to be paid for success in IT. Despite this, I neglected seeking out the company of other women in the field. I figured I simply didn't have the time, But several years later, I was introduced to the concept of peer networking and the power it could hold for women. There are a variety of ways to network, and I've become familiar with a few specific types. Here's a look at the benefits they offer.

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Gail Farnsley

Peer to Peer

Formal Networking Groups These organized groups meet regularly and provide a career-oriented agenda and an excellent way to make contacts in the industry. There are a variety of local, regional, national and international IT groups from which to choose. I belong to Women in Technology International and a central Indiana group called Women & Hi Tech.

Joining formal groups allows you to meet amazing and powerful women and hear from some of the top female leaders in the field. The leadership opportunities within such groups are also a great benefit. Any formal networking group is worthwhile, but groups designed for women explore topics from a female point of view. Subjects such as how best to create a work-life balance if you're a 70-hour-a-week CIO, often take on an entirely different meaning for women than they do for men.

Informal Networking Groups

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These aren't part of an established organization and can meet on whatever schedule the members choose. I'm part of a group that formed unexpectedly when one of the members was writing an article about high-powered women in IT. She wanted to get a group of senior women in IT in Indianapolis together to talk over dinner, and we enjoyed the conversation so much that more than six years later, we still meet and have invited other women to join in.

We don't have an agenda; we talk about anything on our minds — jobs, dreams, families, hobbies, whatever.

Some members are still in IT, and some, like me, have moved to other careers. The members have all been in the trenches and can understand the challenges, frustrations and rewards of CIOs. We feel comfortable sharing ideas and getting advice on jobs and even on how and why to change careers.

I can't tell you how important my group was to me when I made my latest career change from CIO to professor. Even though we are all busy professionals, we make our dinner meetings a priority.

Affinity Groups These types of networks are made up of people at your company who share a common interest, not necessarily the same type of job. When I was vice president of IT and CIO at Cummins, I led a group that included all the women from the company — executives, managers, programmers, human resources professionals, marketers and secretaries. I had the opportunity to connect with women I might never have met in the course of my job as an executive.

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Recently, I was re-connected with a marketing and HR employee at Cummins whom I'd met in the affinity group, and thanks to her, we are helping to develop a science camp co-sponsored by Purdue University and Cummins. Affinity groups also allow women who don't have management roles to take on more responsibility in the organization. These groups can be especially beneficial to those looking to move into a different assignment in the company or perhaps a different career.

Even if you have no intention of leaving your job, affinity groups make it easier to make contacts on the inside to share ideas and get things done.

One-on-one Mentoring Even though a mentoring relationship isn't really a peer network, I would highly recommend having a mentor or being a mentor. Each is rewarding in its own way, both personally and professionally. I've served as a mentor to both men and women through the years — in formal and informal capacities — and am still contacted by young people seeking career advice. In fact, one of the reasons I decided to make the career move to academia was to have the chance to work closer with, and offer my insights to, young people.

Oddly enough, although I've had several mentors, none has been a woman. One of the most significant was a male high school teacher who taught a computer class.

I worked for him grading papers (he was legally blind).

He had worked at IBM in the 1950s and was always talking about how computer careers were rewarding and lucrative. He convinced me that computers would be a good career for me. That led me to reject my guidance counselor's advice to go to vocational school, and instead I applied to college. He even helped me with the application and financial aid process. Without him, I wouldn't be where I am today.

Although many women in IT — especially in the upper ranks — have very little spare time, I've found that peer networking is worth the time you invest in it. I've always felt that I get much more out of networking groups than I put in.

My advice as a former CIO is simple: Seek out groups, and if you don't find one you like, start one of your own.

Being part of a peer networking group might be the best career move you ever make. CIO

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Anuj Gulati, Director, ICICI Lombard General Insurance, says enterprise architects are at the heart of his organization.

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Cover Story | Enterprise Architecture

The Case For

Reader ROI:

The benefits of having an enterprise architect on your team Why they are critical to great IT-business alignment Why an organization's need defines the role

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hen technology infrastructure lines up with business projects like musicians in a marching band, you know you have a good enterprise architect on staff. But will you keep him when it's time to start handing out pink slips?

You will if you can make the case for this hard-to-define but critical IT position. An enterprise architect, or team of them, creates a model — usually with graphical software, but paper will do — of how your company works. That includes the business processes and the related technology as well as a common vocabulary for IT and non-IT people to use to discuss operations. The goal is a little thing called alignment.

The essence of the job "is about improving communication between the people with the problems and those who would solve them," says Leon Kappelman, co-chair of the Society for Information Management's enterprise architect working group. "That's vital."

Believers such as Scottrade CIO Ian Patterson use the enterprise architect (EA) position in part to bring the IT group close to the internal customer. At the $1 billion (about Rs 5,000 crore) brokerage, CEO Rodger Riney recently suggested to Patterson to send some EAs to User REAL CIO WORLD | a P R I L 1 , 2 0 0 9

Photos by Srivatsa Shandilya Imaging by BINESH SREEDHARAN

The architect is key to aligning business and IT. In tough times, this hard-to-define position is more important than ever. By Kim S. Nash

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Cover Story | Enterprise Architecture Summits with customers — people who trade stock online — to learn directly what services they want, Patterson says. "They get firsthand knowledge of what customers are saying" to translate into IT projects, he explains.

Achieving that impressive lockstep between business and IT takes time and practice, of course. The job of an enterprise architect is hard to master and sometimes hard to nail down.

Now, amid an economic downturn, a position like that — without concrete and measurable financial value or, typically, any direct reports — can be difficult to justify when the board of directors demands company-wide layoffs. Yet don't let those obstacles induce you to cut the enterprise architecture job automatically when you must reduce staff, experts warn. You could dig your company a bigger hole.

The EA is key to aligning business and IT, which in these recessionary times is more important than ever.

No UNivErSAl Job DESCriptioN So what does an architect do? The answer depends on whom you talk to.

At some companies, the position emphasizes technology, as in the planning of company-wide systems. A core objective, for example, is to ensure that all new software and hardware meet standards and work together.

However, a CIO makes better use of an enterprise architect by having him or her focus on the technical viability of product solutions while determining their economic value to the business, says Ken Zivic, a consultant at Forsythe, a technology advisory firm. This will result in an improved IT ability to make better business decisions while considering benefits, risk and the effects of new technology implementation, he says.

"There are so many vendors pulling and tugging on IT organizations. EAs have to be a shield for that," he says. "A voice of reason."

Not only that, but an enterprise architect must be a voice that many kinds 22

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STRucTuRaL

FlExibility ICICI Lombard can absorb seismic shifts in the economy and still grow thanks to its enterprise architects. any enterprises are rationalizing their IT spends in response to the worsening business environment. and they believe that enterprise architects (eas) are expendable. anuj gulati, director, ICICI lombard general Insurance, isn’t one of those people. optimistic that his team of enterprise architects will help ICICI lombard ride through the slowdown, gulati insists architects are indispensable, especially now. “as enterprises re-engineer their business processes and leverage technology to gain flexibility, the role of enterprise architects becomes critical. They function as a business-to-technical liaison and integrate the architectural stovepipes of business, information, application, and technology. architects give an organization the flexibility to configure products and processes thus reducing time-to-market. Further, through automation, the team reduces manual intervention in service delivery thereby reducing errors and cost,” says gulati. gulati can back up the rhetoric. his architects have integrated business processes with technology applications so seamlessly that it’s lent agility and flexibility to the business.

Take for example, how they are directly responsible for shrinking the time it takes to set up all the support services needed for a new policy (these services include changes customers want to make to their policies, renewals and claim handling). earlier it took six months to set up the entire administration and claims services for a new policy — today, it takes less than 90 days.

That gave them the ability to be the first to launch a secure mind policy, which covers three months worth of emIs for people that have suddenly lost their jobs. The policy was introduced in January 2009 — quick turnaround given that mainstream Indian media started covering job losses only in the second week of october. gulati also says that his architects have driven up efficiency, contained costs, ensured far more data integrity across ICICI lombard’s architecture, and facilitated automation and the integration of processes. all of which are good things, especially if you are as aggressive as ICICI lombard. since its inception in 2001, the mumbai-headquartered insurance company has been making waves. It achieved financial breakeven in its first year of operations and after posting strong results consistently for the past eight years, it is now India’s largest private sector non-life insurer.

It’s architecture has also helped the company build on its thrust areas: superior service at every customer touch point and a comprehensive and quality portfolio. how it pioneered weather insurance is a case in point; it’s the sort of innovation that will come handy during a slowdown.

In fact, technology is so core to its business that the insurance major refers to

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itself as a technology-led business distributor. Their business processes are defined in a way they deliver on the strategic objectives through technology, says gulati, who is also the company’s IT head. That’s why, says gulati, they decided to invest in an enterprise architecture program from the start.

ICICI lombard’s enterprise architecture program required them to marry their strategic objectives with their business processes and the underlying technology apps. Though an experienced architect might helped, the task seemed too large for one person, so ICICI lombard’s management decided to create a team of four to five people. They would serve as a "fulcrum" around which various projects would revolve. “The ea team comprises a combination of business and technology experts empowered internally with need-based external expertise,” says gulati. “Their deep understanding of the organization’s strategic objectives and its applications greatly enhances their ability to architect, design, review, implement and oversee the development of IT. They are at the heart of our organization.”

The good IT governance that comes with an enterprise architect has introduced discipline down the line. While most companies in the bFsI sector battle ‘dirty data’, ICICI lombard maintains one system of record for a type of transaction. and that reflects in their hardware and software. “If you do not duplicate the storage of data, applications can effectively communicate with each other and you get higher integration across these processes. and when you avoid duplication, you automatically save on resources. It’s a significant benefit,” says gulati.

The architect team (called process managers at ICICI lombard) is empowered to ensure that new initiatives are in keeping with the architectural roadmap of the organization. It ensures that business processes are adequately integrated with the technology architecture so that the organization consistently delivers on its service parameters. and it's because its architects laid down the rules that ICICI lombard can grow the way it does. In its first five years, the number of policies the private insurer distributed grew from 10,000 in a month to 10,000 in a day. It’s growth that ICICI lombard soaked up easily thanks to their architects, says gulati.

It’s flexible IT architecture also enabled the company to broaden its footprint. IT expanded from 30 offices to 400 offices, as it grew from nothing to rs 3,300 crore in 2008. “This would not have been possible if we did not have an integrated technology back end. our ability to handle this scale of transactions is only possible because of the architecture we have,” says gulati.

It has allowed the insurer to offer its customers more options to interact with them. Traditionally, a customer would either visit a branch or be helped by an agent. Today, says gulati ulati they can use a Web-based platform to buy a policy themselves online and renew it via their mobile phones.

“We also allow our customers to buy our policies seamlessly through our partner websites. If you go to Jetairways.

Jet com and buy a ticket you could seamlessly buy a domestic insurance policy of Icicilombard.com. ombard.com. We would not have been able to offer the customer so many service options if we did not avail the services of architects. The eas have helped us forge partnerships with the right distributors and develop technology-led delivery mechanisms,” says gulati. and as ICICI lombard ombard went from handling two million policies to four million policies a year, it has been able to maintain the same level of manpower — and there’s room for a significant percentage more without increasing staff. “The enterprise architecture they have designed has helped us scale up in nonlinear fashion,” says gulati.

In a market like today, that contribution is considerable. but ut perhaps more critical is how its architects enable the insurer to unlock new opportunities. “g “given that general insurance penetration accounts for 0.6 percent of the country’s gdP, the growth potential in this industry is immense,” says gulati. “We intend to leverage our enterprise architecture to tap this opportunity. our ur architects can give us an edge over competitors. Its one thing to deliver a product and it’s a completely different thing to have a robust architecture in the back end to deliver it. We have that and that’s how we outsmart our competitors,” says gulati.

—by sneha Jha

“Our ability to handle this scale of transactions iS oNly poSSiblE

rE.” bECAUSE oF oUr ArChitECtUrE.” — Anuj Gulati, Director, IcIcII Lombard General Insurance

Cover Story.indd 23

Cover Story | Enterprise Architecture of people can understand, says Tim Ferrarell, CIO and senior vice president of enterprise systems at W.W. Grainger, a $6.4 billion (about Rs 32,000 crore) distributor of heavy equipment.

Ideally, Ferrarell says, this person "can think at a strategic level and all the way down to the operating level and understand how to move up and down that chain of abstraction," he says. "And know how to deal with conflicts and trade-offs."

Gee, is that all? Actually, no. That person also has to gain the confidence of the senior leadership team, he says. Execs must believe that the enterprise architect comprehends how the company works, where it wants to go and how technology helps or hinders, he says. Then effective working relationships can bloom.

In 2006, Grainger went live with a company-wide SAP project — 20 SAP modules and 30 additional applications that would touch 425 locations. To help guard against what could go wrong in a big-bang cutover, Ferrarell took his team of about 20 enterprise architects off their regular jobs and assigned them to design and integration roles on the SAP project.

The SAP implementation was such an allencompassing program that it made sense to re-purpose the enterprise architects into key roles in the project. Their broad business and technical knowledge made them very valuable team members, says Ferrarell.

Grainger's senior business-side managers knew these architects and their business savvy firsthand, he explains.

The trust was there, which helped get IT the intense cooperation needed during and after the complicated launch. Their architects played a significant role, not only in shaping the need for completion of the ERP project, but in ensuring its design would enable their business requirements.

The SAP project succeeded, Ferrarell says, in part due to the institutional knowledge and business-IT translation skills the EAs brought to it.

Now that the SAP implementation is stable and perking along, Ferrarell is putting the architecture group back together. One of the first tasks for the 24

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aRchITecT NeeDeD?

yES… MAybE Not The ambivalence around whether architects are needed is representative of the role's continuing evolution.

nce you get past all the jargon and the highly-nuanced — and sometimes conflicting — job descriptions, your enterprise architect is basically the guy who understands what the business needs, where it is headed and finds technology to match those needs. They’re the ones in charge of abolishing silos, enhancing seamless collaboration and aligning IT to the business. They also translate techno-bable into CXo-speak. hang on for a second, isn’t that the CIo’s role? not really says alok Kumar, CIo reliance Infosolutions, reliance Industries’ IT arm.

If, today, large organizations have hundreds of databases and as many silos, he says, “it’s the CIo who created those databases. There needs to be someone on his team who can fix that. In my opinion, a CIo role is more a business guy than a technical guy.

The ea is the tech muscle for the CIo.” That was the thinking when reliance retail decided to get an enterprise architect (ea) in the summer of 2007 — before the economy went sour. Kumar says they were looking for a “common agency” that could ensure that the fast-growing retail division worked off architecture that was robust and scalable despite the multiple teams employed in its development. among his responsibilities, the new architect was supposed to keep a sharp eye out for the hardware and databases used in applications in development to ensure the highest amount of efficiency and that upgrades or new requirements could be added seamlessly. “The idea was to ensure that the whole system wasn’t rigid, that it was agile.

The architect also guided us when we needed to buy or create an app,” recalls Kumar. but before the year was out, the architect and reliance parted ways.

“These are the people who, seemingly, don’t add value to the emergency requirements of a company. They make things better, improve things, which isn’t normally what organizations are looking for during these times,” says Kumar.

While the lack of will to hold on to their architect probably had something to do with the nose-diving economy, what’s telling is that he was not replaced. If architects are seen as dispensable, that probably has something to do with the fact that it’s hard to define their Kras and harder still to find “visible returns on what they do,” says Kumar.

“It is hard for an ea to show his work to the people who pay money because they have

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very little understanding of IT. They just look at results. They will ask an ea ‘what do you do?’ and he’ll say ‘I create diagrams.’” despite this, Kumar insists that there is a real need for enterprise architects. yet y he limits the companies that need an enterprise architect to a small pool. and he should know, Kumar himself was an ea. organizations that need architects, he says, need to be large, with plenty of in-house development, preferably companies that have outsourced part of the IT and face a lot of change. “eas are a good choice when there are a lot of systems, a lot of data, a lot of regulations. an ea’s role also is very important if an organization is innovative. a bank like ICICI or hdFC, for example, wont be able to survive without one, because they have new products almost everyday. but it’s an investment and businesses shouldn’t look for immediate benefits,” he says. and investments they are. architects are hard to find and Kumar estimates that someone as senior as architects need to be come at a premium: between rs 35 lakh to rs 50 lakh per annum.

That’s one of the reasons architects in India are an unnamed lot. Their jobs are normally filled in by CIos or their second-in-commands, says Kumar. “a a lot of people look at what an ea does and say ‘what’s the big deal? I can do that.’ This isn’t the West. This is India. We are used to having multiple roles.” or some companies hire an architect from the outside, on a visiting arrangement because “enterprise architecture,” he says, “cannot be justified as a full time job.”

It’s an idea that cuts both ways. att a time like this, when business needs to move fast on every opportunity, an architect on hire, with little knowledge of an enterprise’s IT set up, represents one more layer of IT bureaucracy. but ut as the same time, having an architect from the outside, whose time is billed to every project, can help streamline the requirements process. “every “ design has a cost to it. so o we put that cost to the business and let them figure out whether they are under- or over-designing. once nce we did that their requirements became clearer, they started doing their homework better and scope creep became minimal.”

With the advent of soa,, many say that architects will become an essential part of the IT landscape. but only time will tell. For now, in India, it seems it will fall into the category of what cannot be defined, cannot have a place in the slowdown.

—by sunil s shah

“a lot of people look at what an architect does and say ‘WhAt’S

thE big DEAl? i CAN Do thAt.’”

— Alok Kumar

cIO, IO, Reliance Infosolutions

team is to help business groups identify what new services they want to offer customers and scope out what the IT requirements would be, he says. The job of their architects is to align business strategy, operational model design and systems design to help support Grainger's multi-channel strategy, he adds.

Ferrarell hires enterprise architects from outside Grainger, but the best usually come from within because they have institutional knowledge, he says. Despite the bad economy, he's filling these jobs.

"This is an absolutely pivotal position."

WhErE to StArt Other companies, though, have to be convinced of the enterprise architect's criticality. Sony Pictures Entertainment launched an enterprise architect role modestly in 2002, focused at first on technology issues only, says David Buckholtz, vice president of planning, enterprise architecture and quality at the media company.

He had to start small: Sony Pictures Entertainment didn't even have a corporate-wide IT department until the late 1990s, Buckholtz says. The company grew from acquisitions and other deals that parent company Sony Corp. of America made in the 1980s and 1990s, such as the acquisition of Columbia TriStar movie studio (The Karate Kid and Ghost Busters) and the acquisition of Merv Griffin Enterprises (Wheel of Fortune and Jeopardy).

"We're in a creative industry and people made a lot of decisions on their own," he says.

Hence, no central IT until relatively recently and no strong belief in the importance of central IT, he says.

Buckholtz wa s hired from General Electric to start an enterprise architecture team because REAL CIO WORLD | a P R I L 1 , 2 0 0 9

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Cover Story | Enterprise Architecture reinforce to business-side counterparts Sony Pictures wanted more efficiency the expected returns on IT projects as the and savings from IT, he says. At first, he temptation to cut spending grows. "We concentrated on classifying existing and make sure we close the loop and quantify future technology investments. Categories hard-dollar costs and benefits for the include technologies in development CFO," Buckholtz says. where Sony is doing proofs of concept; technologies in pilot; current and supported; supported but older versions; No DECrEES those headed to retirement; and those FroM oN high that are obsolete and no longer supported To be successful, an enterprise architect except "under extreme duress," Buckholtz must not only connect with senior business says, laughing. managers but with the rank-and-file IT He began this way to demonstrate staff as well. that IT could be businesslike: investing Being perceived as imperious can well, conscious of risk, planning for the sabotage enterprise architects, according to future. "This is how you plan enterprise Ryan Plant, himself an enterprise architect architecture when you don't have at Interbank FX, which makes technology business support yet. We had to build up for trading foreign currency online. to that."

In smaller or midsize companies, the Once the architecture group has the enterprise architect is typically one of enterprise IT house under control, it can the highest-paid IT professionals, which look for ways to work can cause some friction with different business among employees. And technology groups usually the EA works to build credibility closely with the CIO — an beyond bits and bytes, influential place to be. he says. One technique An enterprise architect Buckholtz used was has to guard against to install architects getting too far removed to in different business the management echelons that have enterprise groups to work on and losing touch — and architects have better projects on business turf influence — with the aligned business and IT. 28 but using IT's budget. A technologists who design free trial, in a sense. and code systems, Plant percent reduce IT cost.

By 2005, Buckholtz's says. In other words, as Source: Infosys enterprise architecture group had started a much as an architect must Survey 2008-09 high-profile project build relationships with with the digital media those outside IT, he also team to map out how Sony Pictures must maintain good relations with those would digitize content for downloading inside IT who can make business plans to mobile phones and other devices. He into technology realities. counts it as a success that the digital To keep those connections, he advises, media group continues to use that road architects might consider hosting brownmap today. "We identified high-value bag lunches and inviting application work and we were all committed to it," he coders, designers and integrators to says. "It was not a group off somewhere, talk about a topic of their choosing. The passing down standards." architect can present on it and lead a As the economy tightens, Sony discussion afterwards.

Pictures must make its distribution "You're showing people that you're chain as efficient as possible, he adds. thinking about things within the context Movies, after all, are a discretionary of what they're working on and you're expense for consumers and if they pull thinking in terms of how they work every back on luxuries, Sony Pictures will feel day," he says. "It's an education session it. Enterprise architects continuously and it's a marketing tactic."

23% of companies

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People go back to work thinking they've learned something and can approach the architect in the future, he adds.

Tick-off programmers by handing down standards via e-mail and a rap of an invisible gavel, and standards will be circumvented, Plant says. "Without the ability to execute, architects are going to constantly struggle with justifying their existence."

yoUr SECoND iN CoMMAND? YRC Worldwide has formal enterprise architects on staff. The higher up anyone climbs in CIO Michael Rapken's IT group, the greater percentage of time is expected to be spent on what he calls "account management" with business colleagues, which are largely EA skills. They include assessing and planning potential projects together with business departments, making sure technology standards are met and business conditions satisfied.

His team is rated each year on how well they build relationships with business counterparts, among other things, through an annual internal customer satisfaction survey IT hands out to the rest of the transportation company. But evaluation also comes through personal feedback.

"You can tell who's being a success by whether I hear compliments about them," he says.

Score one if in the enterprise architect you recognize the makings of a good CIO. It's a reasonable hypothesis, says SIM's Kappelman. In a small or medium-sized company, in fact, the CIO often does much of what an enterprise architect usually does at a large firm. In a big company, the enterprise architect becomes its own career path, and one that can be just as strategic as a CIO's, Kappelman says.

One often-discussed vision of the future of the CIO profession has the technology caretaker part of the job being outsourced entirely, with the strategy parts remaining. If that happens, Kappelman says, "the CIO becomes the ultimate enterprise architect." CIO

Send feedback to this feature to editor@cio.in

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HoW to EnsuRE YouR

New eA’s success An enterprise architect can help your company make connections throughout your organization's technical and business communities. But only if you understand how to set the stage for effectiveness — and that begins before the EA's first day of work. By J.P. Morgenthal

Reader ROI:

What you need to do before your EA’s first day Why you need to get everyone onboard Expectations you need to temper

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ou've spent months considering the right person for your open requisition for an enterprise architect (EA). You've had the job candidate meet with representatives from the business and IT, you've extended a job offer, he's accepted it — and now your new enterprise architect will be joining your company. Since the EA is typically a senior role, this is a highly-visible hire and you want the EA to be successful for the company's sake and for your own. Thus, the next step is critical.

Here's a guide that will lead to success and happiness for all involved in this new venture: Establish clear goals and expectations before day one. Before your EA shows up for his first day of work, talk with the business leaders and IT leaders to learn the organization's expectations of this individual. Does the business expect this person to fix broken processes and remove the bureaucracy? Is the application development team already questioning you on the EA's authority over their implementations? If you get a sense of exaggerated or conflictridden expectations, you can bet that your EA, if he's good at what he does, will see this by the end of the first day. Then you have a third party's expectations to manage.

Here’s what you should do: discuss the EA's deliverables with key individuals in the organization. Let him know what you, as the EA's manager, expect from your new hire. If those key individuals have issues with your plan, let their concern circulate through the proper channels. This is not an exercise in political correctness. You are embarking on a critical hire that will most likely impact these individuals' jobs. It's important that your EA knows that these goals have been vetted and that everyone with a gripe has had the opportunity to be heard. If the issue is of real concern to anyone but the person raising the red flag, you will get ample opportunity to explain your point of view, hear alternative views and come to an agreement prior to your EA's start.

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When you meet with your EA on the first day, present him with the final plan. By now, it has the acceptance of the organization.

Introduce the EA to the key players at a single meeting, no later than day two.

Chances are, your EA has been around the block a few times and has considerable experience. He doesn't need to spend the first days dallying about his office "getting adjusted." An EA who has reached this level is aggressive on problem solving and will want to land running.

DoN't Be A PArty PooPer Do not squash this enthusiasm. It will raise all sorts of flags in the eyes of your EA and bring about buyer's remorse.

Harness the EA's enthusiasm, but channel it appropriately. Establish a meeting of all the key players and the new EA no later than the second day.

Make sure that the expectations for the relationship with key players are stated right up front. For example, "Jim, Stella is responsible for managing all telecommunications systems in the company. We expect you to work with her to design improvements in customer service operations."

Do not send the EA on wild goose chases to find key individuals for themselves. Moreover, do not place them in the position of figuring where their role ends and another's starts. Enterprise architecture has many tentacles and will touch many areas of the business. Hence, it's easy for the EA to step on someone's toes and not even realize it. This tends to create the antibody-effect working against the EA. Run blocker for your EA. One of your EA's toughest jobs is moderating personalities while trying to design out redundancy and ineffective processes and systems. Frequent checkpoints are an opportunity for the EA to identify bottlenecks and hurdles. This is key. Do not make your EA be his own blocker if you want him to succeed.

While you probably never wanted to play bad cop, this is your new part-time

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job now that you have an EA. Establish trust with your EA. Let him know it's safe to come to you to discuss a difficult individual or a festering problem without fear of repercussions or reverberations.

Your EA can handle the message, "We know about that system, but we have no budget to replace it in the near future." He will move on and focus on areas where he can make headway, knowing he relayed the problem area to the people with the power to do something about it.

Yet, any EA worth his salt will harp on politically-charged issues when they affect overall corporate performance, which can lead to political suicide. You don't want your EA becoming so sensitive to politically-charged issues that it affects the outcome of the work product.

your BusiNess is Not His BusiNess Don't expect your EA to drive the business. I once had a CEO ask me what I recommended with regard to nextgeneration architecture. I explained to him that it's not my job to tell the business what to do. I asked the CEO to explain what he wanted to achieve, by when he wanted to achieve it and how much money he was willing to put down to make it happen.

I don't believe he liked that answer too much. Still, the point is important.

Your EA is there to create a master plan for the interactions of all your systems and associated resources to meet the business' goals. EAs are not hired to create solutions in search of a problem.

Your EA is not just the 端ber-tech-geek.

In order to be effective, your EA needs to make recommendations that affect systems design, resource allocation, processes and organizational structures.

The EA is the master architect of the people, process and technology mantra.

If you lock your EA's role into only being permitted to make recommendations regarding process and technology, you are missing a critical component and eventually it will come back to bite you. For example, citing ways to

reduce expenditures through process optimization in billing may require that 40 percent of billing clerks be replaced by an automated system. You need to make your EA feel safe that she can make these recommendations.

roADmAP For your eA I suppose it would be useful to describe what should be in the plan described in the first point. First, it should include an explanation of why the company created this position. Cite examples of past problems that you believe could have been avoided with a good enterprise architecture. Put in a concise definition of the business' purpose. That is, what does the company do and how does it make money. Define the key business initiatives for the current year and, wherever possible, relate the initiative to expectations of delivery for the EA. Unfortunately, you cannot know what you don't know, which is why you are hiring this person in the first place. Thus, a key deliverable should be to create a highlevel design of all the current systems and the integration points currently in place. It should include a set of recommendations by the EA that incorporates the business goals. For example, if cutting expenses is a high-priority goal, then the recommendations may be related to modification of hardware infrastructure as well as changes in the current to IT operations size and processes.

Proper care and feeding of your EA is imperative to his or her success. Follow this advice and your EA will have a long and prosperous career with your organization. As a result, you will reap the benefits of focusing your IT efforts to reducing end-user frustration and increasing productivity. CIO

JP Morgenthal is a leading independent It t architecture consultant region who focuses on enterprise architecture, soA, BPM and cloud computing. He has written three books on integration, most recently

Enterprise Information Integration: A Pragmatic Approach. send feedback on this feature to editor@cio.in

REAL CIO WORLD | A P R I L 1 , 2 0 0 9

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EVENT REPORT

Presenting Partner

Smart EntErpriSE

architEcturE Sensing this as the time to make their businesses more efficient, CIOs discussed and debated issues related to enterprise architecture and how they saw it keeping an enterprise agile and responsive.

“We are responding to the economic meltdown by creating efficiencies internally."

Arun Gupt GuptA, Customer Care Associate and Group CTO, Shoppers Stop

“We are now rationalizing our infrastructure and realize it is time for housekeeping."

GopAl rAnGArAj, VP-IT, Reliance Life Sciences

“through enterprise architecture seamless integration between different units is possible."

ShASi KumAr rAvul rA ApAty CTO, Consumer Finance, Reliance Capital

“the challenge is to use resources sparingly while increasing efficiency levels."

SAtiSh pendSe, CIO, Hindustan Construction Company

The currenT economic instability has made it important for organizations to preserve their balance while navigating the rough waters. The trick is to be centered and shift weight in just the right direction at just the right time.

When business goals hold most of the focus, time calls for organizations to work as a whole. Being fragmented and siloed just adds to an organization's So, is having a right kind of enterprise architecture a way out? Enterprise architecture is the process of aligning a business's strategic vision with its information technology. It connects different business units for synergistic communication and collaboration, creating a more seamless customer and end-user experience.

Arun Gupta, customer care associate and group CTO, Shoppers Stop, said his organization is responding to the economic meltdown by creating efficiencies internally. He said, “We are trying to utilize all the available technologies to their best and trying to devise ways by which we can sustain their use. The filters now are more aggressive, and before investing in some resource we evaluate in terms of finding its impact on organization, customer and employee.”

According to Gopal Rangaraj, VP-IT, Reliance Life Sciences, IT has been more reactive than proactive in this course. He said, “Looking back, we realize that IT doesn’t align with the overall motive. Now we are rationalizing our infrastructure and realize that this is the time for housekeeping.” Process re-engineering will play a major role in creating efficiency in the system, said Shashi Kumar R., CTO, Consumer Finance, Reliance Capital. He said, “If there are two disparate systems in an organization, there's bound to be inefficiency and duplicacy. Through smart enterprise architecture seamless integration is possible.”

Talking about the challenges that CIOs are facing in this regard, Satish Pendse, CIO, Hindustan Construction Company, said that the challenge is to use resources sparingly while increasing efficiency levels. This

EVENT REPORT

gives us an opportunity to drive the best out of whatever we have invested in. Vijay Devnath, chief manager-IT, Konkan Railways, said, “Subconsciously, we are architecting and a lot of it goes in to avoiding wasted investments.”

According to Hiren Shah, Director IT, CRISIL, another issue is that the representation of IT, ShAnKAr KAlyAnA, DistinguisheD engineer anD technology executive, iBM specially in India, is often not there on the Board and that accentuates the challenge. In consent to this M.D. Agrawal, chief manager (IT), Bharat Petroleum, said that there’s a dilution in the power of CIOs. "Business has become pervasive and if we sight of governance, an important aspect of IT, we lose control," he said.

Suggesting what needs to be done in this scenario, Alok P. Kumar, CIO, Reliance Infosolutions, said that organizations can actually save money from their existing enterprise by tweaking what they already have, or by redoing their architecture, focusing on the immediate needs.

“It needs to be communicated to the top management that costs can be cut down by architecting the business properly,” he said.

The issue of pushing the idea of aligning IT with business, by the means of enterprise architecture, requires defined tangible and intangible benefits. Addressing this issue Shankar Kalyana, distinguished engineer and technology executive, IBM, said, “Longstanding drivers like how a solution impacts the bottom line or top line, and the value to customers and employees will help you push the idea. Each specific architecture has to be tied to these drivers, because at the business level it’s not about technology, processes or architecture but about business goals. You can’t talk about business architecture without talking about business.”

Echoing the same thoughts, Sudhir Bahuguna,CIO, Reliance Gas Transportation, said, “CIOs need to learn about business and talk in that language as they can play a very critical role in creating an enterprise architecture.” It's a thought Arvind Tawde, Sr. VP and CIO, Mahindra & Mahindra, agreed to when he asked CIOs to look at their business' operating model to derive value out of enterprise architecture."

“representation of it is seldom on the board and that accentuates the challenge." hiren ShAh, Director IT, CRISIL

“We can save money from the existing enterprise by tweaking or by redoing the architecture."

AloK p. KumAr CIO, Reliance Infosolutions

“to derive value out of enterprise architecture, it has to be driven by your operating model."

Arvind tAwde Sr. VP and CIO, Mahindra & Mahindra

“ciOs need to learn business as they can play a vital role in creating enterprise architecture."

Sudhir BAhuGunA CIO, Reliance Gas Transportation

“architecting helps us avoid wasted investments and facilitates better response." vijAy A devnAth Ay Chief Manager-IT, Konkan Railways

“Business has become pervasive and if we lose sight of governance we lose control." m.d. AGrAwAl Chief Manager (IT), Bharat Petroleum

Calling For More

Measure

By Sunil Shah In 2006, after 1,400 years, the oldest family business in the world went out of business. Kongo Gumi, a Japanese temple builder that’s been in operation since 578 AD went under burdened by excess debt.

Debt-free and with billions of dollars of cold cash in the bank, that’s not a future Infosys needs to worry about.

But its not taking chances. His confidence tempered by a determination keep the slowdown from Infosys’ electrified fence, S. Gopalakrishnan (Kris to his colleagues), is focused on business efficiency. And that’s his advice to other business leaders.

It’s a strategy that’s working, if the atmosphere at Infosys is any indicator.

The air there has a feel of business-as-usual— not anxiety and fear.

In this interview, Kris also shares his views on the slowdown and what companies can do to stay healthy.

CIO: Earlier this year, you said you wanted to make Infosys one of the world’s top five IT companies. How do you plan to do that?

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

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S. Gopalakrishnan: Clearly we want to be a leader in this industry. To classify someone as a leader, you have to study each of its stakeholders and ensure that they see you as one of its best partners or providers or employers or even as the best opportunity for investment.

Starting with customers, our solutions and services have to be world-class and rated as one of the best and that’s what we are striving to do. We want to be more proactive with coming out with solutions and services that address trends in the technology and business. For instance we measure repeat business; typically it’s been between 90 and 95 percent and we compete on value — not on price. This proves that there is value in working with us; our customers aren’t with us because we are the cheapest, they want to work with us because they see value in our partnership.

Photo by Srivatsa Shandilya

S. Gopalakrishnan, CEO and MD, Infosys Technologies, says that only IT can deliver the the true control over business that companies — including Infosys — need to live through the current storm .

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S. Gopalakrishnan expects I.T. to: Increase business efficiency Stay on top of risk Open Up new markets

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3/27/2009 11:03:21 AM

View from the Top

We also monitor how analysts rate our services and we want to be perceived as a leader. With our employees, we want to be seen as the best employers. With our investors, we want to be seen giving the best returns. What we focus on is growth margins, being an investor-friendly company and one that addresses corporate governance and risk.

How has the downturn changed your plans?

In this environment, we continue to run the business as efficiently as possible, sustain our relationships with clients and continue to invest in certain areas so that when the recovery commences, we emerge out of it in a strong position. Given that downturn is something that’s occurring on a global scale and across all industries, as a service provider we are also impacted. Growth has slowed. So, in the short term, we need to run the business efficiently, sustain the momentum we’ve created, and make sure that the company is not as hard hit as the competition. That’s the goal of the company right now.

How much longer do you think the downturn will last?

Experts vary in their estimate, from 18 months to four years. The best case scenario is mid-2010. The reason why I believe there is this wide variation is because we have yet not hit the bottom. There is still concern about large companies, certain currencies and countries. That’s why it’s hard to say when the recovery will start.

Till September 2008, people assumed that the slowdown wouldn't be that bad. It’s only after September 15 that everyone’s opinion completely changed and that they started saying that this was the worst slump in the last 70 to 80 years.

When times are good, everyone, even poorly run businesses, benefit. When things are bad, well-run companies survive better and poor-run companies may not even exist.

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is handling the slowdown reasonably well and going forward we are in a good position to handle this.

“In today’s environment, I think the priority has to be running the business efficiently. ” — S. Gopalakrishnan As Warren Buffett famously said: It's only when the tide goes out that you learn who's been swimming naked.

Did you see the slowdown coming?

The equations changed mid-September 2008. We had a fantastic Q2. We grew almost 7 percent sequentially. And then we began to see how this slowdown was going to be different. Of course, at the beginning of the year we had assumed that this was going to be a challenging year, but I don’t think anyone expected it to be as bad as this.

Do you wish Infosys had reacted sooner?

Under the circumstances, we have reacted fast. We are doing reasonably well. We are still growing, still profitable and we're still holding on to our employees. We are committed to all the people we made offers to; they will join in June-July. Neither have we reduced our commitment to our employees in terms of education and training. Infosys

Is nervous sentiment worsening the situation?

Yes, of course. Emotions play a role in making the situation worse. There is a lack of confidence that the recovery will happen quickly. The reason is simple: unemployment is increasing; people are watching their savings diminish and you still hear of large companies that are struggling to survive.

Sentiment is certainly down at this point.

That said, India’s still one of the few economies that is growing, even if we debate by how much. Our exposure to exports is much smaller than our domestic consumptiondriven growth, which is positive. Third, we have an economy which is still creating jobs and wealth and that’s positive for anyone who is focused on India. Look at the growth in cell phones. It was between 9.5 to 11 million. That’s a fantastic indicator. And I’ve heard from retailers that they are not seeing any impact in Tier II or Tier III cities.

Will a new Infosys emerge out of this?

The company has constantly been changing over the last several years. Ten years ago, we were primarily focused on technology solutions, application development and maintenance. Today, we have complete endto-end solutions, from consulting to business processing to outsourcing. In fact, 53 percent of our revenues come from services that we didn’t offer about seven years ago.

Infosys will continue to change. We are introducing new services like learning services and, maybe even software-as-aservice. We are expanding geographically.

From a market perspective, we have created business units or initiative to focus on the West Asia and Latin America. India is a focus area for us, as is China. From a delivery capability perspective, we have

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View from the Top

opened a delivery center in Mexico and we are still investing in China. From an industry perspective, we see opportunities in new sectors, or sectors that are small today but which have significant potential, including the public sector and the government.

One of the possibilities that could come out of the downturn is that cloud computing really takes off. We already have solutions and relationships that we can leverage if it does.

But aren’t you focusing on making Infosys a more agile company for the future?

We already have processes in place that allow us to react very fast. We have fiveyear scenario plans, three-year business plans, one-year budget plans and budgets are revised every quarter. We announce our results within two weeks of a quarter’s end.

We are one of the companies that still gives guidance. That shows that the business has the information it needs. And quarterly budget revisions allows us to respond to situations very quickly.

Look at Q3, not only did we react by revising our guidance, we were able to meet those numbers.

What’s your advice to other CEOs? Those who are focused, who are able to bring their products and services to these markets, will continue to do well and increasingly, I think they will even see growth. The key is to make sure that you run your business as efficiently as possible, that you have tight control over your business operations and you have metrics to measure how your business is performing so that you can react fast. All this will require investments in systems and technology.

For example, on the last day of every month, at 3 pm, I get Infosys’ trial profit and loss position. Within two week of the quarter end, we announce audited results. That wouldn’t be possible without good systems.

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Or take our decision to cut SNAPSHOT How can CIOs travel by 20 percent. It was Infosys help? done immediately. I could put Technologies budgetary controls into the CIOs must create the models Revenue: system to cut budgets and if that can track business risk. $ 4.18 billion* someone exceeded that budget, In large companies, this is a Employees: travel would require exception specialist function; they have Over 91,000* approval. It was very simple departments that look at risk.

Presence: for us to do. Without systems But ultimately assessing risk is 25 countries* like Unified Communications driven by IT and risk models.

Development (UC), you can't do that.

Small companies may not have Centers: 54 In this environment, there is a dedicated team or a chief risk an opportunity for companies officer. But a model still needs VP & Head IS: J. Sivashankar to build these systems so to exist and the CIOs will have that they have near real-time to enable this.

VP & Head CCD: information and control. In Muralikrishna K. today’s world, where reaction What about *FY 08 times are so important, outsourcing? creating these capabilities is extremely Should Indian CIOs turn to it important. It gives companies confidence, to improve efficiency? flexibility and can save cost, which will pay for these investments.

It’s hard to generalize. It depends on individual companies. The decision depends on where a company is in terms Isn’t this also a good time to of sophistication, markets, products invest in technologies that and services. However, I firmly believe bring companies closer to that outsourcing makes sense for larger their customers? companies in the country. Many of these companies are global and need to have the In today’s environment, the priority has best IT and IS capabilities. to be on running business efficiently. Once Evidently, the cost arbitrage doesn’t exist companies have this in place, it's smart to here, so there has to be true value delivered. invest in getting closer to the customer.

That said, there is still a cost benefit, because There are other reasons why companies an outsourcing partner has built a sharedshould invest in technology. India is a young service capability, which allows companies country with a tech-savvy population and to leverage scale benefits. Plus companies just to be able to reach those consumers, can take advantage of best practices in their companies need to invest in technology or run industry. The third benefit is that companies the risk of missing out on an opportunity. can truly manage IT as a variable cost. And In a country like India, if companies want with SLA penalties, companies are creating to introduce efficiencies and maintain their higher efficiencies and more transparency in margins, they have to leverage technology. how costs are managed. Finally, outsourcing Technology is the only way companies can allows companies to move to a pay-for-use provide products and services to remote areas model with SaaS or cloud computing. And at a reasonable cost. Selling to rural India that’s what will probably drive smaller requires good forecasting, a good supply enterprises to outsource. I see the downturn chain and a good inventory management as an opportunity for companies in India to system. All this requires technology and discover the benefits of outsourcing. CIO only then can companies take advantage of market opportunities efficiently.

Send feedback on this interview to editor@cio.in REAL CIO WORLD | a P R I L 1 , 2 0 0 9

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Case File

The MaTh in Buried under a set of dying servers and their whopping maintenance costs, Lextron, a distributor of animal health pharmaceuticals, was desperate. It needed to subtract costs and add efficiency before it succumbed to a bad economy. Its problem solver: a simple equation and virtualization. By Joanne Cummings

Case File

Money is tight. Performance is declining. Your servers are all mostly three-year old and pretty soon, their high-priced maintenance contract is about to kick in. What do you do?

If you’re like Tim Hays, you take the money that you would have spent on maintenance and instead use virtualization to not only improve performance, but increase IT efficiency, cut power and cooling costs 45 percent, and make disaster recovery as easy as pushing a button.

“I guess I’m more of a business guy first and an IT guy second,” says Hays, director of IT at Lextron, a wholesale distributor of animal health pharmaceuticals with 600 employees in 44 locations across 19 American states. “I look at IT as a business enabler. Virtualization wasn’t something that we did just because it was the next cool thing. It made a lot of economic sense.”

Il lUStratI on by Unn Ik rIShnan aV

Starting Small Hays didn’t jump into virtualization all at once. His first foray was in 2005, when he was faced with paying $300,000 (about Rs 150 lakh) over three years to maintain the three Unix servers and direct-attached storage units supporting his ERP, inventory management and sales management functions. All told, the three servers were responsible for handling $1.75 million (about Rs 87.5 crore) in sales transactions daily.

At the time, virtualization was not wellknown. Instead, he used the $300,000 to replace the Unix servers with one PA-RISC-based HP-UX server running HP’s Virtual Partition (vPAR) software, which enabled one server to host three virtually partitioned servers. He also put the server on a Fibre Channel-based HP EVA 5000 storage-area network. “Cost-

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SharePoint, CRM and Web services, as well as file and print.

“We had servers that needed to be replaced and we had a track record of taking multiple physical servers and combining them into one,” Hays says.

“Virtualization seemed like an obvious project to at least investigate.”

The company decided to virtualize its 40 servers and run them all on a cluster of two HP x64 DL-360 servers, each with 20GB of memory and running VMware Virtual Infrastructure 3 (VI3) software. Hays says that the decision to use just two physical servers hinged on VMware’s licensing costs. “It’s just a math problem,” Hays says.

“I can buy more VMware licenses and spread them over cheaper servers, or I can buy more expensive, robust servers and fewer VMware licenses. I just projected the total cost of ownership for a 36-month period, and using these four boxes was optimal mathematically.”

Plus, the move enabled Lextron to eliminate three racks of equipment, along with 45 percent of its power and cooling costs. And it increased productivity overall, especially in IT. “If someone needed a test server in the Success Breeds Success old world, you had to find a Faced with a similar situation physical box, and make sure it on the Wintel side of the house Reader ROI: had the right physical features in August 2006, Lextron once How virtualization — CPU, memory, the right again calculated its options. saves cost network connection,” Hays The company had been Why you should says. “Sometimes, we had to using 40 physical servers test your virtual purchase a new server just to to support its Microsoft environment test a particular application.

Windows environment, How virtualization That’s all eliminated with including Exchange, aids DR wise, it was a wash,” he says, noting that the depreciation for the new equipment was $100,000 (about Rs 50 lakh) per year, the same as he would have been paying for maintenance per year on the old gear.

But reports now ran 30 percent to 40 percent faster, and user complaints declined. “People were waiting less time to get information, and they didn’t have that problem where they were outworking the ability of the system to retrieve the data,” he says.

At the same time, the company also needed to upgrade its ERP databases from Informix 7 to 9.4. “We had 1,500 programs that we needed to regression test against new hardware, a new database, new development tools and a new operating system,” Hays says. Buying new equipment enabled Hays to install all the new software and thoroughly test everything before cutting over. Once his team was confident everything would work, they simply switched users from the old equipment to the new. The whole process, which could have taken six months in the past, took just 45 days.

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InfograPhICS by anIl t

Case File virtual machines. They’re very easy to build up and take back down.”

Plus, with virtualization and fewer physical servers, Lextron was able to go to the next big step, implementing what Hays calls “push-button” disaster recovery. “Because of virtualization, we were able to rent a much smaller facility for a disaster-recovery center — if you looked at it, you might even think it was a broom closet,” he says. The [disasterrecovery] site has just two server racks, an inline cooling unit, and UPS and battery backup. Plus, Hays uses Vizioncore’s vReplicator software to replicate virtual machines from the primary site to the backup site.

“I have virtual Exchange Server ‘A’ sitting in my production datacenter, and multiple times a day, Vizioncore takes a snapshot of everything that’s unique about it — the server, the database — and it passes that data over to virtual

Exchange Server ‘B’ at the the equipment that I had, I got [disaster-recovery] site,” says a better return on the invested Hays, noting that the disastercapital for equipment, and I recovery site is located 3 reduced power and cooling miles away and is linked costs,” Hays says. He notes SNAPSHOT to the production site via a those benefits came on top of Lextron 180Mbps connection. “From the savings he got in the first ESTABLISHED: 1967 a command console, I can place, by buying the four servtell it to automatically switch ers and VI3 to replace 40 servEmPLOyEES: 600 over to Exchange Server B ers. “It was easy math.” and run all my users, and LOCATIONS: 44 my users wouldn’t know the multiple Benefits difference. It’s push-button Hays, found that virtualizing HEADquARTERS: Colorado [disaster-recovery].” the company’s servers Vizioncore cost $600 (about provided a host of benefits, Rs 30,000) per server license, and Lextron from reduced costs to improved efficiencies. uses it for 26 critical servers. “Twenty-six He offers these three ways to get the most times $600 (about Rs 30,000) is less than bang for your virtualization buck. $15,000 (about Rs 7.5 lakh),” he says. “So Right-size the hardware. When it’s another area where we just said, ‘Why moving to virtualization, and putting wouldn’t we spend this money?’” many server eggs in one hardware basket, In the end, virtualization was just a noit’s tempting to just go with the biggest, brainer for Lextron. “I got more most robust servers available. productivity from my But that’s not always the best course. staff, I got better “People ask why we used DL-360s, which utilization of are kind of entry-level servers,” Hays says.

“And it’s because mathematically, it made From reduced costs to improved efficiencies, sense. The price we were looking at and the doing the math on virtualization provided performance we were looking to get was Lextron with several benefits. achieved with less-expensive equipment.”

Understand your needs. Hays says it’s also tempting to purchase all of VMware’s bells and whistles, including Vmotion, which automatically moves virtual servers from one physical box to It brought accommodate load balancing or failures. down power “But if I can move a server with a system and cooling administrator’s assistance in five minutes costs by 45% vs. using a piece of software that costs a considerable amount of money and can do it automatically, for my environment, I’ll do it myself.”

Try it for free first. Hays says VMware’s GSX version is free and a good place to start. “Just try it,” he says.

With new “With GSX, you can play around with equipment, virtualization and see if it will work for Lextron could switch your organization — without a huge over its users from the up-front investment.” old equipment in just And all it took was simple math. CIO 45 days — a process which The company was able could have taken six months. to run its reports 30-40 % faster.

two and two together

Virtualization saved the company

rs 50 lakh

per year.

Joanne Cummings is a freelance. Send feedback on this feature to editor@cio.in

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Disaster Recovery

Are YouReady for a

Four reasons and eight practical steps for building a better business resiliency program.

By Stephanie BalaouraS

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B

usiness continuity (BC), IT disaster recovery (DR), and information security are essential elements of business resiliency, with the common objective of managing the risks of business disruption. While all have traditionally operated as separate silos, they follow similar processes: they all require business impact analysis and risk assessment processes, and all have a heavy reliance on controls documentation, monitoring, and testing.

Reader ROI: Security and risk professionals should apply a common riskThe importance of based approach to these disciplines to streamline processes, DR today improve cross-discipline collaboration, and provide a common Why you need a system of managing risk. So how should your company attempt common set up to leverage common best practices, processes, and tools across How to approach a disciplines to improve business resiliency? One way is to have DR project REAL CIO WORLD | a P R I L 1 , 2 0 0 9

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Disaster Recovery

the same senior executive ultimately accountable for their success.

Today, at least 66 percent of security decision-makers are already either primarily or completely responsible for BC/DR. They may be responsible for both BC and IT DR or only IT DR, but it's clear that as companies seek to institutionalize these disciplines, they are turning to senior security executives for leadership.

But running a company-wide security program is difficult enough. Why would IT leaders want to raise their hand to take on BC and IT DR?

DR is Your New KRA Security standards recognize information availability as a responsibility. Information security professionals have

Managing Disaster Proactively

B

efore selecting a disaster recovery (Dr) strategy, a Dr planner should refer to the company's business continuity plan which should specify the key metrics: recovery Point objective (rPo) and recovery time objective (rto) for various business processes. the metrics specified for the business processes must then be mapped to the underlying It systems and infrastructure that support those processes.

While it is important to have disaster rPos and rtos in place, here's something to think about: what if the critical data you are currently using, becomes corrupt? Worse yet, what if someone accidentally deletes some portion?

Well, CIos will head over into the most recent backup data, and simply recover. but because when there is no crisis as such, the data backup is usually done on a 24-hour, daily basis, think about the situation you are creating for the organization — the daily rto and rPo back is up 24-24 (24 hours each). In the event of an unplanned incident which is not necessarily a disaster, you can't get to the data until 24 hours later, which means that unless you 'declare' the organization to be in a state of disaster, you will have lost 24 hours worth of data. so, it is imperative that your regular metrics match with your disaster or in-crisis metrics. — Cso Pakistan

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always considered themselves responsible for preserving not only the confidentiality and integrity of information, but also the availability of information.

CISOs, CSOs or other head security officers have the skills to institutionalize these programs under the security umbrella. Successful BC and IT DR programs require the skills that most successful security leaders already have.

If it's not your responsibility today, someone will ask you to do it in the future. As companies begin to establish these programs, they must determine who in the organization can take on these responsibilities.

Forrester has seen the following executives assigned the responsibility: the CIO or the CISO (the most common), a dedicated risk manager (typical in large financial services firms), or the COO or CFO (this is the least common).

It's an opportunity to make the security program more strategic. The tasks associated with executing security policies such as software patching and application security are increasingly being automated through tools, then managed and monitored by the IT operations team. This allows IT leaders to focus on more strategic business and IT priorities. In addition, both BC and IT DR require the input and collaboration of multiple groups, including business owners, application owners, legal, HR, facilities, and IT. This gives the CIO the opportunity to increase their exposure and relevance to non-IT audiences.

Extending your responsibilities and reach throughout the company under the banner of business resiliency will require that you: Set up a cross-functional advisory board. A senior executive in the company must have ultimate responsibility for BC, IT DR, and security, but none will be successful without involving business owners and other departments in the process.

Give your resiliency managers a forum to network and exchange best practices. To increase collaboration across a large, geographically distributed company, you must hold annual best practices workshops, monthly teleconferences, and other forms of communication among various BCM, IT DR, and security managers.

Test your plans more often and train everyone in their role and responsibilities. Test strategies should include plan walkthroughs, tabletop exercises, simulations, and full tests. Tests must be interdisciplinary and involve business members to be effective.

Testing has many benefits. It helps validate team member roles, responsibilities, and competence, and it validates the currency of plans and the procedures.

Run business resiliency assessments at least every two years. Adherence to the corporate standard must be

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Disaster Recovery

assessed periodically. The assessment process should be constructive, not punitive; where there are areas for improvement, the local and corporate resiliency teams work together to implement the recommendations.

A Call To Join Forces BC, IT DR and information security will continue to require specialization, but there are opportunities for better alignment given their common goals and requirements. Cross-team feedback on strategies and responses, the use of common software tools, and coordinated testing are substantial areas of potential benefit. By closely aligning these approaches you can: Close critical gaps in continuity strategy. Companies frequently lack coherent strategies for workforce recovery and emergency communication, because it's not clear if it falls within the scope of BC or IT DR. If you're able to successfully failover IT systems to an alternate site it doesn't help if no one has determined how employees will continue to work.

Implement comprehensive resiliency testing. Forty percent of companies conduct a full test of their IT DR plans once a year, but 20 percent never conduct a full test.

A first step toward increasing resiliency is to increase the frequency and types of tests with coordination among the BC, IT DR, and security teams. (See Calamity Check) Prevent security policy violations. IT disaster recovery often leads to the creation of multiple copies of data. Data is backed up once a day, and once a week it's taken off-site to another corporate facility or thirdparty service provider. Data is also frequently replicated over private networks or the Internet to an alternate datacenter. In addition, there is growing adoption of IT-related SaaS for online backup and disaster recovery, and this data could be transmitted and stored in an insecure way. Security professionals are not always aware of these IT DR arrangements.

Leverage common tools. It's not uncommon to see one team responsible for continuity within a company subscribe to BCP SaaS while IT is unaware of its existence and is in desperate need of DR plan templates and a DR plan repository. Likewise, security professionals may deploy IT GRC software applications that also offer business continuity management (BCM) modules that could be leveraged by other groups in the company— but no one is aware of it. In the end, it's not unusual for a company to have invested in two to three different software applications with similar functionality. In addition to the unnecessary cost, it means that the company has no easy way to compile the information from these separate sources into a realistic picture of its business resiliency.

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Calamity Check P

ractice doesn't guarantee success, but test drills certainly help disaster recovery managers and project teams to identify gaps and areas for improvement in their organizations' disaster preparedness. Practitioners offer the following checklist of what to do (and what not to do) during a test run.

DO: Make sure that key decision-makers and rank-and-file employees alike have access to the disaster recovery plan or a cheat sheet, even if it's a simple set of instructions they can keep in their purses or wallets.

DO: before the drill starts, identify a single leader to communicate to employees what needs to be done.

DO: Establish clear objectives for the exercise. understand what is meant by success. If systems aren't recovered in time or you fail some other aspect of the test, it's not a failure as long as your organization learns from it.

DO: Make sure you have mission-critical data stored at a location away from your primary datacenter and pull that data into test drills.

DOn't: Practice for just one type of event. Disasters come in all shapes and sizes. Practice for different scenarios (for example, a network outage or a pandemic) to help employees understand the impact of different types of disasters and what their roles are expected to be.

DOn't: use your test drill to figure out your communication plan. t testing communication should be a key part of your drill.

Disaster recovery team members should have blackberry and ell phone contact information for key personnel, and they should keep that information both at work and at home.

DOn't: Play the test drill as a low-key event. Even though it's only a drill, behave as though it's a real crisis. Practice the way you want it to play out in real life. —thomas Hoffman

Incorporating BC and IT DR functions is not something that you can do with your existing security budget and staff. You will have to build the business case for a larger program by selling the benefits of greater efficiency, broader participation across the organization, and vastly more insight into the organization's risk profile. CIO

Send feedback on this feature to editor@cio.in

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IT Management

TTak aking of off The

IT Management

Enterprise software maintenance and support costs are rising even as budgets tighten. In response, some organizations are finding new balance with less expensive options. By Tom Sullivan

Reader ROI:

Renegotiation ploys Rethinking your support needs Alternative to support

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IllUStratIon by MM Shan It h

THE opEn sEcrET

in the industry is that maintenance and support for enterprise applications is wildly profitable for vendors and, likewise, incredibly expensive for IT shops. Some of those IT shops, in fact, are overwhelmed by the cost and find too little return to justify paying for it.

Even as the economy worsens, IT service contracts are growing pricier. The Yankee Group puts that hike at 10 to 15 percent year over year. IT budgets, meanwhile, are softening, according to Gartner, which found that while overall IT spending is expected to expand, that growth rate has slowed from 3.1 percent to 2.3 percent.

Yet companies still shell out millions for support and maintenance contracts to stay on the software upgrade treadmill despite, Yankee says, 80 percent of customers' IT budgets going toward operational expenses, while a paltry 20 percent is available for capital expenditures.

According to a June 2008 Forrester report, 21 percent of companies are undergoing major application upgrades, while a similar percentage will face minor upgrades. "To a large extent, these upgrades are driven by vendor-imposed support deadlines where customers will face increasing maintenance costs or the decommissioning of specific releases if the upgrades are delayed further," the report said.

What's more, Oracle recently ratcheted up its prices, again, this time by as much as 20 percent, while rival SAP ended its low-price support option. Previously, customers could choose the lower tier that cost 17 percent of their license fees; now they are left with the Enterprise Support

IT Management package, which runs at 22 percent. So what is a company facing the now-clichéd mantra 'do more with less' to do about those high-ticket enterprise application support and maintenance contracts?

Basically, IT shops have three options: renegotiate existing contracts, switch to a third-party service provider to extend the life of your applications, or in certain instances, the extreme case: drop support altogether.

Revisit Your Contracts Customers have more power than they might think in negotiating an existing contract. "A customer’s leverage is not just to go to a competitor," explains Frank Scavo, president of Computer Economics, a 28-year-old IT research firm.

According to Scavo, customers can use ‘events’ in the normal course of a relationship as opportunities to negotiate, such as buying more user licenses or modules, or upping the ante to a longer-term contract.

"If you're planning to buy additional modules from an apps vendor, use that as an opportunity to negotiate better

Easy and Overlooked Ways To Cut Costs Buy refurbished equipment: You can expect 40 to 50 percent discounts from the original price on most used equipment. In fact, the price of some used equipment may be reduced by as much as 90 percent, says Corey Donovan, vice president of operations at Vibrant Technologies, if you can use a three-year-old product.

Buy equipment at auctions: Another source for IT equipment is from local bankruptcies, says John Baschab, senior vice president of Technisource Management Services. Auctions are a good place to pick up consumables like toner cartridges.

Sell your old equipment: IT equipment depreciates in value 2 to 3 percent per month. If you're a large company, you could be losing tens of thousands of dollars for every month that assets are taken out of service but not sold.

Sell equipment to your own employees: If the other methods to sell your unneeded equipment don't make sense, you always have the option of selling it to your employees. If you're going to do this, make clear it is sold 'as is' — and stick to that.

—Ephraim Schwartz

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Feature -IT Management.indd 44

terms and conditions," Scavo advises, "perhaps to get a refund on other modules not implemented, or to lock in maintenance fees at some fixed rate. Or to get computerbased training thrown in for free. Roll that discussion in as part of the transaction. You may not get what you want, but there’s no better time to ask than at the point where the vendor wants to make a new sale to you."

Also, Scavo suggests assessing what you have and what actually gets used — for both support options and application modules — since some customers inevitably wind up paying for more than they ultimately put into practice.

"With Oracle, the way the license is negotiated you get the kitchen sink. There are definitely features in there that we pay for but don't use just because the package is so big," says John Mayes, associate vice president and chief procurement officer of Yale University.

Scavo also recommends that IT look hard at how many user license seats you initially purchased and how many are currently being utilized because while the vendor will tell you if you've exceeded the original number, they're not as likely to let you know about the surplus you're still paying to use, support, and maintain.

Yet another option for cutting costs is to consider a lower tier of support. "A lot of CIOs and CEOs are re-thinking the level of support and what they're getting for it. People are cutting costs where they can," says Laura DiDio, a research fellow with Yankee Group. "But there's a sense among CEOs and CIOs of 'let's not be pennywise but pound foolish,' so they at least get phone support."

SAP, for instance, offers Enterprise Support at the high end. According to an April 2008 IDC report titled The Evolution of SAP Support Services, software upgrades, updates, and patches are the chief reasons customers purchase premium support. Older, more mature applications that run with relatively few problems could be ripe for a lower level of support, such as SAP Standard Support or even the project-level SAP Safeguarding.

Anybody But the Vendor When the vendors either won't budge on price or simply cannot provide the level of service that you require, there are third-party providers to consider — but the vendors will fight tooth and nail to keep you from going to one.

That's what happened when Rusty Gaston, CIO of Santa Fe Natural Tobacco, called her Oracle rep to explain that the company was considering going with a third-party support provider for PeopleSoft 8.8 instead of renewing with Oracle.

"Our maintenance costs were incredibly high," Gaston explained. "We were not getting a return on the dollar for maintenance fees."

But Oracle did not surrender pleasantly. "It was immediately about telling me how stupid I was. It was all

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IT Management about what's around the corner for Oracle, rather than a negotiation," she added.

"This was like me asking somebody what time it is and them saying 'we don't use the sundial anymore.'"

So Gaston turned to a third-party provider of support for Oracle applications.

After evaluating both Rimini Street and daniel reio rememBers the days when buying software meant it came on a CD rival TomorrowNow, she ultimately elected with a paper manual packaged in a box. "the way that some customers used to track their Rimini Street because it was willing to software license rights is, they would walk into the server room and count the number of engage in a unique relationship with boxes on the shelf," said the senior marketing manager with Etobicoke. "but now everything Santa Fe Natural Tobacco that calls for is license-based. It's all virtual," he says.” what Gaston referred to as aggregate staff, CDs and manuals have been replaced by license keys and electronic files, making it or support folks dedicated to her so that difficult to track software licenses. also, the tendency, says reio, is for organizations to Gaston would not have to carry an extra focus on the business, leaving license tracking behind. "the reality," reio says, "is that today 2.5 full-time IT professionals. tracking is much tougher."

Rimini Street and TomorrowNow there are products and services available to help with software license management, provide performance, operational, and but "there is no silver bullet," says Edwin Jansen, manager of It asset management configuration support, as well as patches, service with Softchoice. bug fixes, legal, tax, and regulatory to start, organizations should realize the benefits of a license management strategy, updates, among others. "The standard like cost-avoidance. businesses will have planned budgets and expenditures, "and by then pricing approach for both Rimini Street getting tapped on the shoulder by a vendor can mean you now have to buy licenses at list and TomorrowNow is to take whatever the price that you had not planned on," says Jansen. customer is paying to Oracle [or SAP] and Dealing with non-compliance can take precious time away from core responsibilities, halve it," explained Pat Phelan, a research said Jansen, especially when the chief financial officer and legal department are predirector at Gartner. "In Rimini Street’s occupied with "looking through the licensing situation in panic mode." case, they have taken an even deeper Most often, counting and measuring software utilization entails It staff "walking around discount for certain situations. I suspect or counting by post-it note," says ross Chevalier, president and Cto of novell Canada. it was for deals where Oracle had been because It environments are heterogeneous, Chevalier recommends a tool that tracks substantially overcharging for old, very software installs and utilization regardless of brand. It's useful, too, for license renewal so stable modules." an organization can "get levels of entitlement (from the vendor) that are just right for their Gaston's experience echoes that business," he said. "Well, you can't know what's right if you can't count it." assessment. "We now get support While there is no silver bullet for license management, a comprehensive strategy comparable to what we were getting from can help an organization align purchases, contracts and support, and tie that with user Oracle, but it's 50 percent of what I was provisioning. "It really is key to taking a lot of operational expense out of the business," paying Oracle. I get a whole, whole, whole said Chevalier. lot more. Not only because of the support, — Kathleen lau but also the aggregate staff arrangement." the other half of its customer base uses Rimini Street to Rimini Street in May pre-announced that it will support extend the life of older applications; many want to keep SAP starting in January, becoming the first third party to their software for five or even 10 years without upgrading. actively pursue R/3 customers, according to Gartner. Since "Customers are taking control of their destiny." Often, spreading the word, "we've had tons of calls from top SAP "the software can run even after the vendor doesn't want customers. Some of them, SAP's hair would stand on end anybody on it." if they knew these guys were talking to us. We're talking Gartner's Phelan explains that "old releases of products top five to ten companies here. They stand to save millions are very stable and require little actual on-the-ground of dollars," says Rimini CEO Seth Ravin. support; and the companies are not receiving much in SAP downplayed the significance. "Customers are telling the way of support from the vendors anymore on the old us more and more that they want us to support them, and releases anyway, so the risk of going to a third party can be not just SAP software but everything that connects to less than it looks at first glance." it. And they’re willing to pay for it," says Bill Wohl, vice The city of Flint, Michigan, for instance, uses a PeopleSoft president of global communications at SAP. payroll app from 1997. Had they been on Oracle's upgrade That may be true for some customers, but third-party path, they'd have spent millions by now to get new apps support has another key advantage: a way to escape the they didn't really need, says Ravin. He used to think the high-pressure up sell to the latest version. Ravin says that

who's counting your licenses ?

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IT Management practical life of an application was 10 years. "With Flint, we're going to go another five."

80%

When subscribing to SaaS applications from the likes of NetSuite, Salesforce. com, SalesNet, or Workday — or even Oracle or Microsoft SaaS apps — the host handles upgrades. Be aware, however, that Going Naked per-seat subscription prices track pretty At some point the desperate CIOs closely with the conventional licensing, consider the radical possibility of going maintenance, and support costs of off maintenance and forging our own on-premise software. You get quicker time support. Backing that idea, Scavo points to market and avoid up-front licensing out that maintenance and support costs, but factor it all out, and you may contracts may not be worth the cost for not save much, particularly if you add customers that get only bug fixes, help subscription fees to extra-cost options. desk, or access to future enhancements.

Source: The Yankee Group Open Source enterprise applications — "It may sound crazy, but it might make including SugarCRM, Compiere, xTuple, sense to abandon vendor support if an and OpenERP — are moving into larger organizations, says organization has highly modified the software, is running Ned Lilly, CEO and president of xTuple, the Open Source on an older release no longer supported, intends never to ERP provider formerly known as OpenMFG. "We have upgrade, or plans to migrate from the system in the near more and more enterprise CIOs staring down a SAP or future," Scavo added. "Vendors have increased their fees Oracle contract renewal, and asking themselves 'why not for software maintenance to the point where they may not Open Source'?" Lilly explains. "Frankly, this is happening be justified in a large percentage of cases." a little faster than we'd anticipated."

"Going naked," as Scavo calls it, works in very specific Perhaps, but for the time being, Open Source enterprise scenarios. "When we know we are moving off the platform software appeals primarily to SMBs. "The greater the at the useful end of life of the software, it might make sense complexity, the less Open Source [enterprise applications] not to renew the contract," Yale's Mayes says. But for the provide a viable solution for the enterprise," says most part, the risk is higher than the cost, akin to driving Gerry Brown, senior analyst at Bloor Research. Indeed, around without auto insurance. proprietary or open, customers still need those tax, legal, "The question is: how critical is it? If the system is down and regulatory updates, and it's more cost-effective to and you can't get it started, can you go back to the vendor? sign an extensive support contract than to employ an Or can you get someone else there right away?" Duncan army of experts.

Jones, a senior analyst with Forrester Research, probes.

Regardless of whether you're going Open Source, buying "If the knowledge base of known bugs and patches is out support for a packaged application from Oracle or SAP, or there, it can work. If not…" subscribing to SaaS, the trick, according to Tom Pacileo, Matt Aslett, enterprise software analyst at the 451 executive consultant at Compass Consulting, is developing Group, describes the risk bluntly: "It would take a brave an upgrade road map and balancing the technology so that company to run an ERP [or CRM] application without companies don't overbuy support and not actually need all official support given the criticality and complexity of of what they pay for.

ERP apps."

That may be easier said than done. Rimini Street's CEO Ravin claims that up to 70 percent of revenue from support Alternative Approaches and maintenance contracts actually goes toward software Few companies would consider enduring that kind of risk development, so customers wind up paying in advance with a mission-critical application. Instead, they would for programs that they may not want or may never get. be more likely to consider two popular options to lower Plus, companies need the latest versions of applications enterprise software costs: SaaS (software as a service) to take advantage of the most exciting new technology or Open Source. Instead of slogging it on the upgrade developments, such as SOA and virtualization. treadmill, jump off and try something new.

"Businesses don't have the luxury of letting support run With SaaS, support costs are similar, but maintenance out," Yankee's DiDio says. "They get you one way or the costs plummet, since the vendor hosts the application. other: pay up front or cross your fingers and pray." CIO With Open Source, the business model generally relies on for-pay support, but with a robust enough community, adroit customers may be able to get away with minimal support and rely on the assistance of peers. So far, however, few large companies have made the leap to SaaS or Open Source enterprise applications.

Send feedback on this feature to editor@cio.in

of an enterprise's

IT budget go toward operational expenses.

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The CIO Role

Give me a Venti non-fat decaf Sumatra blended with Italian roast and two pumps of cinnamon dolce syrup plus a light dusting of mocha powder..,

but hey there, aren’t you the Starbucks’ new CIO!!??

Bold changes are brewing in IT with the advent of new Gen-X leadership from Starbucks' CIO Stephen Gillett.

By Thomas Wailgum

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Sharp-eyed and highly caffeinated regulars might have noticed the brand-new employee at the Mercer Island Drive Thru Starbucks.

The newbie, wearing the standard-issue green apron, was receiving a crash course in just about every function at the 1,800-square-foot store. He took a turn as a barista, manned the drive-thru, handed out samples to customers, took out the trash, and assisted a patron who was trying to connect to the Wi-Fi network. He tinkered with the store's point-of-sale (POS) system. He even did some scheduling.

Reader ROI: What customers likely didn't realize was that the nearly Why Starbucks six-foot, three-inch man offering them free cookie and coffee is focusing on samples was not just any barista. He was Starbucks' new customer relationship CIO, Stephen Gillett. To Gillett, who frothed lattes recently management as part of the coffeemaker's week-long executive immersion How a next-gen CIO is driving that change process, nearly every business and customer-facing process in the store was new.

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The CIO Role "They do a lot in the store," says Gillett, the former CIO of stock-photography company Corbis whose background includes senior IT posts at digital media ventures Yahoo and CNet. (Gillett can claim some retail experience: in his younger days he worked at a restaurant and an Albertsons grocery store.) "They do a lot of manual things, and they do a lot of automated things using systems and process. For me, it really amplified the expediency by which I want to deliver some of our key transformational technology platforms."

Since being named SVP and CIO in May 2008, Gillett has learned all about the expediency required at his new gig — whether it's delivering coffee to a hurried drivethru customer or refreshing Starbucks' core technology portfolio. And the pressure is on. Starbucks is in the midst of a grueling company-wide transformation to recapture the brand's mystique with aficionados who once didn't mind paying three to four dollars (between Rs 150 and Rs 200) for a cup of upscale coffee. But with the economy's unraveling, newly frugal consumers are now more concerned with choosing between paying their bills each month — not with two shots of espresso or three.

This abrupt about-face by its customer base has jolted Starbucks. In 2008, the company shuttered 600 of its nearly 6,800 US stores and laid off more than 12,000 employees out of a global workforce of 176,000. Fourthquarter 2008 earnings plunged 97 percent compared with the previous year, and the stock has tanked, losing half its value last year. In 2009, the company has said it expects to

Changing Role of A CIO A lot of people mistake the CIO to be the geek, and that's not true. Well, not entirely true. The real planning and drive that an organization gets because of its alignment between business and IT objectives, is what the CIO is responsible for.

The link between business, technology and the rate of progress for any organization, is usually what the the head of the department helps contribute to. Competitive pressure on the business is a pre-requisite for CIOs to get an opportunity to demonstrate the value to their organizations and deliver at the business driver levels.

CIOs, therefore, have to make a case and develop the internal relationships to understand the pain points of other departments so they can be addressed on an ongoing basis.

This case building sometimes requires the understanding of the business problem at the same level as the business and digging up of best practices and industry-wide trends for solving those problems. Once the credibility is established and business executives start treating IT as a friend rather than a black hole that keeps sucking in money, the CIOs can move into a business driver role.

—By Nauman Sheikh

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reduce its cost structure by more than $400 million (about Rs 2,000 crore).

Against this backdrop, Gillett's mission is to create and implement the technology vision of "anything that touches the consumer, whether it's in back-end [IT operations] or in how a customer interacts in a physical Starbucks store," says Chet Kuchinad, EVP of Starbucks partner resources, who lead the team that hired Gillett.

"Stephen's not just about legacy systems and not just about efficiency. He's about how we take technology and connect with Starbucks' consumers in a different way.

Frankly, we've just begun, and there's a lot of work to be done yet."

Gillett's keenly aware of the stakes, and his role. "I feel like the pressure is equally distributed among the executive team," he says. "I'm part of the team, and the pressure is shared."

The Evolution of a Next-Gen CIO

G

illett knows a thing or two about pressure and being a team player. He was a member of the University of Oregon Ducks football team; he played the offensive guard position, where the success of the entire offense depends on five large men working in concert to provide protection for the quarterback and open lanes for running backs.

At a glance, Gillett is both a contradiction and affirmation of IT stereotypes: a jock, but also an MBA grad and once one of the top guild masters in the online role-playing game World of Warcraft. Those gaming skills helped Gillett land a senior director of engineering position at Yahoo and they've enhanced his leadership skills more than his MBA coursework, says Dr. John Seely Brown, director emeritus of Xerox PARC and a visiting scholar at the University of Southern California, whom Gillett counts among his vast social network.

Former managers describe Gillett as a socially gifted and highly charismatic businessperson. Just how charismatic? In 2006, he became the CIO of Corbis, which is owned by Bill Gates. During his tenure, Gillett often went head to head with Gates on internal technologypurchasing decisions and persuaded Gates to adopt tech platforms that were, in some instances, from Microsoft's competition, such as SAP's ERP products.

"Stephen was able to explain to Bill why Bill's product wasn't the right product," says Ted Cahall, EVP of the platforms business unit and technologies division at AOL, whom Gillett worked under at CNET and who twice attempted to hire Gillett for the AOL CIO position.

"You'll meet a lot of technology people who are extremely intelligent but they have really stunted social skills," Cahall says. "They don't have an ability to sell their ideas and don't have the ability to ingratiate themselves with key leaders. Stephen does that so well."

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The CIO Role Of course, you don't become CIO of any organization without having the technical chops. At 12 Entrepreneuring, where Seely Brown and Gillett worked together, Seely Brown says under Gillett's watch the company installed the first complete VoIP Cisco system and "bet our entire enterprise on it working," he writes in an e-mail. The system worked quite well. "I think [Gillett] even helped Cisco debug the system," Seely Brown says. Cisco used some of 12 Entrepreneuring's learnings in a product-training video. "[That's] just one simple example of thinking both about the technology," says Seely Brown, "and the people."

And, by the way, Gillett's just 32 years old. So it's a safe bet that he's one of the youngest Fortune 500 CIOs. But his take on leadership and success makes him sound older than his years. "Those are traits that are really age agnostic," Gillett says. "Having a proven track record is what really drives your ability to execute."

What emerges, then, is not only a picture of the IT leader who's tasked to transform Starbucks' technology infrastructure and digital in-store offerings, but also a glimpse of the next generation of CIOs: a technologist with an MBA, a socially adept leader with loads of ambition, and a senior vice president of a multibilliondollar company who uses the Web for LinkedIn as well as World of Warcraft.

The Right CIO for the Job

I

n January 2008, long-time leader Howard Schultz returned as CEO to rescue the ailing company. Former CIO Bryan Crynes left shortly thereafter. It would have been reasonable for Starbucks to reach into the retail or restaurant industries for a seasoned and well-known IT chief to help drive its transformation. "I was a bit surprised that they would call someone like me," Gillett concedes, given his lack of a traditional retail or supply chain background.

But Starbucks was "looking for a very different kind of CIO," Kuchinad says, one who could manage the traditional IT requirements and "bring innovation to some of the legacy systems." Most importantly, the leadership team wanted a CIO who understood Starbucks' new generation of customers and how they engaged with the brand in store and online.

Paula Rosenblum, managing partner at Retail Systems Research and a former retail CIO, says Gillett's hire was a signal of significant change. "Starbucks wanted to skew new and skew fresh," she says, "and get out of this old and stodgy, 'Well, if we do this in the supply chain, we'll save 15 cents and cost control our way to profitability.' That's not what they're about. They're about the customer experience."

Yet over the last few years, the company was so focused on the back end, "we were not devoting as much resources

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Leadership and success are traits that are really age agnostic. Having a proven track record is what really drives your ability to execute.

— Stephen Gillett, SVP& CIO, Starbucks

to the customer-facing side," says Kuchinad. "What fascinated the leadership team was Stephen's knowledge of where and how these consumers lived, and how he was technologically engaged with them. While he did not have the traditional retail IT experience, we wanted someone who was leading edge, who knew where the technology was evolving."

Starbucks wanted a fresher blend: someone who could manage a traditional IT environment and provide a creative take on how technology could better serve its customers using tools such as remote ordering and automated systems, loyalty cards and business intelligence.

"When you look at our customers and what's happening in our stores," Gillett says, "you see wireless devices, iPhones, converged networks, laptops. You see a generation of customers who are entering our stores and engaging [with us] in new ways."

Gillett believes that everything he learned at his previous employers is applicable to Starbucks' retail model. "There are a lot of things a traditional retailer can learn from big Internet and big software," he says, "as far as scale, analytics and really using those tools that drive the Web-type companies."

A Tall Order

T

he ‘Starbucks experience’ is something you'll hear often from its executives. During the past several years, that experience has been diluted by an over-expansion REAL CIO WORLD | a P R I L 1 , 2 0 0 9

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The CIO Role to some 17,000 stores worldwide, diverging product offerings, new coffee-making equipment and cut-throat competition from Dunkin' Donuts and McDonald's. In a highly publicized 2007 internal memo, Schultz, who was not running day-to-day operations but still held the chairman title, derided "the watering down of the Starbucks experience" and "the commoditization of our brand."

Starbucks has been in a transformation mode since Schultz returned and took back the CEO reins. "Starbucks has to find a way in this economy of expressing the value message along with the indulgence factor," says RSR's Rosenblum. "So the challenge is to create, whether through technology [applications] or otherwise, that there's the perception of value. Along with that, it's really important for retailers to find clever and innovative ways to save money."

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“Stephen's not just about legacy systems and not just about efficiency. He's about how we take technology and connect with Starbucks' consumers in a different way.

We've just begun, and there's a lot of work to be done.”

— CHeT ku uCHI CHInAd, eVP, VP, STARBuCkS S PARTne neR ReSO SOuRCe eS

Gillett's priorities are wide ranging, but three in particular illustrate what he's up against. First, he says he's attempting to change internal perceptions of the IT department "from being perceived as and operating like a traditional IT shop...to becoming a technology company and using the term 'technology' versus 'IT' when we look at how we're going to transform our business."

(See Changing Role of A CIO) His plan includes aligning IT's activities with those at the top of the company's transformational agenda, mainly its customer experience strategies. For example, ethical sourcing of coffee is a big piece of its social responsibility platform. Customer surveys have shown it is important, and executives view it as a competitive differentiator. Starbucks does have a system (using Oracle databases) that tracks coffee origin and other related information, Gillett notes. "If we want to increase the amount of fair-trade coffee or fair-trade cocoa in our inventory," Gillett says, "technology has to be able to deploy a system that can track which purchases are actually fair-trade

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certified and what aren't. You can't make that type of a statement without having a technology impact."

Gillett is also completing a previously planned global, multiyear Oracle ERP rollout. He spent his first couple of months learning the business and, ultimately, how the ERP rollout would impact business processes and activities. He found that in many cases, the ERP systems being introduced are replacing manual processes, "which is the most efficient thing you can do," Gillett says.

Perhaps his most crucial duty is to enhance Starbucks' ability to mine its customer data to help "re-ignite our passion with our customers," Gillett says. A lot is hanging on the loyalty card data (Starbucks' Reward cards) and business intelligence (BI) reporting tools to extract meaningful customer analysis.

At a financial analyst briefing in early December, Starbucks marketing executives talked up success they've had, so far, with the Starbucks Reward cards and the new Gold Card in 2008. One of the first positions Gillett opened up when he was hired was a VP of business intelligence.

"Analytics is absolutely a key driver of everything you do," Gillett says. "And generating BI demand across the business and strong analytics is something that Starbucks is going to usher in.

Technology has to play an absolutely critical role in all that."

A November 2008 Aberdeen report on BI's use in the retail industry, as well as a survey of 152 companies, shows Gillett has considerable work ahead. "Many organizations spend months and endure significant costs to obtain the reporting and analysis capabilities that BI promises," writes Aberdeen research director David Hatch, "only to find that different 'versions of the truth' still exist without any definite way of determining which one is real or accurate."

Gillett says that Starbucks is making progress but is nowhere near mastering BI. "[The business users] haven't indoctrinated it into everyday business decision-making yet," he says. "We still have a lot of decisions based on real-time data, intuition, or historical trends. I think in today's economic climate, having strong analytic and BI-based decision making can help give a new dimension to that."

As for the role that he and IT can play on the Starbucks team and in its transformation, he seems characteristically assured of himself.

"Technology and IT have a critical role in all that because we have to understand our customers with [respect to] today's economic climate and the cost pressures they face," Gillett says.

"We have to understand our customers in ways that we've never had to in the past. I think BI and data warehousing, and consumer insights from a marketing perspective are going to be what gives us that view into the Starbucks customer." CIO

Thomas Wailgum is senior editor online. Send feedback on this feature to editor@cio.in

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Essential

technology Illustration by pc anoop

From Inception to Implementation — I.T. That Matters

To get all the benefits of storage virtualization, CIOs need to ensure that they can maneuver past interoperability and infrastructure obstacles.

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Hitting The Storage VirtualizationJackpot

By Cindy Waxer Storage Virtualization | Babu Kudaravalli, senior director of IT operations at SXC

Health Solutions, knows about the havoc an acquisition can wreak on a company's storage infrastructure. While overseeing National Medical Health Card Systems' (NHMC) IT department, he watched the pharmacy benefits manager grow nearly 40 percent per year, primarily through acquisitions. The result was a mish-mash of more than 60 servers that were functioning at 90 percent utilization, impacting performance and creating a constant challenge for storage and system administrators, he recalls.

Fortunately, that had changed by the time SXC acquired NMHC last February. Gone was the hodgepodge of arrays and, in its place, a high-capacity, easy-to-manage storage infrastructure made possible through storage virtualization. "SXC was very impressed," says Kudaravalli, adding that SXC plans to preserve NMHC's storage environment.

But accolades aren't the only reason companies are turning to storage virtualization.

Cutting costs, easing management headaches, simplifying data migrations across

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essential technology

multiple tiers — these are just a few of the factors pushing them into the arms of vendors including Hewlett-Packard, EMC, Symantec and DataCore Software. A study by research firm TheInfoPro reveals that 35 percent of Fortune 1,000 storage organizations are using the technology and plan to expand their investment during the next two years.

Not unlike server virtualization, which simplifies the management of disparate server hardware and operating system platforms, storage virtualization masks the complexities of heterogeneous storage arrays by aggregating them into a centralized structure. And it's earning plenty of fans. But with all the hype surrounding this technology, many CIOs fail to consider the hurdles — from interoperability glitches to deployment snafus — that can greatly impact storage virtualization success.

"In the course of putting [multiple storage devices and arrays] into one consolidated pool, companies risk introducing new problems, like performance issues," warns Greg Schulz, founder of consulting firm StorageIO Group.

Far from Plug-and-Play Kudaravalli agrees. Today's NMHC storage environment consists of two HP StorageWorks XP24000 Disk Arrays, which supply enterprise-class capacity to applications from a pool of virtualized storage. And two HP StorageWorks Enterprise Virtual Arrays support nearmission-critical applications requiring high availability and mid-range capacity.

The result is 55 terabytes of virtualized storage. But, Kudaravalli admits that "it took a long while to get there."

For a company to make the most of storage virtualization, a solution must be able to accommodate existing storage hardware, as well as satisfy the requirements of future storage systems.

In NMHC's case, Kudaravalli needed a solution that would be compatible with factors including the company's existing servers, host bus adapters, fiber cards,

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fiber switches, operating systems and multiple business applications.

For this reason, NMHC spent nearly nine months testing evaluation copies of HP's technology, and decided to limit itself to a single vendor. By doing so, Kudaravalli hoped to reduce the interoperability headaches that can arise from deploying disparate solutions from competing vendors.

Schulz of StorageIO recommends requesting a compatibility matrix from your vendors that outlines — not only the products each supports but — the versions and configurations, too. While a storage virtualization solution may accommodate a competing vendor's hardware, interoperability issues may prevent it from taking full advantage of a device's functionality.

AMulti-step Process Another obstacle that can stand in the way of a high-functioning, virtualized environment is a botched deployment.

Because implementation errors can result in data loss and reduced service, experts warn that deploying virtualization across an entire enterprise in one fell swoop can easily spell disaster.

Rather than risk "putting its business in jeopardy," Kudaravalli says NMHC adopted a piecemeal approach to implementation that spanned more than a year and involved the use of test servers for development, quality assurance and production trials. As a result, Kudaravalli was able to standardize the deployment process, avoid having to hire top-dollar consultants, reduce the complexity of the overall project and gain time to properly troubleshoot unanticipated deployment glitches.

Time certainly wasn't on the side of Gerry McCartney, CIO of Purdue University.

But he knew that wresting control of the institution's complex and overloaded storage environment called for a carefully plotted procedure. Purdue selected EMC's Invista network-based storage virtualization solution. But McCartney first made certain Purdue's existing

63%

Of companies in the US planning to implement storage virtualization say heterogeneity is somewhat or extremely important.

Source: State of the Storage Virtualization Market 2008, F5 Networks

storage-area network was robust enough for virtualization, ensured adequate switch port capacity, certified connected hosts, as well as updated firmware and operating system patches.

"It was a lot of work but it was the best method to preserve the integrity of our operating environment as we proceeded," says McCartney.

McCartney also opted to deploy the virtualized environment "host by host," to allow system administrators to become familiar with it and make certain they did not run into performance issues. This slow-and-steady approach also afforded Purdue University's IT team the time needed to determine which systems could be virtualized in place, and which required scheduled migrations to avoid disruptions.

However, not all experts agree that a slow deployment is a smart move. John Sloan, a senior research analyst with InfoTech Research Group, cautions that "a graduated approach" delays "reaping the benefits of a streamlined infrastructure."

All the more reason for companies to test the waters before pooling their storage resources via virtualization. CIO Send feedback on this feature to editor@cio.in

REAL CIO WORLD | a P RIL 1 , 2 0 0 9

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Pundit

essential technology

Clouded Economics

Stuck between capex and opex, IT organizations don't really understand the true savings of cloud computing.

By Bernard Golden Cloud Computing | You don't have to spend much time around cloud computing before you run into arguments regarding cloud economics and you will undoubtedly encounter the phrase 'capex vs opex'.

There have been many discussions comparing the cost of 24X7 use of an Amazon EC2 instance against the cost of hosting a server within a company's datacenter. Usually people take the average selling price of a 1U server, divide it by 36 (the number of months in the typical service life of a piece of equipment) and show that it totals less per month than renting from Amazon.

Therefore, they conclude, cloud computing is more expensive than self-

When added to the cost of an internal server, these factors significantly raise the monthly overall cost to host a server.

Therefore, the typical cost discussion regarding internal datacenter versus cloud provider costs is typically oversimplified. This isn't really surprising, given that most IT organizations really don't have a clear understanding of their true costs to begin with. This is where we move into capex vs opex territory. People have described the difference between the two types of expenditure, regarding cloud computing, as unimportant — after all, it's all cash flow. This is enormously wrong.

For starters, even if the cash outflow was roughly the same, the cloud alternative would

is paid. Therefore, given the option values associated with cloud computing, companies might be willing to pay more than the cost of an equivalent amount of internal server capability.

Because capital investment is limited, companies usually want to direct it toward revenue-generating activities. This is why IT reports to the CFO in many companies.

As one colleague who consults on financial strategy with many large companies said, "You know what we think of IT? We think it always shows up, spouts unintelligible jargon, and asks for huge lumps of cash."

With a perspective like that, it's easy to understand why any initiative that promises to reduce lumpy capital investment and

It's easy to see why an initiative that promises to reduce capital investment is extremely attractive to bean counters. owned. This discussion is wrong and misunderstands the real issues for most companies. Comparing the monthly cost of an EC2 server against hardware in a datacenter is simple-minded, because it overlooks the direct costs that accompany running a server: power, floor space, storage, and IT operations to manage those resources. It sidelines the indirect costs of running a server: network and storage infrastructure and IT operations to manage the general infrastructure and the overhead costs of owning a server: procurement and accounting personnel.

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be more attractive. This is because a payment on a capital good like a server is one of a series.

Once you purchase a capital good, you're stuck with it, as anyone who has purchased a car understands. And even when you're no longer excited about owning it, the finance company still expects its monthly payment.

By contrast, if you rent a car, you are committed to it only as long as you want to use it — and once you've paid for that use, you have no further financial obligation. A rental car costs more per day than the same car would, if purchased. There is an option value in that flexibility, for which a premium

transform it into smoother operational expenditure would be extremely attractive to bean counters.

A good strategy would be to identify decision criteria for determining whether a given application should be hosted internally or could be moved to a cloud environment. With defined criteria, a portfolio analysis can be undertaken to make a set of recommendations and create an action plan. CIO Bernard Golden is CEO of consulting firm HyperStratus, which specializes in virtualization and cloud computing.

Send feedback on this column to editor@cio.in

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3/27/2009 11:27:09 AM