CIO April 15 2009 Issue by Sreekanth Sastry

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From The Editor-in-Chief

“What’s new in green IT? It’s only about cutting power use in datacenters, right?”

Sunny Side Up Green IT doesn’t equal energy efficiency alone.

That was the reaction of a CIO whom I was talking to recently. Wrong, dead wrong. Green IT, or more appropriately sustainable computing, isn’t just about saving power or reducing cooling costs. Granted that the power consumed by fans and other cooling components already accounts for 60 to 70 percent of the total energy consumption in a datacenter and that even an office setup with just 15 PCs puts out roughly that same amount of carbon emissions as a mid-size car each year. But this is still no reason to assume that green IT equals energy efficiency alone. Recycling, safe disposal, document management and, even, alternative energy sources all represent the green IT mandate. Need convincing? Let me tell you about P.A. Kalyanasundar, GM–IT at Bank of India. Power was his problem too — the lack thereof that is. The bank’s 200 rural branches received power only for a few hours daily. Also, when power did flow in the voltage levels were too low to charge the UPS. The result: customers Have you considered would have to be told to come another alternative energy sources day, when the computers linked to its like the sun to power up core banking solution could actually be computing resources in turned on. your enterprise? So why didn’t the bank simply power its rural branches with gensets? Just keeping a single branch going for a month worked out to Rs 4,500 in kerosene alone (that the fuel would have to be picked up on the black market was another issue). So Bank of India took a slightly offbeat step — and began installing solar panels on the roofs of its branches. Today, as it rolls out the solar panels across all its rural branches, it’s found that the payback period is as low as five years. After that, all it takes to keep the panels going is Rs 3,000 in annual maintenance (the average life of the panels is 25 years). Going solar has also helped bring down operating expenses at each branch by about Rs 1,500 monthly, since they no longer draw power from electricity companies. And, it’s got the bank some happy customers as well. Makes you take notice and think a bit about the greening of IT, doesn’t it? How is your organization gearing up to green itself? Do write back. I look forward to knowing your thoughts.

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

A P R I L 1 5 , 2 0 0 9 | REAL CIO WORLD

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content APRIL 15 2009‑ | ‑VoL/4‑ | ‑Issue/11

I Ph oTo by Sr IVaTSa Shan dIlya

Tamal Chakrovarty, CIO, Ericsson; Anjan Choudhury, CTO, Bombay Stock Exchange; and Shankar Rao, GM-IT IFIM Business School, all found ways to keep large and important projects from being shelved.

Project Management

Business Transformation

COvER stORY REsCuE ACt | 24

BLOCkBustER’s CLIffhAngER | 32 With a new strategy and fresh IT, Blockbuster, the onetime king of movie rentals, is attempting to reinvent itself for the age of downloads and video on demand.

Tight times require new strategies to keep your IT projects from being torpedoed and your career moving forward. Here are seven. f feature by Dan tynan, t thomas Cutting, gunjan t trivedi and sunil shah

CoVEr: dESIG n by bI n ESh SrEEdharan

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PLus:

hOW tO BE A ChAngE InstIgAtIng OffICER | 33 Change is in the air and as more businesses turn to technology to bring it about, you’re going to need to learn new ways of getting your way. feature by Mary Brandel f

feature by kim s. nash f

Integration YOuR M&A suRvIvAL PLAYBOOk | 48 Whether it’s a shotgun or a planned acquisition, chances are you’re not ready. You can change that. feature by David f f f. Carr

Strategic CIO COMMunICAtIng ACROss thE BOARD | 16 CIOs share tips for working effectively with your board of directors. Column by Carrie Mathews

more » 4

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content

Essential Technology | 54 Collaboration | Collaborating Beyond the Firewall

By Cindy Waxer Pundit | Know Your SaaS Facts

By Thomas Wailgum

From the Editor-in-Chief | 2 Sunny Side Up

By Vijay Ramachandran

NOW ONLINE Subroto Bagchi points out how ‘emotional infrastructure’ can yield sustainable competitive advantage.

Executive Expectations view from the top | 38 Subroto Bagchi, Gardener, MindTree, says nurturing human capital is one of the most important ways the company can build a second generation of leaders.

3 8

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 Sneha Jha

Peer-to-Peer How to Spin CRM | 19 A new CRM project that’s been plunked on a heavily-burdened team is a hard sell by most standards. Here’s how it can be done. Column by Al Kuebler

A P R I L 1 5 , 2 0 0 9 | REAL CIO WORLD

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Governing BOARD

Advertiser Index

Alok Kumar

Publisher Louis D’Mello Associate Publisher Alok Anand

Editorial

Editor-IN-CHIEF Vijay Ramachandran

Global Head - Internal IT, TCS Anil Khopkar

Correspondents Snigdha Karjatkar, Sneha Jha,

Chief COPY EDITOR Sunil Shah

Copy Editors Deepti Balani,

Shardha Subramanian Product manager Online Sreekant Sastry Design & Pro duction

Creative Director Jayan K Narayanan

Lead Visualizer Binesh Sreedharan

Lead Designers Vikas Kapoor, Anil V K

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

Sani Mani (Multimedia)

Anjan Choudhury

Designers M M Shanith, Anil T

ADC Krone

CTO, BSE

Canon

Emerson

Ashish Chauhan President & CIO, IT Applications, Reliance Industries Atul Jayawant President Corporate IT & Group CIO, Aditya Birla Group

IBM

21, 22 & 23

Lenovo

IFC

Pacific & Strategic

Samsung

Donald Patra CIO, HSBC India Dr. Jai Menon

SENIOR Designers Jinan K Vijayan, Jithesh C C

Unnikrishnan A V

36 & 37

GM (MIS) & CIO, Bajaj Auto

assistant editors Gunjan Trivedi, Kanika Goswami

Accenture

SAS

IBC

Director Technology & Customer Service, Bharti Airtel & Group CIO, Bharti Enterprises

Sun Micro

Gopal Shukla

P C Anoop, Prasanth T R

Photography Srivatsa Shandilya Production Manager T K Karunakaran

DY. Production Manager T K Jayadeep Mark eting and Sal es VP Sales Sudhir Kamath GENERAL Manager Nitin Walia Senior Mananger Siddharth Singh, Assistant Manager Sukanya Saikia Bangalore Kumarjeet Bhattacharjee, Arun Kumar, Ranabir Das, Manoj D. 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 Events VP Rupesh Sreedharan Senior Manager Chetan Acharya Managers Ajay Adhikari, Pooja Chhabra

VP - Business Systems, Hindustan Coca Cola Manish Choksi Chief Corporate Strategy & CIO, Asian Paints Manish Gupta Director-IT, Pepsi Foods Muralikrishna K. Head - CCD, Infosys Technologies Navin Chadha CIO, Vodafone Pravir Vohra Group CTO, ICICI Bank Rajesh Uppal Chief General Manager IT & Distribution, 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.

Printed and Published by Louis D’Mello on behalf of IDG Media Private Limited, Geetha Building, 49, 3rd Cross, Mission Road, Bangalore - 560 027. Editor: Louis D’Mello Printed at Manipal Press Ltd., Press Corner, Tile Factory Road, Manipal, Udupi, Karnataka - 576 104.

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

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

Group CIO, ITC Vol/4 | ISSUE/11

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4/15/2009 3:32:07 PM

GoverninG Board 2009 Alok Kumar

Manish Choksi

Global Head-Internal IT, TCS

Chief - Corporate Strategy & CIO, Asian Paints

Anil Khopkar

Manish Gupta

GM (MIS) & CIO, Bajaj Auto

Anjan Choudhury CTO, BSE

Ashish Chauhan President & CIO, IT Applications, Reliance Industries

Atul Jayawant

President - Corporate IT and Group CIO, Aditya Birla Group

Donald Patra CIO, HSBC India

Dr. Jai Menon

Group CIO Bharti Enterprise & Director (Customer Service & IT), Bharti Airtel

Gopal Shukla

VP - Business Systems Group, Hindustan Coca Cola

CIO acknowledges the 2009 Governance Board members consenting to guide the magazineâ&#x20AC;&#x2122;s direction and provide reality checks on content and focus.

A P R I L 1 5 , 2 0 0 9 | REAL CIO WORLD

Director-IT, Pepsi Foods

Muralikrishna K. Head-CCA,Infosys Technologies

Navin Chadha

Sanjay Jain

CIO, WNS Global Services

Shreekant Mokashi

Chief-IT, Tata Steel

Sunil Mehta

Sr. VP & Area Systems Director (Central Asia), JWT

T.K. Subramanian

CIO, Vodafone

Div. VP-IS, UB Group

Pravir Vohra

V. K Magapu

Rajesh Uppal

V.V.R Babu

Group CTO, ICICI Bank

Chief GM IT & Distribution, Maruti Udyog

IN APPRECIATION We thank the retiring members of the Advisory Board 2008: AbnAsh singh,UCB Pharma AlAgAnAndAn bAlArAmAn, Britannia Alok kumAr, TCS Anwer bAgdAdi, CFC India Arun guptA upt , Shoppers Stop uptA Arvind tAwde tA , Mahindra & Mahindra C.n. rAm, Rural Shores

Director, Larsen & Toubro

Group CIO, ITC

ChinAr s. deshpA eshp nde, Creative IT India eshpA m.d. AgrAw AwA Aw wAl, BPCL rAjeev shirodkAr, Future Generali India prof. r.t .t. .t t. krishnAn, IIM-Bangalore s. gopA op lAkrishnAn, Infosys Technologies opA prof. s. sAdAgopA gop n, IIIT-Bangalore gopA s.r. bAlAsubrAmniAn, Godfrey Phillips sA sAtish dAs, Cognizant Technology Solutions sivA iv rAmA krishnAn, PricewaterhouseCoopers ivA dr. sridhAr mittA itt , e4e Labs ittA s.s. mAthur mA , CRIS

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new

hot

unexpected

Brewing Cool Projects more energy, they would manage the energy systems of an entire building or even a city and pay for IT many times over. The five areas of sustainability are energy savings — with a 25 percent to 40 percent reduction in costs — resiliency, increased efficiency and better flexibility. The idea is to provide much better information about real-time energy usage in a datacenter and adjust SLAs to meet specific demands. "The TCO is driven by energy, as in the cost of equipment, maintaining and disposing it," says Chandrakant D. Patel, director of the Sustainable IT Ecosystem Lab. "For the nextgeneration city, we can seamlessly integrate IT systems into the city so we can manage the ecosystem — services such as transport, waste and power." —By John Brandon

IllUStratIon by MM Shan Ith

Innovation: it's both an exciting, revolutionary event and a mundane step-by-step process. For every remarkable, headline-making discovery — flash memory, high-definition movies, and quad-core processors — there are more iterative research projects that move technology forward inch by inch. Imagine a computer display that is made almost entirely of plastic, can be discarded, or rolled up and placed into a satchel, and yet has all the brightness and

technology

color properties of the LCD on your desk. It's self-aligned imprint lithography (SAIL) technology. "The patterning information is imprinted on the substrate in such a way that perfect alignment is maintained regardless of process-induced distortion," says Carl Taussig, director of the Information Surfaces Lab at HP Labs. This allows for more cost-effective continuous production on a flexible plastic material, in a low-cost, roll-toroll manufacturing process. "The critical problem for roll-to-roll electronics fabrication is patterning and alignment of micron scale features," Taussig explains. "Imprint lithography is a highspeed, high-resolution process." And then there are sustainable datacenter projects. The goal is to find out how future datacenters can be selfsustaining. Rather than consuming

Quick take

Laxman Badiga: Project Portfolio Management P r o j e c t M a n a g e M e n t In response to the slowdown, many organizations have agreed to put some projects on ice. But they are finding it hard to figure out which projects. Project portfolio management (PPM) can help. Sneha Jha spoke to Laxman Badiga, CIO, Wipro Technologies. to find out how.

What are the characteristics of a good PPM? From experience, a good PPM tool has several attributes. It should have the ability to integrate with project accounting, e-requisition, and the quality system. This provides the organization with the ability to have a 360-degree view of a portfolio. In addition, it needs to be capable of allocating resources (people and material) to manage performance and profitability. How does PPM help in a slowdown? PPM helps prioritize projects on the basis of their strategic value and long-term organizational goals. This is extremely critical in recessionary times. PPM gives the enterprise the ability to visualize the entire relationship. It provides the ability

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to make the right investments to maximize profitability and minimize cost. In addition, it allows organizations to optimize resource allocation. How does it help allocate budgets for projects during tight times? It helps re-distribute funds across the relationship, by priority and thus the ability to establish clear ROI for an investment. Is it hard to implement? Some of the challenges that we have encountered pertain to data discipline. The benefits of PPM are directly proportional to the granularity of the data captured in the transactional systems.

Laxman Badiga

What benefits have you derived from your PPM tool? An effective PPM has given us better visibility of our project portfolios and increased customer satisfaction with transparent dashboards. It has allowed us to maximize profitability based on a 360-degree relationship, made resource prioritization more efficient and enabled us to forecast project budgets. REAL CIO WORLD | a P R I L 1 5 , 2 0 0 9

Would You Move Software Support to a Third Party? IT M a n a g e m e n t It’s surprising that despite the downturn service providers have increased software maintenance and support costs. Some say that vendors are only trying to stay in the game. But, should organizations look at other alternatives? Shardha Subramanian spoke to some of your peers and here’s what they had to say:

“We definitely need support and assistance but not at unreasonably high costs. If all our operations depended on a single service provider then we could have looked at a thirdparty vendor.” trendlines

Sunil Mehta Sr. VP & Area Systems Director Cental Asia, JWT

“Yes. I would choose a third party service provider because they have better domain knowledge and are economical. They give us room to customize and enable change management way better than traditional vendors.” Umesh Vashishta CIO, Unitech

“No. Third party providers don’t offer quality service. We can’t

compromise on quality for the sake of saving money. In fact, taking support for six apps instead of 10 makes more sense than going for a third-party provider.”

M.D. Agrawal

Lend Your

Chief Manager (IT), BPCL

Voice

Write to editor@cio.in 10

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Sealing The Deal

O u t s o u r c i n g Nothing says 'cost cutting' like a big outsourcing deal. And in the face of the current slowdown, many firms sign outsourcing deals without laying the foundation for success. Some of these deals will inked based on brute force and luck, but luck is not a good business strategy. For firms that must execute or renegotiate an outsourcing deal, here are some steps that improve the chances of success. Don't shortcut internal preparation and strategy setting. Savvy sourcing decision makers should strongly resist the temptation to shortcut internal preparation. Although some deals can certainly be fast-tracked and still succeed, there is a lower probability of achieving strategic business objectives. The connection between internal preparation and sourcing outcomes has been claimed before, but Forrester data shows that outsourcing decision makers find it beneficial to devote even more effort to internal preparation and strategy setting. Don't put the move from IT to business technology on hold. Regardless of current weaknesses in the broader economic market, an upturn will come, and the smartest businesses will continue to aggressively leverage technology as a business accelerator rather than as a sunk cost. Laggards will be under even more pressure. Exercising some caution is just smart business, but selfimposed paralysis could be as damaging as a thoughtless lurch toward outsourcing for a quick cost reduction. Working with CIOs and IT management, smart sourcing decisionmakers can implement solid outsourcing relationships to help drive this change. Ride the turbulence to your business' advantage. Forrester Research often sees real-world examples where firms view IT service outsourcing primarily as a cost reduction mechanism around what they perceive to be commoditized work. That may be partly true, but outsourcing creates a remarkably effective opportunity for large-scale change in an organization. Visionary IT and sourcing leaders will position a slowdown, or even a recession, as a driver for cost reduction, productivity improvement, and the shedding of business processes that don't add to brand equity. Leverage your existing outsourcing ecosystem. Firms that have good existing outsourcing relationships are much better positioned to grow their deals and accrue near-term savings. Now is the time to consider aggressively expanding existing healthy relationships with service providers. Firms should also drive hard for additional pricing and service concessions from providers. —By Paul Roehrig

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Datacenter Energy Beast: Tamers Needed Datacenters stand on the front lines of the worldwide battle to tame the energy consumption of information technology. Datacenters account for an estimated 1.5 percent of the current energy consumption in the United States, costing IT departments more than US$4.5 billion (about Rs 22,500 crore) annually, according to a report released by the Environmental Protection Agency (EPA) in 2007, the latest data available. Without efficiency gains, the EPA expects the total consumption due to datacenters to double by 2011. "For years, datacenter management was about keeping systems running," says David Cappuccio, managing VP for infrastructure research Gartner. "It was about hitting the uptime goals. They didn't care how well energy consumption stacked up relative to processing power." Things have changed. Companies that once used to build big with an eye towards growing into their datacenters, now build smaller, densely-packed buildings to maximize energy efficiency. Yet, a significant problem is that idle hardware continues to consume

trendlines

Storage

significant power. Most servers still require two-thirds of their peak power consumption when sitting idle. To further tame energy consumption requires more detailed management of the various systems in the datacenter, Cappuccio says. "Companies are going to ask, 'what is our efficiency compared to our competitors?"' he says. "And then the next question is: how are we going to improve that? So they are going to have to monitor their energy output at a much more specific level then ever before." Using power management systems to turn off unused systems is key to improving efficiency, according to the EPA report. Adding the capability to concentrate processes on fewer systems, so that more idle systems can be turned off is a state-of-the-art recommendation in the report. Energy management systems, especially paired with virtualization, can make datacenters much more efficient, says John Steigerwald, director of product management for IBM's performance management group. "Management plays a key part," Steigerwald says. "We see increasing

demand among our customers to monitor and manage their energy usage." Of course, for datacenters, the power consumed by servers, routers and other information technology is only half the energy equation. The energy required to cool servers increases power consumption by at least half, says Steve Yellen, VP of marketing for Aperture Technologies, a datacenter management software firm. "You really can't run IT from a business point of view focusing on cost and services without looking at power, physical connections, and cooling," he says. With companies more focused on energy efficiency and cost, Yellen argues that they will increasingly treat their IT departments as a separate, internal, business-one that bills for what some people call the 'private cloud'. "We think it is going to turn into this economic view about the equipment where IT will be selling processing and storage as a service," Yellen says. "Companies will take a serviceoriented view of what is happening in the datacenter, and a holistic view of the equipment." â&#x20AC;&#x201D;By Robert Lemos

Tools IT Pros Love

Which tools will get the nod from IT professionals in the coming year? Virtualization, business process management and VoIP implementations top the list. Currently Implementing Business Process Management

22%

Desktop Virtualization

29%

Storage Virtualization

23%

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23%

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Mobile/Wireless

21%

Source: CIO Research

Infograp hics BY pc ano op

VoIP

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UC still nascent In Asia PACIFIC

Thin is in Everything today is about thin. Ask an executive what cellphone, laptop or monitor models they like, and you are more likely to get a response that involves its look and feel. In addition to the perception, space is also becoming an issue. With skyrocketing real estate and the need to still have more people to get the job done, and you start thinking how many desktops or thin clients you can fit into a hall space. With more visually appealing user interfaces, even DOS and Telnet look great in black and white on an LCD panel, coupled with the desire to have thinner desks and narrower tables, the thin display is what companies are looking for. According to Bigbruin.com, "LCD monitors definitely hold the edge over CRT monitors when it comes to being energy efficient. The huge tube in a CRT monitor is the source of most of its energy consumption, and a comparably sized LCD may use just a fraction of the electricity. A typical LCD monitor consumes about 48 watts, which is less than your typical light bulb. In contrast, a 19" CRT may draw up to 160 watts. That's 3/10 less electricity, which translates to noticeable savings on your electric bill." And if you're wondering whether or not LCDs improve visual work performance, the answer is yes. Visual search times for text targets embedded in a screen of text are 22 percent faster for LCDs than CRTs, and also faster for low contrast, small characters. Eye fixation times are 9 percent shorter and 15 percent fewer eye fixations are needed to read the same information from an LCD versus a CRT. Visual search error frequency is 22 percent less when reading from an LCD than a CRT. LCDs have been shown to allow for greater postural variety during computer work. Be it for your technology needs or for the software app you're working on, chunky and bulky are out of style for everything. With cloud computing coming up, the desperate need to bring costs down quickly and maintain high efficiency, applications need to be scalable and light. Technology

Il lustration by MM Sh an it h

trendlines

T e l e c o mm u n i c a t i o n The unified communications (UC) market in Asia Pacific is still in the very early stages of development and faces many challenges, according to Springboard Research. "There is a definite disparity in the value of UC as perceived by different organizations," said Ravi Shekhar Pandey, research manager at Springboard Research. "In large enterprises, IT views UC as an evolution in convergence that organizations must adopt, while SMBs are more concerned about improving communications and finding solutions to their business problems, and therefore are paying less attention to UC." Springboard said that 21 percent of survey participants have deployed UC solutions and companies with more than 500 employees are the leading adopters. China leads the region in adoption with 35 percent of Chinese respondents affirming to having deployed UC. Springboard's findings also indicated that organizations in Australia and India are more likely to deploy UC over the next 12 months than anywhere else in the region. "A significant number of companies are planning to purchase VoIP solutions over the next 12 months. This, we believe, will accelerate adoption in the region as VoIP is an important aspect of UC and once a VoIP system is in place, organizations will be more inclined to unify communication in their organization," Pandey said. The report also brings to light low user satisfaction with UC, with only 13 percent of survey respondents using related products terming their experience 'very satisfying'. A high percentage of respondents are 'somewhat satisfied'. Advising vendors to invest in market education and awareness-building, Springboard also reported that many businesses confuse unified communications with unified messaging and have little understanding of the former's benefits. "Vendors would be well-served by taking an incremental and pragmatic approach to unified communications sales in the region rather than pushing grandiose visions that will be harder to sell, and perhaps even more difficult to secure high satisfaction post-sale," Pandey added. Announcing findings from its latest report, Springboard pointed out that few organizations are aware of UC solutions or how their disparate communications tools or systems can be synchronized. The report titled Unified Communications in Asia Pacific: Key Trends and Market Insights is based on a survey of 469 CIOs, IT managers and business managers at over 400 large and SMB enterprises in Australia, New Zealand, China, India, Malaysia, the Philippines and Singapore. â&#x20AC;&#x201D;By Computerworld Hong Kong staff

â&#x20AC;&#x201D;By Rabia Garib Vol/4 | ISSUE/11

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waste w aste is about bout Security; Not the Planet It leaders are concerned about where their electronic equipment is going after disposal because they are worried about sensitive data loss, not the environment, according to findings of a new survey. the survey, conducted by osterman research for Converge, an e-waste disposal firm, found two-thirds of respondents said their organizations do not have formal green It plans. and when it comes to managing phasedout technology, they are twice as concerned about data security as they are about being green. according to the report, more than 41 percent of respondents said concerns about data security breaches from assets released from an organization is the primary motivator for adopting a formal It asset disposal program. In

trendlines

e n v i ro n M e n t

comparison, just 25 percent said their disposal program is motivated by their business commitment to being green. "What we see in the headlines is the green aspect of It asset disposal. but what our customers have been telling us for some time is that it's the data security that keeps these folks up at night and not the environment," said Chris adam, director of It asset Disposition Services for Converge. adams said many clients have come to Converge following a breach that occurred because an organization did not yet have a formal asset disposal program, which has become a necessity in today's times. "there have been some data security issues that have occurred on end-oflife equipment that was sitting idle in their locations that unfortunately was removed and a breach was discovered

after the fact," he said. the report also looked into the various disposal methods used by organizations to get rid of their e-waste. While a majority said they use a combination of methods, including recycling and donation, 15 percent of those polled admitted their e-waste is simply placed in a dumpster. "Who knows? that number may actually be higher. Some people may have been shy or embarrassed about answering that honestly," said adams. "While most have gotten the message and implemented ItaD (Information t technology asset Disposition) as more of a strategic part of their business plan, there is still work to be done. I think the good news in the numbers is that twothirds of respondents said they do have a formal asset disposition program." â&#x20AC;&#x201D;by Joan goodchild

No PiNk SLiPS M a n a g e M e n t While a number of IT suppliers are reporting layoffs, many technology buyers are hoping to avoid staff cuts. According to survey results released recently by Robert Half Technology, a majority of CIOs expect to maintain existing staff and some even plan to add staff during the second quarter. More than 80 percent of 1,400 CIOs who were polled said they plan to maintain current staffing levels throughout the second quarter this year. Eight percent expect to hire IT personnel and 6 percent anticipate staff reductions over the same time period, the IT staffing and consulting firm reports. The reasons cited by those CIOs that plan to hire include corporate growth or expansion (25 percent), and expansion or increased investment in the IT department specifically (9 percent). Eight percent point to increased workload and another 8 percent point to systems upgrades as a justification to bring on more personnel, and 6 percent indicated they would be increasing customer/user support. Five percent said the plans lined up with routine hiring, and 2 percent expect to bring on

IllUSt ratIo n by an Il t

s ta f f

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more staff to help with the installation or development of new enterprise-wide applications. Among the 6 percent who expected to lower headcount during the quarter, 40 percent pointed to a reduced IT budget and 21 percent said the staff cuts were the result of the "impact of the financial fallout" on their respective company or industry, according to Robert Half Technology. Nearly 20 percent are experiencing IT projects being put on hold and 18 percent reported company-wide layoffs as the reason behind IT staff cuts. The firm reports that 21 percent percent of CIOs expecting staff additions plan to hire a mix of full-time and project workers, and 8 percent will invest in contract resources. "Companies are being more judicious when hiring in today's economic environment. Budgets must support critical IT projects and companies are re-examining their staffing needs accordingly," said Dave Willmer, executive director of Robert Half Technology, in a statement. â&#x20AC;&#x201D;By Denise Dubie

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Al Kuebler

Peer-to-Peer

How to Spin CRM A new CRM project thatâ&#x20AC;&#x2122;s been plunked on a heavily-burdened team is a hard sell by most standards. Hereâ&#x20AC;&#x2122;s how it can be done.

Il lustrat io n by MM Shan it h

t was about the rockiest start to a major IT initiative I've ever been involved in. Because I'd implemented IT marketing programs (now called client relationship management, or CRM) earlier in my career, the CIO charged me with doing the same for his organization. Of course, projects that sail along smoothly, with no resistance, are great. But it's the ones that throw lots of roadblocks in our way that end up teaching us things. We were in trouble from the start. In a meeting with all of his direct reports (which included me), the CIO declared his intention to establish a CRM program. He didn't offer any reasons for this. He just announced that I would be directing the effort and stated that he expected everyone's full cooperation. The reaction from my peers was mostly silent, but I could feel the tension in the room. A few comments were made that made it clear why this initiative was receiving such a cold reaction. The one that best summed things up: "We're up to our necks in work, and we're now supposed to pony up resources and time to create whatever CRM is?" I said that I would be answering the question of "whatever CRM is" at a meeting in a few days. I didn't sense much enthusiasm for that, either. In the days that followed, several fellow IT managers called to ask about this "CRM thing." Most of them implied that we didn't need it at all. The more accommodating said it could wait until next year.

Negotiating Buy-in I could understand why some of my fellow managers might be panicking. We all had more than we could do already. Any new 16

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4/14/2009 6:16:41 PM

Al Kuebler

Peer-to-Peer

initiative was bound to sound like just another thing that we couldn't give the proper attention to. It's been my experience that change can't be mandated. For it to really take hold and transform an organization, you need buy-in. Tell a group of people you plan to make some major changes in the way things are done, and the thought going through the head of each and every one of them will be, "What's in it for me?" We hadn't even attempted to answer that question yet, and as the days passed, there was nothing to stop the resistance from growing. Winning buy-in from stakeholders can be tricky in the best of circumstances, but I had a taller wall to scale than normal, simply because there had been time for rumor and misinformation to foster discontent. I wasn't sure how to overcome the resistance that was building at my upcoming meeting, so I talked to someone else from IT. She didn't hesitate. Her advice was to show our peers what happens in an IT organization that doesn't have a CRM program and then show how things work in an IT organization with a mature CRM program in place. Then, she said, "explain the differences and ask us which one we'd rather be." It was a brilliant idea. I prepared my material, scheduled the meeting and informed everyone that I would identify the pros and cons of CRM programs. In an effort to ensure attendance, I said that each

We don't have any repeatable way to ensure we have the resources to honor every commitment we make. We tend to promise things and then try to figure out what's required later. We don't have any cross-functional management or coordination capability â&#x20AC;&#x201D; we react. We lack a consistent notion of how to create and add value to each business we serve. We don't manage the expectations of our clients with a comprehensive description of our services. We don't appropriately capture revenue for all services, and our billing can be unpredictable. We sometimes blame other parts of our own organization for a missed commitment, giving clients the impression that IT is a dysfunctional organization. We don't share our direction and strategy with our clients or seek feedback on how we could be more responsive. The CIO then called for discussion on these characteristics. Several managers were defensive at first, but the CIO was able to draw out a general acknowledgment that by really owning our service organization, we could begin to address each of these undesirable traits.

A key aspect of the CRM unit's communication plan urged the entire management team to get out of our offices much more often to meet with both clients and staff. It was an undeniably good idea, so we all agreed. manager would be expected to tell me what they thought CRM would mean for their part of the IT organization â&#x20AC;&#x201D; in other words, they would be asked to vote. At the meeting, I began by saying that, whether we had a CRM program or not, we should view our IT service organization as a business and ourselves as its owners. While IT wasn't itself a profit center, the decisions we made affected the costs of our clients on the business side. We had to seriously consider that our clients viewed outside IT service firms as our competition. "So, CRM will help us prove we're the best alternative?" one manager asked. "It will," I said, "but I don't expect you to take my word for it. Let me show you instead." I then laid out what defined us now, as an IT service organization with no CRM program in place: We don't have a formal marketing sense about our clients. We don't know what services they use, what they're happy and unhappy with, what their measures of success are, what their billings are, who the IT decision-makers are, what their IT usage profile is (by line of business) or what our role is or is supposed to be in supporting their success and managing their risk. Clients and even other parts of IT service don't know how to best obtain our services.

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That was my cue to move on to the characteristics of an IT service organization with a mature CRM program in place: It has a service directory that's written in client terms and is available both as a hard copy and online. It makes integrated bids on projects, with each IT service aspect represented as needed, and all coordinated through an account relationship management function. It reviews service-level commitments for continuous improvement opportunities. It proactively deals with client issues. It has a formal marketing plan for each business and function it supports. It routinely communicates with clients in multiple ways, touting accomplishments, heralding direction, highlighting client success and soliciting feedback. Its intra-service coordination is seamless, and performance is consistently excellent. Each IT service line of business is benchmarked to show how it did and cost differentials compared with external alternatives. Clients routinely ask for IT's advice on using recently developed technologies to avoid cost, improve their client services and increase their revenue. REAL CIO WORLD | a P R I L 1 5 , 2 0 0 9

4/14/2009 6:16:41 PM

Al Kuebler

Peer-to-Peer

Clients appreciate IT's value and its services and see it as a powerful ally and involved partner in achieving their goals.

Which One Should We Be?

Your Quest for the

Perfect Case Study

Ends Here Finding the perfect case study on technology implementation just got simpler. Visit the 7TeX FfgW[Xe 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. Jad]$^[YX# F[_b^[ÉXW%

Now the managers had two sharply differentiated organizational profiles to consider. What, the CIO wanted to know, were the pros and cons of each? The single advantage of staying as we were was simply that it was the easiest option — in the short term. The cons were that clients went without information and were unhappy, that employees were frustrated, that clients felt that outsourcing would be preferable and that, despite knowing about our problems, we had done nothing about them. On the plus side for changing were some simple facts: our clients' experience with our IT service would improve dramatically, as would IT employees' understanding of their role in providing it, and IT service would improve. The only con we could think of was that until benchmarking was done, clients might see the CRM function as bureaucratic or an additional expense. Then I made the choice more stark by posing two questions: which IT service organization would you rather have serve you? Which would you rather work for? In the end, we had our buy-in; the entire management team fully endorsed the idea of CRM implementation. As we moved on to execution of the plan, we staffed the CRM team with people proficient in interpersonal communications and consultative skills, and then we kept them focused on critical CRM processes. The client-focused transformation, once begun, was irreversible. Service directory information was in demand the minute it became available. CRM gave rise to outside training initiatives, including industry best practices, for all IT professional staff. IT professionals started to feel more respected and proud of their contribution and value to the enterprise. As for the "What's in it for me?" question, it gradually answered itself as our desired outcomes began to be achieved. It took a while, but our constant state of reaction was gradually replaced as more time became available to us and we were able to more favorably influence our future. Strategic discussions, previously rare (given the fact that our beepers would never shut up), became routine. By the way, a key aspect of the CRM unit's communication plan urged the entire management team to get out of our offices much more often to meet with both clients and staff. It was an undeniably good idea, so we all agreed. And guess what. The CRM unit began tracking us to make sure we followed through. CIO Al Kuebler was CIO at AT&T Universal Card, Alcatel and McGraw-Hill, and director of process engineering at Citicorp. He is now a general management and IT consultant. Send feedback on this column to editor@cio.in

Log on to www.cio.in/casestudy

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alternative views BY Sneha Jha

Slowdown and Your I.T. Strategy Outsource Vs. In-house

— not the context activities — because that is what helps drive business and promote sustainable profitability. C.V.G. Prasad CIO, ING Vysya Bank

long-term benefits and outsourcing is one such strategy. Outsourcing will help companies rationalize their operating costs, which makes strategic business sense during these times. In a downturn, CIOs can’t be spending their time and resources looking at non-core areas. They need to focus on core competencies — as opposed to context activities — because that is what helps drive business and promote sustainable profitability. I, for one, wouldn’t want to develop skills on the technology side because that’s not our core competency and that’s not where we want to build skills. We want to focus on higher-priority tasks. But outsourcing needs to be strategic. Even if cost is a key driver, an outsourcing decision will now be taken for a number of different reasons. For example, CIOs may not be able to maintain variable skill sets internally. And if IT is outsourced, CIO have SLAs. The current recessionary trend will goad plenty of organizations to consider outsourcing as an option as they feel the pressure of costs mounting. Weighed down by such pressures, organizations will consider and evaluate outsourcing as an option. They will take stock of the entire gamut of services and will evaluate which functions can be outsourced. Then organizations will look for opportunities for quick wins and long-term benefits. Outsourcing is certainly worth considering during the recessionary times. But it should be considered by the organizations only as a long-term strategic option and not as a short-term cost savings option.

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Trendlines.indd 15

because it is better in sync with the business' needs. And that's critical in view of the downturn. Charles Padmakumar CIO, Aricent

Traditionally, IT has always been considered a cost center and a service department. But in the last couple of years, IT has become a strategic department. It has now become a business enabler. It is a key influencer of business processes. That’s why IT should not be outsourced during these recessionary times. Businesses are banking on it heavily that outsourcing IT may not be a smart move. Outsourcing is based on contracts that have a defined statement of work (SOW) but today business is so dynamic that you can’t rely on an external team to meet all your business needs. If IT is not aligned to the needs of business then it will go back to being a cost center. Also managing an internal team is easier than controlling an outsourced environment, which is a big advantage. An internal department has more ownership and can deliver better on business needs because it is better in sync with business objectives. And it is critical to align IT with your organization’s goals in view of the downturn. Also, the maturity level of an internal team is higher and is not limited by a SOW. The decision-making process is also faster when IT is in-house. Take a system that’s just been put in place. In an outsourced set up, benefits will be defined by SLAs. An internal team, on the other hand, will be able to extract more benefits from a new implementation because internal expertise can exploit the product more effectively. Business alignment and maturity of an internal department is higher with an internal team. They grow with the organization understand the business’ needs. IT is strategic and it may not be wise to outsource a strategic function during a slowdown. I think its best to keep it in-house.

REAL CIO WORLD | a P R I L 1 5 , 2 0 0 9

trendlines

During these recessionary times, organizations should look for strategies with

An internal department can deliver better

Photos by Srivatsa Shandi lya

You need to focus on core competencies

4/14/2009 6:36:05 PM

Carrie Mathews

strategic CIO

Communicating Across the Board CIOs share tips for working effectively with your board of directors.

T leaders often find themselves called upon to address their companies' boards of directors. For many, the boardroom is an alien environment, full of high-powered execs with little affinity for technology. To succeed in this setting, CIOs must effectively convey their wins, opportunities and challenges in helping achieve business goals. For tips on wowing the board, we turned to some of the more boardseasoned members of the CIO Executive Council.

Know the Players Jeff O'Hare is senior vice president of enterprise information technology at business process outsourcing provider West. At past employers, he has researched board-member backgrounds, and then used this information to frame his presentations and follow-up conversations. O'Hare focused his information gathering on areas like functional experience, industry, company size and comfort with risk. "When I was making a presentation to a board with heavy finance and operations experience, I made sure to include an appendix of highly detailed financials and a snapshot of rolled-out milestones directly from the actual project plan," says O'Hare. Illustrat ion by pc anoo p

Develop Ongoing Relationships Pamela Rucker, vice president of IT at PSC, a privately held environmental services company, holds regular pre-meetings with directors from the PSC executive board and representatives of its ownership to learn their points of view. Rucker estimates she spends 20 percent of her board interaction time in these one-on-one meetings. She also uses them to ask questions and

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4/14/2009 4:49:42 PM

Carrie Mathews

strategic CIO

The most important thing in any board communication is to tie it to profitability and business value. air concerns privately. "The actual board meeting can't be the first time that you're telling the board about changes or plans, or they're going to feel blindsided," she says. Rucker suggests using these meetings to sell your ideas prior to presenting them formally. They also let you tell your story not only multiple times but in multiple ways. "Sometimes I may have to present information in three different ways in three different meetings in order for everyone to get it," Rucker notes. How does Rucker get time with individual board members? Her face time with directors from her own company happens in monthly IT steering committee meetings they attend. For members from the company's ownership group, Rucker watches for their particular interests during board meetings, then establishes a rapport around those topics. David Webb is former CIO of SVB Financial Group, where he is now chief operations officer. He agrees that engaging the board isn't just a quarterly, formal interaction. "You need to want more interaction and find ways to do so. If you don't, you won't build that relationship," he says. Webb finds that access to board members becomes easier over time as long as you have good reason to meet. "The first call is always the hardest. If you have difficulty making a cold call, have the CEO clear the path for you," he says.

Get Feedback From a Board Buddy Twila Day, CIO at $33 billion (about Rs 165,000 crore) food company Sysco, developed a sounding board within the board. She pings select members prior to her presentations to preview what she wants to share with the group. She developed this tactic after a one-on-one meeting with a new board member who had a strong technology background. When a second member with similar experience joined the board, Day asked if she could send both of them her presentations ahead of time for their input. This peer review helps Day fine-tune her message, gives her fresh ideas from technologically experienced board members and helps avoid last-minute surprises during the actual presentation.

Get Organized O'Hare's objective in a board presentation was to get the right message across. "I typically provided them with enough information to guide them to the conclusion that I wanted, but I didn't tell them my opinion right away," says O'Hare. He found that buy-in was stronger when members felt they contributed to the solution. O'Hare organized his slides using the SOAE model (situation, opportunity, action, expected results) and never arrived at a board meeting without multiple solutions to a stated issue or problem in his back pocket. "I 20

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could demonstrate that an objective and thoughtful approach was used in resolving the problem," he says. "I also found that having different ways to solve a problem was a good way to prepare for the eventual questions."

Let Financials Do the Talking In his board presentations at past companies, O'Hare included the following financial information. All of his finances were tightly aligned with the office of the CFO, and the financial team validated the numbers. In some cases, O'Hare would present the high-level finances and then let the CFO field the detailed questions, which showcased collaboration at the executive team level and sent a powerful message to the board. What a financial presentation should include: Impact to this year's budget/P&L Impact to cash flow Impact to net income Capex and opex Return on investment and cost benefit analysis with supporting details Revenue projections, margins, market analysis Geographical variances Carrying costs on investments, if applicable

Get to the Point As Webb constructs his board presentation, he asks himself, "How do I get my point across in the first thirty seconds?" Day keeps it concise. "I lay the foundation and then, in future meetings, I move forward with more of an â&#x20AC;&#x2122;update' format," she says. O'Hare used an executive summary at the beginning to grab attention and then shared supporting information. The most important thing in any board communication is to tie it to profitability and business value. "CIOs really have to think like a CEO and investors when presenting to the board," says O'Hare. "For example, it's not IT cutting costs; it's about how this cost savings idea fits into the overall cost model and positively contributes to competitive margin." This is what board members want to hear about. At past employers, O'Hare sent customized versions of his quarterly IT reports to the board. These reports profiled technology objectives and successes and tied them to business value. O'Hare involved senior team members (director-level and up) in prepping for board meetings and providing input on the presentation. "My philosophy was that if they needed to come off the bench, they needed exposure so they were ready," he says. CIO Send feedback on this column to editor@cio.in

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4/14/2009 4:49:42 PM

Cover Story | Project Management

Rescue Tight times require new strategies to keep your IT projects from being torpedoed and your career moving forward. Here are seven. By Dan Tynan anD Thomas CuTTing

ImAgIng by b InEsh sREE dh ARAn

Ph OTOs by sRIvATsA shAndILyA

o weather the current economic maelstrom, enterprises not only are reducing head count but also are cutting back on ambitious or long-term projects in IT. Knowing how best to keep your IT project in the pipeline could mean taking a cue from those best versed in achieving project approval: outside consultants. "Without a doubt, companies are cutting back significantly this year," notes John Gardner, CEO of Integrative Logic, a data-driven marketing group that helps its clients build customer loyalty. "They're getting pressure to optimize every dollar to either stop the bleeding or start the recovery. From our perspective, the key is showing them at the finest level possible that continuing with our initiatives will not cut their costs but help generate revenue." What's true for consultants such as Integrative Logic is equally true for IT leaders looking to kick-start an internal project or to keep the project funding flowing. Those who are best at proving the value of their projects will win. And when it comes to uncertain times, keeping your project off the chopping block can end up saving your skin â&#x20AC;&#x201D; and even enhance your career. Here are seven ways to do it.

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Reader ROI:

Why ROI metrics arenâ&#x20AC;&#x2122;t enough anymore The importance of optimism Where to look for wiggle room

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Act Anjan Choudhury, CIO of the Bombay Stock Exchange, gave up temporarily on a pet project to meet a business need.

Cover Story | Project Management

Tip 1

Murder y your Pets

ometimes to get a key project approved, you need to kill one of your pet projects — or several of them. The ability to choose the initiative that's more beneficial for your business over the long haul will ultimately earn you more support for projects when times are flush. "Offer to cancel a project that's being supported in exchange for the strategically significant one," suggests Blackbaud's Lant. "This will show that you believe in the value of these key projects and are willing to sacrifice to protect them."

Fall In Line I

You need to be willing to take a hard look at every new initiative, even those you desperately want, says Johanna Rothman, principal at Rothman Consulting Group and author of Manage It!: Your Guide to Modern, Pragmatic Project Management. "Be honest and ask about each project, 'Should we do this project at all?'" she says. "If not now, put your project on the project backlog or the parking lot or kill it outright. Senior managers are more likely to fund a project if they think you're optimizing at the organization level rather than at your group's level."

The problem is that CIOs tend to kill the wrong things, says Nelson. They'll cut longer-term projects that cost more money in favor of cheaper, short-term projects that produce quick wins. In many cases, the success of that shortterm project may depend on two or three others that didn't make the cut. Instead, Nelson says, IT leaders need to look at their entire portfolio of projects and select those that map closest to the business's long-term strategic objectives. The good news is that all this slashing can be better for your long-term career prospects. "Even as R&D and investment projects go away, IT leaders should be able to prove every project's worth and not give up," notes Keane's Nelson. "Managing a reduced budget is a better career builder than spending an increase." CIO

The CTO of the largest stock exchange in South Asia shuffled important projects that took months to organize — but ensured that he kept all of them.

n retrospect, 2008 was an eventful year for Anjan Choudhury, the CIO of the bombay stock Exchange (bsE). Choudhury had spent a lot of his year chalking out an elaborate IT roadmap for south Asia’s largest stock exchange. On the anvil were an exhaustive CRm and extranet planned for the first half of 2009 and data warehousing and mining AnjAn Choudhury solutions for the second half, which Director, ICICI Lombard could spill over into 2010. General Insurance because the bourse interfaced with a large portion of consumers including corporates, brokers, and sub-brokers via various channels, Choudhury knew the CRm project was strategically important. It was his pet project because it would give bsE a unified view of its customers and he was putting his energies behind it. destiny, however, had another plan. As the satyam fiasco unfolded, regulatory authorities swung into action to prevent another financial scandal from taking the country by surprise. sEbI, the ministry of Finance, and the ministry of Company Affairs ordered for data, reports and plenty of analyses to be done online. “The authorities asked to us to

proactively look out for any traces of malpractices such as circular trading,” says Choudhury. The new imperative required the bsE to have robust systems that could run reports for data dating back to the early 1990s. To do that document management, data warehousing and data mining became critical because they would permit the bsE to generate reports in 10 minutes instead of two days. some reports took more than month to compile. This, however, put Choudhury in a difficult position. It made the data warehousing and mining solutions that were planned for the latter half of 2009 — after the strategically important CRm — more crucial. “From this point of view, the project shifts became far more urgent,” says Choudhury. The looming slowdown didn’t make the situation any easier. Choudhury was forced to revisit his carefully designed timelines and allocated budgets. As reluctant as he was, he had to pull the dust sheets over the CRm project. “We did a fairly detailed job on the CRm but had to let other critical projects take the lead. We decided to postpone the CRm project to the end of 2009. It was a trade-off between the short-term and the long-term benefits of the systems, and we prioritized accordingly,” says Choudhury.

—by gunjan Trivedi

Tip 2

ll projects rely on assumptions. The bigger the project, the bigger the assumptions. Sometimes the key to getting your project approved is simply a matter of assuming the best rather than the worst. Adam Nelson, director of IT consulting at Keane, tells the story of a state-wide ERP project initiated six years ago. The ambitious project aimed to consolidate the financial, procurement, and HR resources of more than 50 state agencies on a single platform. Based on the initial projections of the IT professional services firm hired to do the job, the state legislature approved a fixed $68 million (about Rs 340 crore) for the project, which was slated to take two to three years and produce up to $117 million (about Rs 585 core) in cost savings. Well, that didn't happen. After two years, the project's original contractors asked for more money, got rebuffed, and left the project. Two years later, a second firm that had been brought in to finish the project did the same thing. The state government ended up taking control of the program. "The reality is that if the original IT company had been 100 percent honest and said that this project would cost a minimum of $90 million and take at least five years, the legislature might have said no," says Nelson. "The optimistic financial picture probably seemed necessary to obtain sponsorship and budget, but the numbers were simply unrealistic." Nelson adds that the ERP project is finally on the road to success, though it's still not fully deployed and its ROI will likely be much different than what was projected at the outset. Yet without those initial rosy projections, the project would never have gotten off the ground â&#x20AC;&#x201D; and it needed to get off the

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ground, says Nelson. It really needed more accurate financials, supported by more standardized program management and earned value, more oversight, and smaller, more frequent milestones. "In my experience, it's better to be transparent and realistic about everything, but there's no reason you shouldn't add assumptions and budget for contingencies," says Nelson. "I would never presume to ask for 100 percent of a project's costs initially because I don't know 100 percent of the project requirements." Todd Lant, director of corporate IT at Blackbaud, a technology solutions provider specializing in non-profits, recommends IT leaders take a staged approach when pushing ambitious projects, one that relies on shorter milestones with metrics tied to future funding. "If you cannot get funding for the whole project because of skepticism of deliverability or payback, ask for funding in phases," says Lant. "Each phase can

have a checkpoint where [progress] is measured and funding for the next phase is approved or denied. If the business isn't happy with progress or results, there is much less risk." CIO

Tip 3

Talk Like a CF CFo

ruce Culbert, CEO of IT recruiting firm iSymmetry, says he recently helped convince a national retailer to build its own social networking platform to cull feedback and ideas from its customers. Despite the cost â&#x20AC;&#x201D; a seven-figure budget over the next two to three years â&#x20AC;&#x201D; the retailer approved the investment "because the cost of not doing the project in terms of dissatisfied and lost customers was far greater than the addition of new IT capabilities," says Culbert. In tough economic times, companies look to hold on to the customers they already have, he adds. Projects that reduce customer retention costs or increase the efficiency of marketing campaigns are more likely to get a green light. REAL CIO WORLD | A P R I L 1 5 , 2 0 0 9

IllUStratIonS by pc anoop

Embrace Optimism

Cover Story | Project Management But even the most ruthless, costslashing IT project can die a swift death if it's pitched in language your CFO can't understand — and everybody talks about ROI just a little differently, says Culbert. "You need to have a sound understanding of whatever language your company works in," he explains. "Do they use internal rate of return, payback period, time to value? Sometimes business leaders don't always sync up to the value language of the company. If capital is involved, you need to understand the process your finance department uses to approve the budget and get it into the language they speak." Greg Baker, CFO of managed services provider Logicalis, agrees."Business case assumptions must be thoughtful and clearly supported in terms a CFO will understand," he says. "Include metrics on power usage, maintenance contracts, and head-count savings. These often can't clearly be seen until the next fiscal year. CFOs crave cost-control drivers that help manage long-term planning." And if you can show payback for an IT investment over 18 months or less, even better. CFOs love to recover the cost of tech assets before they're fully depreciated, says Baker. CIO

heavyweight Champion How a CIO pushed the big mama of projects, the ERP, through the slowdown.

“n

ot all over again.” The thought flew unbidden through shankar Rao’s mind after he was told an ERP project he had been pushing for over a year was going through a management review. The former CIO at sasken, who’s currently pursuing a doctorate, remembers the heavy lifting needed to get the ERP approved. he had set up a cross-functional committee comprising many departments and it took plenty of debate before everyone agreed the project was good for the organization and “if done properly, could take us to the next level,” remembers Rao. And all that work was in danger. Rao had started ground work on the project in early 2007. A full year later, by the time project had gained enough momentum to take off, the downturn appeared on the horizon. “by the time we started in June 2008, there were signs of the slowdown and customers began asking us for rate cards and that sort of thing,” he says. Few knew better than Rao how badly sasken needed to plug automation gaps in the current system with a new ERP or the re-implementation of their existing one. It was only a matter of time before the lack of visibility in finance, project profitability and crucial data like resource utilization hampered true management. “At most senior management meetings, a lot of time was spent on debating data. People in the business should spend time analyzing data, not verifying its validity,” he says. despite the need for a better ERP, he knew he was taking on a Rs 10-crore goliath. “ERP is one of the biggest projects you can think of in any organization. Unlike other projects, ERP touches practically everyone and every department, he says. Rao decided there as no time to waste. his first strategy was to reach out to senior management and opinion leaders individually. The tricky part, he says, was figuring out who they were and what their grouse with the current system was — ground he had covered during the year-long run up. “I did a lot of pre-wiring, by meeting with them one-on-one and making sure we were on the same page. The idea was that before we entered an important meeting, I’d have met all the key members to ensure they don’t throw me a googly,” he says. Another trick was to ensure that he only alluded to ROI — never actually using a figure. Part of the rationale, he says, is that most leaders already know how much they’re losing in “billing leakage” or in missed opportunities and pointing out their problems is enough. “I didn’t do any magic. I just acknowledged the facts these leaders had,” he says. but what he really advises CIOs is to let the others do the talking. “It should not be a presentation of the IT head asking the business to invest crores, especially during this time, because that approach will fall flat. my advice would be to convince and get business leaders to talk. CIOs should start it off and then let business take over.” Post the implementation in February this year, some of his peers thanked him for his perseverance. “my colleagues from “ finance were very thankful that I pulled this through. They said that after they heard of the slowdown, ‘we thought this would be shelved and we would have to live with this mess for some more years,’” says Rao. his final piece of advice? “If you want a system like ERP to be successful at a time like this, you need to spend a lot of time on communication management.” — by sunil shah ShAnkAr rAo GM-IT, IFIM Business School

A P R I L 1 5 , 2 0 0 9 | REAL CIO WORLD

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Tip 4

Work the Numbers

o paraphrase Benjamin Disraeli, there are three kinds of lies: lies, damn lies, and ROI calculations for IT projects. To be sure, no company will pour money into IT without a strong case that the business will get something in return. For you, however, the issue will be to choose the right metrics and present them well. After all, calculating true return on investment goes beyond demonstrating cost reduction or bottom-line enhancement. Worse, top brass are no longer as likely to let simplistic metrics pull the wool over their eyes. "As we move deeper into belt-tightening, we are seeing more ROI calculations being dismissed," says Esteban Kolsky, vice president of eVergence, a strategic consulting and managed services firm. "Most ROI calculations from vendors are flawed toward magical and large returns, and most calculations from users are too simplistic and unreliable. Bottom line: CEOs and CFOs don't believe them that much anymore." Case studies that show how other organizations implemented similar projects and achieved positive results may have more credibility with management teams than straight ROI projections, says Kolsky. Though numbers can't be rejected entirely, the kinds of numbers you use should vary depending on the ultimate goals of the project, notes Arabinda Roy, senior project manager at software services vendor Data Inc.

"Despite being a great decision-making tool, ROI is often a misleading indicator for deciding whether a project should be pursued or not," says Roy. If the project aims at reducing head count, inventory, or transaction costs, so-called hard ROI numbers may be sufficient, notes Roy. But for projects with less measurable aims — such as improving the business environment or coping with changes in the competitive landscape — soft ROI, such as the increase in growth potential or business value as a result of improved relationships, comes into play. Here, demonstrating the value of your project can prove tricky, but if you focus on value hidden in these areas and make a strong case, you will significantly improve the likelihood that your IT project doesn't get scuttled. But don't focus too narrowly on your project's niche lest you lose sight of the big picture. IT leaders also need to step back and look at the impact a project could have on the entire organization, notes Lou Trebino, CIO of Harry Fox Agency, an online licensing business for music publishers. "You need to look at the opportunity costs," Trebino says. "What are we not going to be able to do, in terms of people and dollars, because we took on this project? Will we be able to do more or do

Tip 5 just do It

ll the PowerPoint slides in the world may not convince your bosses to pull the trigger — or to get out of your way. Sometimes you just have to go for it. And if you can do it with a minimum of risk, so much the better. Mark Zwartz learned of this strategy the hard way when he tried to virtualize his company's datacenter. Zwartz is the IT

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what we do more effectively? Is this what we need to have a competitive edge in the marketplace? It can't just be cool — there needs to be real competitive advantage." Jon Rider, CIO for Gilbane, a $3.5 billion (about Rs 17,500 crore) construction and real estate firm, says business need is the true ROI. If the business has asked for IT's hand in a project, that should be enough. "If you're doing an IT project that is either not driven by the business or does not have direct bottom-line financial impact to the company, you probably should not be doing the project in the first place," he says. "Would you have the business or IT shop do an ROI on something as basic as an e-mail server? No one would tell you, 'There is no ROI, so we don't need it.' The business need bypasses the requirement for IT to sell an ROI back to those who requested it in the first place." CIO

manager for three separate companies — an insurance company, a hedge fund, and a real estate investment firm — all owned by the same family in Chicago. Thanks to this set up, every IT decision had to pass through the insurance company's CFO, the real estate firm's controller, and the chief of operations for the hedge fund. None of them knew anything about technology, and none of them really wanted to learn. For these guys, visiting Zwartz was like going to the doctor; aside from an annual checkup in January when he met with all REAL CIO WORLD | A P R I L 1 5 , 2 0 0 9

Cover Story | Project Management three companies, the only time he saw them was when they had a problem they needed him to fix. The company's business continuity plans consisted of a high-availability site that mirrored the primary datacenter, so that employees could still access company data from home if a disaster struck. But the contract on the highavailability site was expiring, and tests with the Microsoft SharePoint and Exchange servers often failed in any case. The datacenter was maxed out in terms of rack space, the servers were old, and simply renewing the maintenance contracts on them would cost almost as much as replacing them. Zwartz knew the answer to many of his problems lay in virtualization. But explaining what virtualization actually meant to his technophobe bosses — let alone the benefits — was a near impossible task. So he began lobbying for virtualization in November 2007. He started by giving his bosses a running countdown — what month the Exchange e-mail servers were going to run out of storage and what was likely to happen. He showed them photos of physical servers next to virtual ones, and charts illustrating the cost of knocking down walls to build a bigger datacenter versus using blade servers and VMware. He sent them articles on virtualization and links to Web demos. He gave them jump drives with images of virtual desktops on them. In April 2008, when complaints about Exchange, cooling, and space problems began to mount, he had a 90-minute powwow with the bosses. "I swear I was looking at ghosts," he says. "Their jaws sagged open, their eyes glazed over. They still could not get their heads around the concept of one virtual server replacing seven physical ones. To them, it seemed like magic. If I'd had any hair left, I'd have pulled it all out." Then, out of the blue, he got a call from SunGard, which offered a free 90-day beta test of its Virtual Server Replication Services. Zwartz jumped at the offer. He says the service worked so well in his 30

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unilateral Action Sometimes it pays go it alone and wait for the goodness to come later.

or almost a year, Tamal Chakrovarty, CIO at Ericsson, fought tooth-and-nail with unit heads and business users to arrive at a consensus. And failed. The business’ contention was simple: reduce the number of infrastructure and service outages the enterprise was facing. Chakravorty agreed to bring it down from double-digit outage days a year to three days, but the business wanted the number to go down to a couple of hours. At no extra investment. Failing to arrive at a consensus, one morning three months back, Chakravorty walked into a meeting and announced that his team was going ahead with a dR implementation. It was a unilateral decision that would have been hard to get away with in good times and the slowdown made it harder. but the project would enable Ericsson to reduce the number of days of outage to three a year. “If we had continued to strive for consensus, the dR project, in whatever form, would not have commenced. I would have bled all my resources to chase zero-day downtime and would have still been apologizing to the business every time an outage occurred,” says Chakravorty. his railroading approach, while unusual, was essential if Ericsson wanted to tame network blackouts, which added up to about ten days every year, creating revenue losses of about a crore a year. If the global shared service centers and network operating centers blacked out, various services such as finance and other payment modes that were used by telecom operators, were disrupted, too, resulting in losses. “business was furious. We understood their problem but our sLA contract with our outsourcing partners, which was signed about four years ago, clearly stated that double-digit days’ worth of outage was acceptable. going by the book, we couldn’t have done anything about it. nevertheless, IT decided to work around the problem and bring in a business sLA. That’s where the problem began,” recalls Chakravorty. The business returned with a dR plan that blueprinted zero-day outage. based on the amount of bandwidth at various locations and the infrastructure and manpower that could be tapped with the current investments, Chakravorty reckoned they could trim service outages for Ericsson India and sri Lanka to three days.

tests that he retired the physical servers at the high-availability site and moved his entire disaster-recovery plan to SunGard last October. Now, with a successful highavailability virtualization project under his belt, Zwartz was able to convince the insurance firm to go virtual at the production site. The other two firms are waiting to see what happens. Bottom line: IT leaders may have to work extra hard to sell the benefits of technological change without overwhelming decision makers with the details.

"The result of doing — or not doing — the project must be clear to the CEO or manager without them having to read a novel or translate tech," says Glenn Phillips, president of Forte Online, an IT consulting and services firm. "If you cannot do nerd-to-English translation, get someone that can." And if push comes to shove, practical results from a project put in motion can provide all the explanation you need — assuming you can get away with it. CIO

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“On paper, we still have the double-digit figure in the contract. but with our softhandling of the issue and vendor management practices, we managed to get our outsourcing vendors to offer us more value-add for our investment. however, we still can’t penalize our vendors for not maintaining blackout under three days,” he says. It’s been three months since IT has put in place all the tools, technologies, processes and practices to keep its promise. And as much as the business didn’t like the idea of not having zero-day downtime, Chakravorty’s railroading approach opened its eyes to the efforts to curtail blackouts. “Users are beginning to realize the amount of effort required by IT to maintain uptime of critical systems. In fact, the business has slowly begun to release some more funds to invigorate the dR backbone,” he says. The business now understands better, says Chakravorty, what they can and cannot get for every investment they make in IT. With business’ increasing openness to funding the dR R project, Chakravorty plans to plug more loopholes. “If investment comes in, we can gradually take the three-day outage further south,” he says. And the benefits of Chakravorty’s approach keeps spreading. “The business now realizes that maintaining uptime is not as simple as maintaining a home computer. It requires planning, investment and effort. The dR R project that we forced on management has now started a chain reaction. not ot only do they realize the extent to which they can make commitments to their clients, but it also opening up funds for more dR and business continuity TAMAL ChAkrovArTy, projects,” says Chakravorty. CIO, Ericsson —by gunjan unjan Trivedi

Tip 6

Scale Back to Move Your Plan Forward

eeping your project off the scrap heap may mean settling for a piece of the pie instead of the whole thing and hoping you can go back later for seconds. As both CFO and acting CIO of Thomaston Savings Bank, a $530-million

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(about Rs 1,750 crore) community bank, Steve Lewis sees IT projects from both perspectives. But what Lewis saw last fall was a rapidly expanding datacenter that would start to run out of space and storage in less than two years, coupled with a

management team that was reluctant to commit a lot of cash to projects during the middle of a global economic crisis. So he brought in Presidio Networked Solutions, a managed services firm to help solve his problem. Presidio proposed a virtualization solution using VMware and EMC storage that would cost in the neighborhood of $300,000 (about Rs 150 lakh). That's too rich a neighborhood, Lewis replied. So instead of taking the bid to the bank's senior management budget committee where it would almost certainly been rejected, he worked with Presidio to scale it back. Poring over the numbers, Lewis and Presidio realized they were really looking at one project with two distinct phases: virtualization and disaster recovery/business continuity, each of which would cost roughly the same. "When you ask for a $300,000 project, it opens some eyes, especially in an economy like this," says Lewis. "Breaking it into pieces made it a much more presentable case." Presidio also helped Lewis build his ROI argument, using industry-standard metrics to calculate how much the virtualization project would save the bank in power and maintenance costs. And Lewis says there was another key argument: As servers are replaced in the datacenter, they can be farmed out to branch banks, saving them the cost of purchasing new hardware. "That really made for a good ROI costrecovery scenario," says Lewis. Lewis says the bank has cut its tally of physical servers in half and hopes to slash that number in half again before he's through. He expects the project to pay for itself in about two years. Todd Brinegar, chief marketing officer at Presidio, says the key is to separate what's truly critical to the business from their own wish lists. "It's the 'want to have' versus the 'have to have' list," says Brinegar. "You need to look across your organization and decide where you need to be today and where you want to take your infrastructure moving forward." CIO REAL CIO WORLD | A P R I L 1 5 , 2 0 0 9

Cover Story | Project Management

Tip 7

Establish a Covert PMo

ou may be outnumbered, outgunned and weary to the bone, but you know there is a better way to manage your project, your sponsor and the business. Begin an underground movement to develop a covert project management office. The purpose of a PMO is to bring people, processes and technology together to consistently deliver quality results. But what can you do when the people you are trying to protect (management, business or customer) think PMO stands for "painful meaningless overhead"? It's time to go stealth. seT your vision. When things are darkest, night-vision goggles can allow you to focus, but without a target, they're useless. What are the pain points that must be destroyed? Are projects dragging on indefinitely and missing their mark? Do requirements show up like land mines during user-acceptance testing? Reconnoiter the business, discover users' complaints, and set your vision to eliminate them. Liberate

12 SignS

the business, and you will have strong allies. TesT The environmenT. T Search T. for hidden allies who can help your cause. If you are under fire, chances are other project managers are engaged in similar battles. Management may be ready for a new approach. Begin recruiting others to support your vision. Let them help sharpen it. esTablish Tablish your objecTives and T plan. Sketch out your attack strategy. How are you going to accomplish your vision? What steps will be needed? Lay out an aerial view of the endgame. Does it have processes to manage change, issues and risk? Do you see templates for status, metrics to measure, a communication plan? Remember, this is a covert operation. Attacking too many places at once may give away your position. Give the plan time.

You need a Covert pMO 1 2 3 4 5 6 7 8 9 10 11 12

you're leading. but no one is following. meetings are chaotic and unproductive. scope is creeping. Objectives are not being met. your team is pinned down and taking casualties. missions are aborted. Accountability is assigned, not grasped. Reason has been overrun. Everything changes. Every time. The business views you as the enemy. you are frustrated. Confusion reigns.

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mission when resistance is high only gets people killed. If one area prefers e-mail status reports over Word documents, make sure both methods cover the same key topics. Don't fight an immovable force, and never blow up a bridge you may need to cross again. Train projecT parTicipanTs. But don't hold a class or give a lecture; be subtle. Make suggestions. Ask leading questions. Plant ideas. Lead your team, your manager and the business to do projects the way you want them to. Act consistently and perform professionally, making them expect the best of you. Set reasonable and attainable expectations of them, raising their expectations of themselves. Start to win their hearts and minds.

a agree on sTandards. T Identify a consistent approach for doing business. Issue management is an easy target to start with. Define a recording and tracking method. Risks might be next. A proactive risk management approach can avoid issues. These targets should not be difficult to approach. No need to publicly identify them.

help oThers embrace The vision. Success is the best propaganda. You don't need to trumpet your achievements; people will start noticing. Create and use metrics to show improvements. Share your successes with others, and show how your approach can work for them, too. Share the vision, and get them involved in it. In the end, there may be no hero's medals. The chaos may only be pushed back for a time. But here and now, you can make a difference. CIO

leave iT flexible. Be consistent without becoming rigid. Forcing a

send feedback on this feature to editor@cio.in

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Cover Story | Project Management

How to be a

Change instigating OffiCer Change is in the air and as more businesses turn to technology to bring it about, youâ&#x20AC;&#x2122;re going to need to learn new ways of getting your way. Hereâ&#x20AC;&#x2122;s how. By Mary Brandel

Reader ROI:

How to choose what to change The importance of knowing when to stop pushing Why making it personal can help

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s an IT professional, you don't often have the luxury of going with the flow. With businesses everywhere seeking both efficiencies and revenue growth, IT's mission is increasingly geared toward implementing and even spearheading many types of change. That's never been more true than in today's economic climate. "Where do we think productivity is going to come from? From technology," says Charles Beard, CIO at San Diego-based Science Applications International Corp. In a Gartner survey of 1,500 CIOs worldwide earlier this year, improving business processes was identified as the No. 1 priority for CIOs. And in a late-2008 survey of 100 IT leaders by CIO Connect, an independent networking forum for top CIOs in the UK, 62 percent of the respondents said that their board-level colleagues were increasingly turning to them for insight and leadership in the area of business change. But as experienced IT leaders will tell you, it's not easy being an instigator of change. Even though as CIO you're in a good position to recognize processes that should be improved, people might not want to listen to you, especially when you're challenging long-held beliefs. That's why Bogdan Butoi, director of sales operations at Animas, a maker of insulin pumps, wears his politician's hat when he questions processes that his business counterparts take REAL CIO WORLD | a P R I L 1 5 , 2 0 0 9

Cover Story | Project Management for granted. It helps, Butoi says, that he's naturally rebellious. "It's always a challenge to me when people say, 'This is how you have to do it,'" he says. At the same time, he knows there's nothing like the suggestion of change to raise one's blood pressure, so he has learned how to approach people in a politically correct way. We spoke with Butoi, Beard and others to get tips on how to recognize and propose business change in a way that gets results. Here's what they said:

Pinpoint Processes Worth Changing

out of grad school in computer science and engineering — even though they should have learned the scientific method — shoot from the hip instead of fleshing out the who, what, where, when and why," he says. To counteract that tendency, Bonig has his staffers write down everything they know about the problematic process on a whiteboard. He compares the technique to the one used by doctors on the TV show House. "That's a great way to get to an answer, whether you're dealing with a problem or a new process or a manager who doesn't know how to approach a problem," he says.

There's no sense in even getting started if the business process you're targeting Let the Person You're for change won't yield adequate payback, Addressing Be the Expert either in return on investment or reduced IT enjoys a privileged view into crosscosts. To find opportunities, either look for organizational processes, and because processes that run more slowly than others it operates above individual silos that across the entire organization or those that make up the enterprise, it can see where slow down within a particular department, processes bog down. At the same time, you says Ron Bonig , vice president and CIO have to give managers the benefit of the at George Washington University. For doubt that they know what they're doing, instance, if one department regularly Bonig says. So once you've pinpointed requires much more time an inefficient process, than others to complete treat the manager you're the hiring process, that addressing as the expert, might signal a problem. whether you view him Similarly, if there are two that way or not. processes that cross two Rather than calling departments — say, hiring the process "broken," and benefits management choose phrasing that will of CIOs who say their be more palatable to the — but one runs much board-level colleagues manager. Bonig suggests slower than the other, are increasingly that's worth exploring. "rust in the process," turning to them for Then consider the "an opportunity for fineinsight and leadership tuning" or "the need for a payback for fixing it. "A in business change. 5 percent problem to one lube job." Source: Gartner department is not a big However, feel free, he deal, but if it's a 5 percent says, to emphasize that problem to everyone in the organization, while the IT department may not be the that could be a lot of money," Bonig says. expert when it comes to that particular department's operations, it is the expert when it comes to analysis. Use the Whiteboard It's important for you and your staff to thoroughly understand the problem you Ask, Don't Tell detect in the process before proposing Change means more work for everyone any changes. This doesn't come naturally involved, so when it comes to hearing to many IT people, who tend to go with news about the need to make an their gut instinct when it comes to adjustment, people are more open to offering solutions, says Bonig. "People suggestion, dialogue and debate than

62% The number

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they are to lectures and pontificating, says Laura Gorman, a consultant at Ouellette & Associates and co-author of Leading IT Transformation. Although it might be tempting to show off everything you know or demonstrate your enthusiasm for changing a process, she suggests leading with questions, not answers. That way, "when people don't have the answers to your questions, it naturally shifts their thinking," Gorman says. Remember, the point is to gain the manager's commitment, not coerce him into accepting your view of the situation, she says. The purpose behind the questioning, Bonig says, should be to unearth the logic behind the person's assumptions, not to make him uncomfortable. "You need to question their assumptions, not to be obnoxious, but to see if there are holes in their reasoning," he says.

Get the Facts Keep in mind that the manager will likely resist the idea of change, even if your line of questioning is perfectly on target. Business executives speak a language that's based on facts, so if you want to be heard, load the conversation with hard evidence, suggests Beard. "A case based on the hard facts is the best approach," he says. The secret, says Butoi, is to present such a strong case "that there's no way they're going to come back and say no — or if they do, they'll need to come up with a good argument." For instance, a department head might tell you there's no need to implement an automatic lock on her department's computers because her staffers log off or lock their computers every time they walk away from their desks, and they lock their laptops in drawers or take them home every night. All you need to do is walk around after hours with a camera, taking pictures of the unlocked computers or the ones left on users' desks, Butoi says, pointing out that "a picture is worth a thousand words." If you repeat this for a few days and catch several people being noncompliant, you'll show that the manual process — as strong as it looks on paper

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Cover Story | Project Management and as much as it is emphasized in training â&#x20AC;&#x201D; does not work.

Make it Personal As Bonig's example shows, different constituents are driven by different incentives, and it's up to IT to identify what makes the various parties tick. For instance, don't assume that a key stakeholder will be moved by the idea of gaining efficiencies; he may not care much about efficiency if his processes meet his other requirements, especially the ones that show up on his performance review. As Gorman puts it, the challenge is to turn information into information that can't be ignored. To do that, you need to understand what motivates the people you're trying to influence, she says. What are they rewarded for doing? What are they held accountable for? For instance, while senior leaders want to know the facts, other employees may be more interested in how they're going to get their jobs done. "If someone can't speak to them in a way that ignites a fire under them, they'll have no energy to direct toward your initiative," Gorman says. There are two ways to make an effective appeal, she says. Either create a "burning platform," painting a picture in which the status quo is so risky that people are willing to jump into the unknown, or describe a future state that is so opportunity-filled that it creates dissatisfaction with the here and now. Beard prefers to find what he calls "rallying points," or common interests that serve both users and IT. "If I can tie it to their performance objectives, that's even better," he says.

find allies If key constituents are unapproachable or uncooperative, Gorman says it's important to identify other people who will support the effort and even advocate for it. These could include an employee who has no formal standing in the organization but who has lots of influence on the people he works with. This is a good strategy when you meet resistance at a high level, Butoi says. He also suggests that you can sometimes

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It's up to IT to identify what makes people tick. Don't assume that a key stakeholder will be moved by the idea of gaining efficiencies; he may not care much about efficiency if his processes meet his other requirements. The ChAllenge llenge iS To Turn inforMATion MATion inTo inforMATion ThAT hAT CAn'T be ignored.

avoid high-level resistance altogether by identifying someone within the department who will get on board and broach the idea with the manager himself, making it seem as if the idea was generated from within the department, rather than from IT. Another difficult scenario is when there are no quantifiable benefits to present, as in the case of a project that promises to improve compliance. In those situations, you don't want to walk into a board meeting without first establishing allies in the room. "Those are the moments where you have to get people to buy into your vision before you get to the table," Butoi says. That's what he did earlier this year. He wanted to suggest a process change that, with minimal investment, would enable the company to reach its goal of strong double-digit growth without increasing head count. Butoi first presented his idea to several people and won them over, so when he walked into the meeting, he had already gotten four of the nine attendees on board. "I got immediate buy-in," he says, so he was able to launch the project in a couple weeks' time.

Watch Your timing And speaking of time, Butoi warns that there will likely be moments when you'll

need to back off temporarily. In his recent process-change proposal, for example, Butoi knew that he might be faced with board members who simply didn't believe that his proposal would work. If that had been the case and he had pushed, he says, "rather than winning them, they'd end up more against the project." Instead, Butoi says, if you hit strong resistance, rather than digging in, detoxify the situation by acknowledging the questions and promising to go back and restudy the numbers. "If you push it, you're never going to win," he says.

Learn how to negotiate One last piece of advice from Beard is to develop your negotiation skills, either on your own or through formal training. He points out that some MBA programs now teach negotiating skills, and many training firms offer seminars on the subject. There's nothing easy about change, but CIOs worth their salaries know that they sometimes need to push the envelope on people's comfort. As Bonig says, "Someone who's willing to take on new things and challenge the status quo makes a good CIO." CIO Mary Brandel is a contributing writer. Send feedback on this feature to editor@cio.in

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Leaders By Sneha Jha

“Tomorrow's leaders need to understand that today's organizations are not an extension of the factory economy. This is a creative industry; it is a people industry, a knowledge enterprise.” “A postmodern organization has to look at its people as co-creators.” “Emotionality of the workplace is going to be center stage in the next century. Leaders who do not understand emotions cannot lead.” “Human capital does not operate on a ‘create once, use forever’ concept; it persists only if it is maintained and nurtured.” These are the thoughts of one of India’s foremost leaders, Subroto Bagchi: a man so determined to nurture tomorrow’s leaders and engineer what he calls an ‘emotionally-bonded’ organization, that he moved from being the COO of MindTree to its Gardener. Although it’s a role that can only be described as an organizational mentor, that’s a tag Bagchi refuses to be labeled with. In his current role as the Gardener of MindTree, he tends to the organization’s top 100 leaders because as he says, “this will not only sustain our vision for the future but also strengthen the organizational DNA of MindTree.” In this interview, he shares why more organizations need to nurture their human infrastructure, how he does it, and the boundaries that need to be enforced to make such a leadership initiative work.

CIO: Why be the Gardener of MindTree? Subroto Bagchi: I’m very surprised that other organizations have never thought of it and that we ourselves took this much

time to come around to the idea. In New Zealand, when people want to color wool, they dip hundreds of sheep in a vat of colored water. It’s called sheep dipping. But leadership, self-awareness and ‘capacity expansion’ can’t happen like that. You can’t send a 100 people to a training session or

Imaging by unnikrishn an AV

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.

Leading the

P hoto by Srivatsa Shandilya

Subroto Bagchi, Gardener, MindTree, says nurturing human capital is one of the most important ways the company can build a second generation of leaders.

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View from the Top

Subroto Bagchi wants to: Help MindTree grow exponentially Create emotional infrastructure Groom tomorrow's leaders

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4/14/2009 4:53:17 PM

View from the Top

a motivational workshop and make them leaders. You need to work with them in an intense manner. So, I decided to take the top 100 people at MindTree and work with them in an intense one-on-one manner to unlock their hidden potential. When I am engaging with a leader, prior to and after the engagement, we have intense moments of preparation and reflection of what I call ‘sense making’, which helps leaders focus on the critical amid the clutter of thoughts in their heads. I have moved from looking at transactions to looking for patterns. We are looking at a pattern which is of interest from the organization’s future standpoint. We’re looking at a pattern created by a 100 individuals and in that collage, a blueprint of organizational transformation emerges. It is not the other way round. It is a fundamental paradigm shift in thinking.

Do you need to step outside the corporate set up and be a Gardener for it to work? We wanted openness that’s why we made the role non-structural. Nobody reports to me and I don’t report to anybody. I am under no obligation to share any of my findings with anyone. This makes my relationship with these leaders sacrosanct. It's created an atmosphere of openness and fostered communication, besides inspiring trust. Also, I don't influence the talent review system. My knowledge of people’s fears, dreams, aspirations, and weaknesses is not available to that system. I do not sit on the talent review process. The system may lose some, but that’s acceptable. It’s reflective of the greatness of Ashok Soota (MindTree chairman) that he agreed that I wouldn’t report to him and that nobody would report to me. It also demonstrates the collective greatness of the organization.

How does MindTree benefit? Essentially, we observed how in nine years MindTree established a multinational 40

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“The factors that create emotional infrastructure are most difficult to copy and yield sustainable competitive advantage.” — Subroto Bagchi business presence. But now incrementalism will not help the company realize its vision. Exponential growth is the only way forward. Grooming MindTree’s top 100 leaders will give us the best shot at that. Also, we have solved what’s needed to be a million-dollar company. In one stroke, we have solved a succession planning problem. We need substitutes for the 10 people who are at the helm of the decision machinery today. By making people aware of their mission, visions and values, I awaken them to their DNA and the organization’s DNA. If we want to be a long-term player, human capital is pivotal.

Is a specific organizational culture required for this? When we started the company, we decided that we would build a company in which human capital was at the core. Structural capital would be a second-phase activity. And with human and structural capital we would build customer capital. After a point, an organization’s value is a combination of all three. And over time, an organization’s success is a combination of these three.

Human capital is about individuals — not the organization. As much an organization tries, it can only convert a limited amount of human capital into structural capital. People have a misconception that it’s an organization’s job to suck out their brains and put it in jars so that even when they’ve left, their organizations can monetize on their capital. In comparison to physical and intellectual infrastructure, emotional infrastructure is the most difficult to build. Yet the factors that create emotional infrastructure are not visible to outsiders, making it most difficult to copy and therefore yielding a sizable and sustainable competitive advantage. We want to develop an ideal place for people to build their careers. We built the organization to be like a rain forest; we want to create the fertile conditions where talent can grow and be nurtured.

Today, many companies are using pink slips to cut costs. Is there an option? Organizations land in this situation because they are tactical. They hired indiscriminately because they thought the environment was moving at a certain speed. They have a short-sighted view of the business landscape, so they find short-term solutions. An emotionally-enriched organization would not do that. They would not get carried away during the good times. When an organization takes a headcount view, it does not understand that when it takes this seemingly easy way out — like asking five percent or 10 percent of its staff to leave — it fills the organization with toxicity. It is not about someone going away, it is about what that person leaves behind. The people left inside begin to develop survival syndrome. We need to build a more sensitive and realistic view of the future. Learn to develop a long term view and take decisions that won’t be questioned every quarter. The other choice is to look like a smart manager who can lower costs as every quarter unfolds, but neglect to build emotional infrastructure.

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View from the Top

How should organizations view their staff? A postmodern organization has to look at its people as co-creators. Co-creators of both value and a collective vision of the organization’s future. That is why we decided not to call our people ‘employees’. Everybody here is a MindTree mind. The more an organization can look at people as co-creators of a collective future, the more it will see sustainable value creation. This helps an organization achieve shared goals and create a compelling vision for the future.

How can companies address immediate business needs and still build a vision? I worked on a project with Prof. Vijay Govindarajan of Tuck's University (he is also director of Tuck's Center for Global Leadership) to study the attributes of emotionally-bonded organizations. We found that what binds organizations emotionally are also the eight attributes that make successful families. Successful families invariably have a shared vision. This is fundamental to emotional infrastructure. The day a baby arrives, parents start envisioning a child’s future. History is replete with examples of greatness sowed in the vision for a child when a family could ill afford basic necessities. The act of such visioning is future-backward and disregards the scarcity of the present. In an organization with strong emotional infrastructure, there is an articulated vision that is often bold and ambitious. The style of thinking changes from present-forward to future-backward. Successful organizations imagine the future in bold terms. Take the dream of Tata Motors in 2004: “Our intent is to create a high-quality fourpassenger car priced at Rs 1 lakh that meets all emission requirements.” Why does a statement like this provoke an emotional response? Because people are drawn to a bold, challenging, and unrealistic goal.

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Deep inside, we feel uplifted SNAPSHOT What do you look by the thought of climbing forward to in a MindTree a mountain. mentee? But many people blame Executive Chairman: their inability to think longer The most critical attribute is Ashok Soota term on the need to deliver the power to listen and receive. Total Income quarterly results. They have Most people don’t have that. $ 191.1 million* forgotten how their parents As we climb the professional Employees: had to pay bills, meet mortgage ladder, we experience success <7,600* commitments, wash laundry and our power to receive CIO: and throw out the garbage and begins to recede. Look at a Sudhir Reddy still imagine a distant future. tall mountain. No matter how * 2007-08 We cannot blame much it rains, the peak can’t externalities for our incapacity hold water. To be able to hold to envision. Vision is never a constraintwater you have to be able to make a valley forward thing. It is an opportunity-backward out of your mind. thing. I ask my leaders not to see a connection Listening is a multi-layered process. between organizational immediacy and the When you are listening to a mentor, you are power of vision. It is time that we outgrew that listening to his thoughts, at another level you lazy view of visioning. are listening to the idea behind a thought, and at another level you are listening to the voice of the idea itself and suddenly you find that What does it take to be a ideas are building on ideas. This ability to successful mentor? listen and receive makes people mentor-ready. If a potential leader develops a demeanor that I don’t want to be called a mentor. Soon suggests receptivity, the whole universe will MindTree will be in various lines of business conspire to make him succeed. and each will have a vertical focus. It is difficult to be a mentor for people in so many areas. That kind of mentorship becomes How can executives build an superficial. Mentors should be twice removed effective succession plan in from their charges, not ten times removed. tomorrow’s world? My role is more of a sense maker. Every life has a story, a pattern and a possibility. I Succession planning is becoming an connect the pattern to the possibility. For this, increasingly complex issue for postmodern I need to decide what should be underplayed organizations. Old world succession and what to step up. planning assumed that people live in A mentor must commit to investing time reasonably predictable times but today and effort to fuel his mentee’s aspirations. our environment is unpredictable and the He should try his utmost to put an employee time between two predictable situations is on a high-performance track. He should be continually collapsing. a patient listener and must have an eye for We need to marry succession planning spotting talent. A good mentor inspires trust. with ‘what if’ scenarios. And build succession The challenge is to combine nurturing and planning at the top based on different direction-setting. A mentor has to be capable eventualities. We need to build the ability to of unquestioned giving and through that engage with the external world so that in any build a relationship in which he can be tough, eventuality, we have multiple choices. CIO and through that, build an employee’s sense of direction, and their ability to make choices Sneha Jha is correspondent. Send feedback on this and face consequences. interview to sneha_jha@idgindia.com REAL CIO WORLD | a P R I L 1 5 , 2 0 0 9

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Business Transformation

With a new strategy and fresh IT, Blockbuster, the onetime king of movie rentals, is attempting to reinvent itself for the age of downloads and video on demand.

Reader ROI:

Why IT can help a business change models How to grab the customers of your competitors who shut down The importance of agility and being customer friendly

By Kim S. NaSh

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Business Transformation

Action! Adventure! Thrills! Spills!

The high-stakes drama of fixing the money-losing Blockbuster movie rental company has it all, except a happy ending yet. Can the duo of CEO Jim Keyes and CIO Keith Morrow — together again after a highly successful run at 7-Eleven — remake Blockbuster? This storied CEO-CIO team wants to translate the technology-enabled retail ideas they developed to sell snacks to rented entertainment — on land and online. That is, using IT to make sure the right amount of the right product is available at the right time. "You can do it anywhere," Morrow says. "The lifecycle on a sandwich or doughnut is measured in hours and days. The lifecycle of a new movie or game title is not very much longer." At 7-Eleven, legend has it, the most loyal customers visited an average of twice a day, such as for morning coffee and a snack for the commute home. But Blockbuster patrons are deserting to competitors including Netflix and video-on-demand. Under Keyes' leadership, 7-Eleven cultivated customer loyalty by giving local managers control over their merchandise. With near real-time access to customer activity and inventory data, a manager could see that, for instance, he couldn't keep bear claws on hand for two days running — and he could change his bakery order for day three. The insight to use IT to fine-tune local inventory came from Morrow, but Keyes supported it — pushed for it even. "Jim's a believer in trying things to see how they work," Morrow says. Their partnership played a large part in turning 7-Eleven into the United States' largest convenience store chain, with sales of $12.2 billion (about Rs 61,000 crore) at the time Keyes left in 2005. By reprising their roles at Blockbuster, which has posted $4.8 billion (Rs 24,000 crore) in losses since 2000, Keyes and Morrow are betting that, even in this economy, they can turn the company around.

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The pair is nearly two years into a three-tier transformation to stabilize Blockbuster's core rental-store business, diversify sales and build an online distribution system to handle growing demand for downloadable and streaming media. Keyes expects to show a profit this year, but Wall Street remains doubtful about the future: Blockbuster's $258 million (about Rs 1,290 crore) market valuation is a fraction of Netflix's $2.2 billion (about Rs 11,000 crore). Even with IT and business in lockstep, that skepticism portends a nail-biter.

Stars in Their Eyes At its founding in 1985, Blockbuster ruled video rentals. Its blue-and-yellow signage stood for VHS tapes, and later DVDs, to rent for a few days then pay a late-fee when you didn't return them on time. As the century turned, Blockbuster's business began to slide. Profits steadily drained away as physical and then online competition grew. It didn't help that customers couldn't get popular movies at Blockbuster stores up to 75 percent of the time, according to the company's own figures. Losses mounted. When billionaire investor Carl Icahn joined the board in 2005 as a significant shareholder, he went after CEO John Antioco publicly. That same year, on the other side of Dallas, Jim Keyes retired from 7-Eleven, where he'd been for 21 years. During his last six, as CEO, he had hired Morrow. In 2007, Antioco stepped down at Blockbuster, which wooed Keyes for the job. Sitting in shirt sleeves in his 21st floor office recently, Keyes recalled that period, when he

had to contemplate unretiring. He liked the challenges he saw in movie rentals, he says. But he wanted a trusted CIO — his trusted CIO — with him. "Retail is so dependent on technology," he says, leaning forward. "I met with Keith before I accepted the job." He took it in July 2007. Two months later, Morrow joined him. Now Keyes and Morrow face some of the same obstacles many executives do. They have to attract and retain new customers, capitalize on competitor weaknesses and predict the direction and pace of change in a volatile market. But they also have to deal with the ugly backstory. On arrival, job number one for the team was to figure out how better to run its 4,005 US company-owned stores. (Blockbuster also franchises 850 stores.) Yes, the world is webified, Keyes acknowledges, but he contends that there's life yet in Blockbuster's physical stores — not only in traditional rentals, which still account for 85 percent of the $26 billion (about Rs 130,000 crore) industry, but also as a way to seed the ground for new-style consumers. Blockbuster very much wants the 18-yearold college kid to click on Blockbuster.com to download Spider-Man and Spider-Man 2 to his laptop for the flight to spring break. And the company doesn't want to ignore the 47-year-old mom who drives to its storefront at a strip mall to rent High School Musical for that night's sleepover. But Blockbuster also wants to cultivate new kinds of customers, such as people who bring a portable video player to a kiosk to download digital content. Or someone who REAL CIO WORLD | A P R I L 1 5 , 2 0 0 9

Business Transformation will stop at a vending machine at the train station to pick up a disc or a download. "What we want to provide is convenient entertainment everywhere," Keyes says. While Blockbuster expands the idea of what a video rental store is and does, its field of competitors has also grown, says Bobby Tulsiani, a senior analyst at Forrester Research. Beyond battling Netflix, it must also compete with giants such as Apple's iTunes store, Amazon's digital downloads and discs, as well as cable and broadband companies offering video on demand and sites such as Hulu, which offers free ad-supported video streams. Meanwhile, Wal-Mart and Target entice budget shoppers to buy super-cheap DVDs and electronics. And getting ready for their close-ups are still relatively unknown players such as Redbox, plunking down movie vending machines in the lobbies of grocery stores. "Blockbuster has to transform its business, but so does Netflix and all the others. We don't know which method of entertainment will become most powerful," Tulsiani says. "So far, consumers are saying they can live with a multi-platform strategy for movie viewing." Yet even if Blockbuster keeps pace on the Web and with kiosks as digital demand

grows, it will still have to determine what to do with its physical stores, says Carla Casella, an analyst at JPMorgan. "New Blockbuster management is doing a good job building [other forms of] retail through its stores so the business is less reliant on rental. This takes time and initially hurts margins," Casella says. Real estate leases are also a drag. Blockbuster has closed about 250 US stores since 2006 but is obligated to pay about $2 billion (about Rs 10,000 crore) in operating leases for its remaining stores, according to its latest annual report. You have to work with what you've got, Morrow notes. So Blockbuster's current plan is to turn its stores into ‘destinations’ where people can get not just videos but the consumer electronics gear to play them on. Blu-ray DVD players, digital picture frames, e-book readers, portable MP3 players, major game consoles, flat-screen TVs — Blockbuster now sells all of these products from Sony, Nintendo, Archos, Samsung and several other electronics makers. Rolling out across the country are storeswithin-a-store to let curious customers try these gadgets while sipping a cold drink, seated in a cushy gaming chair. This strategy to blanket retail and online outlets to sell consumer hardware next to

rent-or-buy video software opens "fresh" terrain for the industry, says Tulsiani. Netflix, for example, has no physical stores and Best Buy doesn't offer media rentals. And another major electronics competitor, Circuit City, is liquidating (Blockbuster tried last year to buy Circuit City but could not reach an agreement with the company). "There's no reason not to offer a wider array of products, beyond popcorn, when you have all this traffic," Tulsiani says. "It's not crazy. It is a modern electronics store." What Morrow and his IT staff must do to enable this hopeful pioneering involves tactical as well as strategic projects to get customers to Blockbuster locations. For example, the IT staff had to set up new databases to track digital rights for movies delivered on disc and online. Movie companies negotiate different viewing windows for streamed, downloaded and DVD content. For example, you might be able to check out The Dark Knight on DVD for five nights. If you download it on demand, once you hit play, you have just 24 hours to view it. You can also buy the digital copy and keep it forever. Parameters differ for renting a movie on an iPhone, PC or gaming machine such as a Playstation. Blockbuster subscribes to a Web service that updates its Oracle-based digital rights management database. "We've got to get that right at all times," Morrow says. But diversifying sales means more than branching out into new product lines. It also involves coaxing a different kind of customer to look at Blockbuster.

Who Gets the Girl?

Blockbuster CIO Keith Morrow will push rental data to some store managers. Soon, they will stock movies based on local demand, improving inventory.

A P R I L 1 5 , 2 0 0 9 | REAL CIO WORLD

There's a scene in All Quiet on the Western Front where soldiers vie for the boots and other valuables of a dying comrade. The corporate corollary is grabbing the customers of a rival heading to bankruptcy. But you can't do that without good data. Over a Bento box lunch near Blockbuster headquarters in December, Morrow explained how technology helps with the time-honored retail practice of capitalizing on casualties. Before Morrow arrived, Blockbuster kept an Oracle database with data about its competitors' stores. But the system wasn't updated much and needed new

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Business Transformation analysis tools, he says, "to help us with store profitability and finding where the best opportunities are." At 7-Eleven, for example, sales and inventory data was updated frequently throughout the day to keep store employees in the know about which merchandise moved and which got dusty. Now at Blockbuster, financial and real estate analysts add data to the system regularly — including anything public and confirmable about locations and sales statistics — to compare with the performance of Blockbuster's own stores and to jump on opportunities to grab market share. For example, Movie Gallery, which owns Hollywood Video and is Blockbuster's nearest competitor in video rental stores, entered Chapter 11 bankruptcy protection in 2007. The court required it to release the addresses of the locations targeted to close. Blockbuster analysts were able to take that information and fill in anything missing from their Oracle records. Then they ran queries using Oracle business intelligence and SAS statistical analysis tools to figure out whether to lease vacant Movie Gallery spots and where to do local marketing to lure customers to nearby Blockbuster stores. Movie Gallery emerged from Chapter 11 last May, about 560 stores smaller. Morrow declines to cite specifics about the financial gain from such moves, but he carefully lays down his fork and says, "We absolutely made that a priority. It's a pretty important tactic, to go after the revenue of closing stores." Of course, no one thinks scavenging will be enough to lift Blockbuster's financial results. A happy ending means Blockbuster — to borrow from another movie genre — has to get the girl. Not lovable Meg Ryan in any of her numerous chick flicks, but that ravishing beauty known as a loyal customer.

Patrons Now and Later Blockbuster is striving to attract customers from various demographics to its stores and ease them gently into new technology. If people can relax in a cool, low-pressure environment to learn how to load movies onto portable MP3 players, do the hula hoop on Nintendo's Wii and watch a feature film through kooky computer eye glasses, they'll be grateful. They'll see what else you offer.

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They'll come back in person and on the Web. When they someday spot the Blockbuster name on a kiosk at the supermarket or a vending machine at the mall, they'll walk right up and swipe a credit card. Blockbuster will have diversified its sales and been sustained into the future. That's the theory, anyway, that pushed the redesign last year of about a dozen stores in Nevada and Dallas to house new ‘Rock the Block shops: stores-within-the-store that display gear for shoppers to touch and try. These internal shops are dedicated either to gaming consoles and accessories, consumer

according to Gloor. The new merchandise is changing how Blockbuster employees and customers interact, says Lauren Garrett, who manages this location. "I have my people talk to customers about the products, make them feel comfortable," she explains. One effective conversation, she says, is to teach people that a PS3 game machine can play Blu-ray discs. "I had to get customers to understand that last year. Now they're customers of games and movie titles." Which stores get which concepts and electronics will depend on local demographics, sales trends and what

More people eventually will prefer downloadable or streamed content instead of a disc. Blockbuster sits in the unenviable position of preparing itself for the death of its core business, the timing of which can't be predicted.

video equipment or a kids' play area to relieve tense parents trying to browse. In Dallas, Jeff Gloor, Blockbuster's senior director of operations strategic development, walks among clean white counters arranged in a circle to show off electronics at the center of a downtown store. The space is open, airy, neat. "It's like an Apple store," he notes. "Not like a Best Buy, where it's all crowded." Gloor sweeps his arm above the gear. "These are all products you can load content onto." For example, there's an Archos portable media player and docking station to use the player on a home TV, such as a Sony Home Theater sitting nearby. In time for Christmas, Blockbuster released a set-top box it built with 2Wire. "These products might not be familiar to some customers, so they can experiment here. See what it's all about," he says. "Whole families hang out on a Friday night." The Rock the Block shops have increased the average time customers spend in the store as well as their average purchases,

competition is around — variables that will be tracked and analyzed by store managers as Blockbuster expands access to those central Oracle databases and reporting tools. Having store managers rather than a central merchandising department decide the merchandise mix at individual stores usually means better product availability, Morrow says. Inventory was a problem at Blockbuster. Two years ago in-stock availability of hot new movie releases was just 20 percent chain-wide. By late last year, it had climbed to 74 percent, according to Keyes. What was the miracle cure? A homegrown application measures various inputs comprising customer demand — such as sales history — and a custom algorithm figures where to spread inventory across the company's 40 distribution centers. That's part of the IT strategy Keyes and Morrow brought from 7-Eleven. "We're using technology to create a pull system so stores can decide how many copies of a REAL CIO WORLD | A P R I L 1 5 , 2 0 0 9

Business Transformation movie they want," Morrow explains. "Like how 7-Elevens ordered sandwiches." At that Blockbuster store in Dallas, Garrett and her team will be able to repair a Windows desktop in the back room to run numbers and form hypotheses using historical data plus their localized knowledge. If there's a college nearby holding Batman parties the day The Dark Knight is released, it's best to stock up. "At headquarters, they don't know anything like that," she says. Back in Keyes' 21st floor office, he and Morrow agree. Keyes takes out a pen and charts the IT that underlies Blockbuster's key business efforts. He draws boxes and arrows depicting how point-of-sale systems feed information directly to Blockbuster's homebuilt business intelligence tools — the ones that Garrett and other store managers use to make decisions. This is what differentiates Blockbuster from, say Wal-Mart, which dictates most merchandising centrally, Keyes explains. Morrow smiles. Not many other CIOs have a CEO this in tune with IT.

Fire-Breathing Dragons The one time Keyes bristles is when he talks about Netflix. He thinks critics are wrong to dismiss Blockbuster as inconvenient compared to Netflix, whose main business asks customers to visit Netflix.com to compose a wish list of DVDs, which are then mailed using the US Postal Service. Keyes shakes his head. "Their technology, their queue, has you standing in line online. IT should eliminate wait," he says. "Our focus is to provide immediate gratification." To that end, Blockbuster runs a program called Total Access, which lets members order DVDs on the Web and receive them by mail, like Netflix. Customers can mail them back but they don't have to. They can also exchange them at local stores for fresh titles, there and then. This simple convenience, however, is a complicated IT problem. Two distribution chains — online and store inventories — along with customer accounts, must be meshed. That's another homegrown system written in Microsoft .Net to use a SQL Server database. This year, Morrow says, the server end will be migrated from an IBM Unix box to a more costeffective and faster Unix combination: 46

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Retail is so dependant on technology,” says Blockbuster CEO Jim Keyes, that he consulted with CIO Keith Morrow before taking the job.

HP for the application layer and Sun for the database layer. Netflix, for its part, says it isn't worried that Blockbuster will slay its business model and ride off with its customers. Echoing Forrester's Tulsiani, a Netflix spokesman says: "We think there's room for a lot of different models for delivering video to the Internet. Jim Keyes is a very, very effective executive. We know he's had a very successful career and made 7-Eleven very successful." Netflix is keeping tabs on Blockbuster's moves to make its stores entertainment destinations, the spokesman says. And so far, he adds, "We have not seen any impediments to Netflix's growth." Indeed, Netflix's revenues have more than doubled since 2004.

Fairy-Tale Ending? Looming for Keyes is the prospect of re-awakening the ire of Carl Icahn. As he did when Antioco was CEO, Icahn may lose patience waiting for profits. An activist shareholder, he regularly rails about the "survival of the unfittest" CEOs at his blog, icahnreport.com. So far, Blockbuster has improved earnings under Keyes. That is, it's losing less money. Keyes tries to lighten the picture: he insists that Icahn is a funny guy. "No really," he says,

pausing. "He tells jokes sometimes. A lot of people don't know that." Icahn hasn't publicly said what his financial expectations are. Meanwhile, Blockbuster sits in the unenviable position of preparing itself for the death of its core business, the timing of which can't be predicted. Newspaper publishing faces a similar situation as news websites grow and revenue from the paper product dries up. If that's the model in movie rentals, the shift might suddenly, painfully accelerate as it has in the news business. In the last several months, at least 55 daily newspapers in the US have put themselves up for sale, stopped printing on paper or closed down altogether, according to several websites that track media. More people eventually will prefer downloadable or streamed content instead of a disc, Keyes predicts. If that's not scary enough, they might stop renting altogether and buy their entertainment. "We know that," Keyes says. "We're trying to leapfrog DVDs to go digital, while our core business relies on DVDs," says Morrow. "You bet it's hard." But it isn't over. Yet. CIO

Send feedback on this feature to editor@cio.in

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Integration

Your M&A

Whether it’s a shotgun or a planned acquisition, chances are you’re not ready. Here’s how to change that. By David F. Carr

In good times, mergers and acquisitions are often

driven by dreams of synergy, the idea that two successful companies can unite to capture a bigger piece of the market and be more profitable through economies of scale. In bad times, they can be driven by desperation, with one company leaping into the arms of another to avoid collapse. In the past few months, we've watched mergers between distressed financial institutions arranged over a weekend, with the US government playing matchmaker to address a severe financial crisis. The rushed nature of these transactions presumably means that the companies skipped some steps in the normal merger and acquisition planning process. Ideally, the parties to a merger go through due diligence to assess each others' strengths and weaknesses, which includes examining information systems and networks to assess the likely length, cost and feasibility of systems integration.

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Reader ROI:

Top priorities when integrating two companies’ systems Why IT must act fast to help mergers succeed How to prepare before your company faces a merger

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Integration For the CIO to be intimately involved in that process is a best practice. Or so says every CIO. But in reality, that doesn't happen often enough, even in the absence of an economic meltdown. According to a 2007 study, Wired for Winning, by Deloitte, fewer than 30 percent of companies get IT involved in the planning process before a deal is closed. The study also found that this lack of involvement has serious consequences. In one case involving a global manufacturer, IT integration costs exceeded pre-merger estimates by more than $100 million (about Rs 500 crore). CIOs feel the pain: Only half of respondents to the State of the CIO survey said they are involved appropriately early on in mergers and acquisitions.

issue," says Allan Hackney, SVP and CIO at John Hancock Financial Services and veteran of more than 50 M&A transactions stretching back to his days at AIG and GE Capital in the '80s. Joe Beery, the former CIO of America West and US Airways, agrees. "The CIO's role is figuring out how we will accomplish the integration." Beery presided over systems integration for the merger of the two airlines. Although he was involved with the due diligence, he never felt he had the power to say no to the merger, he says. "It was more like, 'We're going to do this deal. Joe, go figure out how to get it done.'" Beery is now CIO at life sciences company Invitrogen (currently merging with Applied Biosystems to form a new

“At least in my experience, never once did a deal get stopped because of some technical issue. — Allan Hackney, SVP and CIO, John Hancock Financial Services

So face it. The CEO and the board, in hot pursuit of a market opportunity or acting in response to competitive pressure, are likely as not to stampede past the CIO and set goals for the transaction based more on back-of-the-napkin estimates than thorough study. Even when the CIO is intimately involved, he probably won't have veto power over the deal. Instead, the CIO's role is more often to set realistic expectations for how long integration will take and what it will cost. Here, CIOs who have been through multiple mergers and acquisitions share their best advice for what to do when a deal is less than ideal from the IT perspective.

You Figure It Out "At least in my experience, never once did a deal get stopped because of some technical 50

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company, Life Technologies). He describes the experience of integrating the airlines so that they could operate as a single carrier within 24 months — a goal CEO Doug Parker had publicly committed to achieving — as "tough and grueling". The single carrier goal meant US Airways had to meet specific Federal Aviation Administration standards for unified operations, requiring the integration of many back-end systems. Although he pulled it off, Beery says, "I'm not sure I would wish that kind of activity on my worst enemy." Charles Beard, who spent years consulting at the Oliver Wyman division of Marsh & McLennan and KPMG Consulting (now BearingPoint) before becoming CIO at Science Applications International Corp. (SAIC), notes Beery's experience as

an example of how the structure of a deal can significantly influence the IT strategy that a CIO must follow. In the America West and US Airways transaction, the decision to immediately integrate the two carriers had a major impact on the IT environment. If the carriers could have come together under a holding company structure operating separately, that business strategy would have dictated an entirely different — and more easily executed — IT strategy for supporting the merger. Beery could have provided some common services to two independent air carriers as an interim step. For that reason, Beard argues that even the due diligence phase is too late for the CIO to be getting involved. He or she should really be part of the discussion about the shape of a deal to help guide decisions by handicapping the odds of success. Depending on the intent of the transaction, the CIO can design the technical due diligence and contemplate the impact on the current IT environment. He can provide these findings to corporate development during transaction negotiations. Beery says he was involved in making those strategic decisions and ultimately saw the logic of pushing for full integration. Too often, however, the CIO's role is merely to cost out the implications of a decision that's already been made, Beard says. And even when the CIO is consulted, he says, "once the decision is made, it's our job to salute smartly and carry out orders."

The Top Priorities The good news, sort of, is that whether or not you've been involved with due diligence, your first steps after a merger or acquisition may be similar. The systems of a large organization are too complex to be taken in by the quick peek the acquiring firm is allowed before a merger is consummated, says Graham Seel, CIO at California Mortgage and Realty. Seel spent two decades at Bank of America and worked on mergers including those with NationsBank and FleetBoston and the acquisition of Continental Illinois. But in a shotgun merger, there's pressure to work faster and more intensely to prioritize which systems

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Integration must be integrated first, as well as to structure the new IT organization, says Peter Blatman, a principal with Deloitte. So when the order to merge comes (whether from your CEO, a bankruptcy judge or the government), it's a good idea to know where to start. "If it were me in one of these situations, I would concentrate on a few things that are must-dos, where the faster you do them, the more likely you are to avoid problems," says Hackney, the John Hancock CIO. First on his list would be to control and integrate financial systems — not necessarily merging general ledgers but figuring out how to consolidate the numbers and integrate accounting practices. "In those systems lies the truth about what's happening with the company," he says. "The sooner you can peer into that data and really understand the situation — and the sooner you surface any surprises, any issues, any smoking guns lurking in the background — the better." Even when there's adequate time for due diligence, you learn to expect some surprises, he says. Second on Hackney's list: network and IT security integration. "The sooner you can reconcile their security policy to yours, the sooner you can link their networks to yours, which allows you to assimilate the acquired people more quickly," Hackney says. Unfortunately, the CIO typically doesn't find out about security weaknesses until after the deal is executed, he says. In a previous role, Hackney saw security weaknesses surface with the acquisition of relatively small firms in India and Southeast Asia. They had a greater tolerance for information security risk. "Security can be a real hindrance to bringing an acquired entity into the fold," he says. Hackney would make integration of financial, security and also distribution systems his top priorities in any acquisition, but he says they would be even more urgent in a distressed one.

Maintain Momentum While no one likes to be rushed, in some ways urgency is a CIO's friend. That's because the early days of a merger are when you're likely to get the most accomplished. "If you can't get majority of the work done on IT integration within the first six months, it doesn't happen," says Deloitte's Blatman. The merger team typically builds up "a good head of steam" at the beginning of the process, Blatman says, but tends to run out if integration drags on too long. Often, a merger team that was pulled together ad hoc, on short notice, can lose momentum as people drift back to their old jobs. In many instances, hybrid solutions and workarounds that were supposed to be temporary tend to calcify and become permanent. Blatman has seen the consequences in a series of recent consulting engagements where "companies are asking us to help them consolidate systems that are the results of acquisitions that happened years ago, but the integration was never done." "The back office is where you tend to lose momentum," Hackney says. In the short term, systems that aren't visible

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When Your Company is a Target

Three ways to prepare in case your company is acquired.

merger or acquisition takes two. And any company can be an acquisition target. even if you don't see an acquisition coming your way today, it doesn't mean you're in the clear, says Albert eng, former senior advisor with cerberus capital Management, the private equity firm that acquired an 80 percent stake in chrysler last year. eng conducted IT due diligence for cerberus. you can increase the chances that your IT department (and maybe you) will survive when another company has yours in its sights if you're prepared. Here's how eng suggests you get ready for integrating your company into another. run tHe numBers: The acquiring company is going to want to assess your IT organization, says eng. If you're prepared, structuring the deal will make the process more efficient and support a more accurate valuation of your company. document and refresh your IT strategy, systems architecture, projects under development, analysis of past projects and, of course, IT costs. eng wants to see long-term and detailed budgets in order to know how well the IT organization is performing. Most importantly, make sure you can show quantitatively how your department adds business value. "Most IT leaders falter at this part of the process because they don't have the experience to align costs with business value appropriately," he says. unDerstanD all your assets anD intangiBles: When you're joining two businesses, you're also integrating two groups of people. It's not enough to understand the capacity of your systems — you have to know the strength and weaknesses of your employees, too — and be able to communicate them to the acquirer. get riD oF BaD HaBits: When being acquired, it's an opportunity look in within your IT department for inhibitors to a cost-effective integration. Obsolete or undocumented technology, poor management of your IT budget and inflexible workers can hurt your chances at a successful merge. —By Jarina d'Auria

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Integration to the customers can operate in parallel without any dramatic consequences. The pain comes later, when the business must meet some broad requirement like compliance with the Sarbanes-Oxley Act, which requires programming changes to be made in multiple systems that serve the same function. "The other place it hurts you is with your next acquisition," which will need to be integrated into multiple backend systems rather than a unified one, Hackney adds. "If the possibility exists that you're going to be doing another two or three acquisitions, that's going to become unmanageable at some point if you don't do the integration." One obstacle to speedy integration may be the aversion IT managers have developed to ‘big bang’ integration projects that often fail. Jan Brecht, VP of IT management and CIO for the Americas with Daimler Financial Services, was advised by consultants to take an incremental approach to spinning off Daimler Financial's operations after Daimler and Chrysler decided to split up in 2007. But with the support of his CEO, Brecht successfully squeezed it down to eight months, rather than the recommended two years. Although this was a divestiture rather than a merger, the scope of the challenge was similar, involving a transition for all Daimler Financial's systems away from Chrysler's applications and datacenters. The incremental approach would have been the safer course, Brecht says, but it came with trade-offs. During the transition, Daimler would have had to maintain temporary interfaces between the new systems it was phasing in and the old Chrysler systems, and those interfaces would have introduced their own complexities. Brecht ultimately decided the cost of that hybrid solution outweighed the risks of the alternative. "If you're determined to do it as fast as possible, while having enough contingency plans in place to manage the risks, then you can dare to do a big bang," Brecht says. Making it work required a tightly coordinated plan in which many tasks that are usually performed sequentially, 52

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such as development and testing, were instead performed in parallel (with incremental testing of functionality as it was delivered). The team also went through five practice launch events before the official go-live and drew up 14 contingency plans for potential problems they anticipated. For example, before going live on the newly separated system, data had to be ported over from Daimler Chrysler over a Saturday night. If testing revealed problems with data accuracy, the first contingency was to retest and re-extract the data up until a deadline of Sunday at noon. If that didn't work, the next backup plan was to abort and go back to using the DaimlerChrysler systems for one week, then try again. Like Blatman, Brecht says that in a merger, he would be wary of temporary

“To state the obvious point that gets ignored all the time: Mergers are about people. I've seen that obeyed to great success and I've seen it ignored at great cost.” — Graham Seel, CIO, California Mortgage and Realty

solutions that bridge between the systems of two firms rather than combining them. For example, if IT does too good a job of providing management with a unified business intelligence view that obscures the lack of integration between the underlying systems of merger partners, the funding to complete that integration may never materialize, he says.

Architect for Success If you're trying to figure the odds that a merger is in your future, the fact that we're heading into a recession actually has a mixed impact. Particularly in combination with tight financing, a poor economy saps the confidence and ability of firms to execute these transactions, says Tayo Olatoyan, a senior research analyst with the FactSet Mergerstat service. According to FactSet, there were 295 mergers between U.S. companies in November, down 38 percent from the peak of 653 in July. During this period, the dollar value of those deals dropped 98 percent. A similar pattern unfolded during the last recession, which started in the wake of the 9/11 terrorist attacks and stretched into November 2002. The total number of merger transactions for 2008, as of late December, looked likely to drop about 32 percent, compared to 2007. On the other hand, when mergers are driven by desperation (or, in the case of some financial services companies, the promise of a big tax break), things can happen suddenly. Whether or not you see a merger coming, you can increase the chances that you will be successful by being prepared. For example, you might be able to make your systems more merger-ready by embracing service-oriented architecture (SOA), a network-centric approach to defining modular information services that can be recombined to create new applications. Because it anticipates the need for integration, SOA is supposed to make it easier to connect systems from two different companies so they can function as one. "I think a CIO today really has to be planning and designing and developing their architecture to accommodate merger

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Integration and acquisition activity," says Beery. SOA is "one good option" for pursuing that goal, he says. Beard notes that SOA would be more useful if both parties to the merger had embraced that style of integration than if only one had. That's part of the reason why, if you can, it's so important to find out early what a merger partner's systems architecture looks like and how up to date it is, he says. Beard sees potential merger help coming from other recent technological innovations, such as software as a service and cloud computing, because the merged organization can more easily tap into an externally hosted customer relationship management application or storage utility than it can integrate in-house systems. "You can use these solutions and not have to bring them into a datacenter that may already be constrained," Beard says. Deloitte's Blatman says the client who impressed him most with its acquisition prowess made technical architecture part of a broader strategy, which also involved developing several standardized ‘playbooks’ for handling different sizes and types of acquisitions. "They asked themselves, 'If we're going to continue to grow by acquisition, what do we do with our IT infrastructure to make it acquisition friendly?'" he says. Among other things, the company's approach led to a decision to phase out proprietary software applications in favor of commercial packages. One reason: It tends to be easier to import another company's business data into a more broadly used commercial application than a homegrown one, Blatman says.

Put People First Integrating technology is important, but it's not the main reason mergers succeed or fail, argues Seel of California Mortgage and Realty. "To state the obvious point that gets ignored all the time: Mergers are about people. I've seen that obeyed to great success and I've seen it ignored at great cost." Other key factors Seel considers obvious but which "in the heat of battle we tend to forget" are how well the merger team bridges corporate cultures and pays attention to customer needs.

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“Once the decision is made, it's our job to salute smartly and carry out orders. It's like: 'We're going to do this deal. Joe, go figure out how to get it done.'" — Joe Beery, CIO, Invitrogen

When Seel worked at Bank of America during its merger with Continental Illinois, he learned quickly how vehemently many at Continental Illinois opposed the deal. During a visit with the Continental Illinois team in Chicago to work on IT integration and related aspects of the merger, he identified one influential, midlevel customer service executive who was outspoken in her opposition. A key turning point in the merger process came when he, somewhat nervously, took her to lunch. "I made her aware that she had enormous influence and that she had a choice of how to use that influence. It was about an hourlong conversation, and at the end of it we went into a meeting, and from then on she was talking about, 'Here's how we're going to make this work,'" Seel says. Later, during Bank of America's acquisition of FleetBoston, Seel recognized that the IT staff had been given very little information about how they fit into the merged IT organization. To bring them into the fold, he asked them how they saw their role. "I asked them to tell me: What are you proud of? Tell me what you think you bring to the table. And they were still talking about that years later." Of course, the problem with easing employees into a merged organization is that they already suspect, with good reason, that some of them will wind up losing their jobs. That can be a terrible distraction, says Steve Terry, CIO and senior vice president of customer operations with Beneficial Financial Group. "So what you want to do is find the keepers and the people who are going to be set loose," he says. "The sooner you do that, the sooner the acquisition is going to be successful."

Unfortunately, when everyone is under pressure to do more with less, you can't offer even the survivors very many assurances that their jobs will be secure for more than a few months, Terry says. But you should try to offer whatever conditional assurances you can, he says. "You may be able to say, 'This is the team for the next six months, and if we do everything we can to be successful — and we can do it — then there should be no more layoffs.'" While Terry has definite opinions on how to manage mergers and acquisitions, Beneficial's strategy has been to avoid them. "We had some very significant conversations about how we pursue growth," he says. Their analysis of the cost of acquisitions led them to a strategy of organic growth through new products or geographies. "It turned out to be a good education for my peers to understand the cost of technology if we take on something different than what we have," he says. In particular, he underlined the challenge that would come with absorbing another company's policy management system and possibly having to run it in parallel for years if they could not find a single system to model the logic behind both firms' insurance policies. The business world would be a better place if that kind of analysis were more common, Terry says. "I believe the CEOs and CFOs who come to value IT's contribution as a deal maker or deal breaker will make much wiser investments of corporate capital." CIO David F. Carr is a freelance writer. Send feedback on this feature to editor@cio.in

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4/14/2009 4:58:25 PM

Essential

technology Web 2.0 tools can help IT leaders reach beyond their corporate firewalls for cost-free advice and best practices from external sources. Here's what you need to know.

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From Inception to Implementation â&#x20AC;&#x201D; I.T. That Matters

Collaborating Beyond the Firewall By Cindy Waxer Collaboration | Overwhelmed by the plethora of disk encryption software options

available today, Richard Morton, chief administrative officer at financial services firm InvestLinc, desperately needed assistance selecting just the right solution. Morton, who acts as the Ohio-based company's CIO, required a program to protect the highlysensitive information residing on employees' laptop computers. He considered soliciting feedback from a high-priced consultant, a seasoned systems integrator and his own IT team. Instead, Morton sought the guidance of perfect strangers. That's because Morton is a member of Spiceworks Community, part of a free, Webbased collaborative IT management application that lets IT professionals develop, share and rank best practices, products, services and reports. Welcome to the world of Web 2.0 IT management, where collaborative tools like Spiceworks are granting CIOs unparalleled access to external brain trusts. Morton is one of a growing number of CIOs reaching beyond corporate firewalls for advice on IT-related

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essential technology

topics ranging from best practices to quick software fixes. Faced with limited internal resources and whittled budgets, they are embracing the Web 2.0 spirit of collaboration once reserved for renegade developers and Open-source pioneers. In fact, many of today's collaborative IT management tools — such as FiveRuns' TuneUp, Paglo Community and AlterPoint's ZipTie — are based on or incorporate Open-source technology. "CIOs are searching for a way to save money and to gain more efficiency so they're looking beyond their own organization for advice, input and access to new people," says Jeffrey Mann, a Gartner research VP and agenda manager for collaboration. But while CIOs are finding that today's collaborative IT management solutions provide rapid and cost-free responses to major IT hurdles, there are regulatory and confidentiality

and IT inventory capabilities, Morton estimates the solution saves the firm nearly $100,000 (about Rs 50 lakh) in technology expenditures. "There's a whole community out there willing to share and offer a non-biased opinion on the applications that you're interested in," he says. "The value is huge." Benefits extend beyond free advice from external experts. Michael Coté, analyst and IT management lead with RedMonk, a research firm, says these communities allow CIOs to build a name as indispensable team leaders in tough economic times. "The more chances you have to show off and document how smart you are to potential and future employers, the better," he says. Although not an Open-source solution, Spiceworks was developed using the Ruby on Rails Open-source platform. But there are plenty of Open-source IT management tools to choose from. Open-source vendor FiveRuns

There are regulatory and confidentiality issues to be considered when stepping outside the firewall to solve problems. issues to be considered when stepping outside the firewall to solve problems.

Money-Saving Advice In Morton's case, after sifting through a Spiceworks Community thread on hard disk encryption applications, he found TrueCrypt, a freeware solution earning raves from community contributors. "Freeware has always been a bit scary to me," says Morton. "Whenever I've looked at hard drive encryption applications, the freeware packages always seemed complicated for end users." But ‘high votes’ from fellow IT professionals convinced Morton to deploy TrueCrypt — a move that saved InvestLinc an estimated $4,000 (about Rs 2 lakh) in software expenses. What's more, because Spiceworks is completely free (the software is supported by ads) and provides InvestLinc with help desk

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recently unveiled its TuneUp service, which lets administrators take a snapshot of a problem they're encountering with a Rails installation. By loading this snapshot onto a public TuneUp community, participants can solicit feedback and receive suggestions for quick fixes. Paglo is another example of an Opensource collaborative IT management solution provider whose online community not only lets subscribers swap best practices, it also lets them publish dashboard formats for system, server or network monitoring to the community. "The idea that different companies would pool raw data and information beyond their firewall creates all sorts of interesting possibilities," says Coté.

publishing proprietary information is an invitation to disasters such as data theft, denial of service attacks and regulatory compliance violations. "I've seen people reveal their entire IT inventory," says Morton. "You have to make sure that the information you put out there doesn't contain sensitive data." Some vendors, like Paglo, automatically strip content that's been submitted so that syntax — not data — is shared with the community. Contributors can also opt to have information stay within the confines of their company. However, warns Coté, it's up to a CIO to create a ‘filtering process’ for online collaboration, as well as strict usage policies. Community size is also something to consider. "You want to be in a community that's large enough that it smoothens out the bumps," says Coté. Spiceworks claims 500,000 members. "Inaccurate data will get into the community no matter how cleansed it is, so you can't believe everything you read on the Internet." Drawing from the collective wisdom of your peers can sometimes compromise workplace productivity. Morton recalls a Spiceworks conference where a member was rewarded as ‘a power contributor’ to the community. "I leaned over to the person next to me and whispered, 'Does this guy have a job? Where does he find the time?'" he chuckles. No wonder then that many CIOs prefer a low profile within these communities, clearing center stage for developers with plenty to share and less to lose. Fortunately, reducing one's exposure to risk doesn't have to eat into the value proposition of online collaboration. With the right amount of distance, discretion and critical thinking, today's collaborative IT management tools can help CIOs tap into the masses for expert IT advice. CIO

Proceed With Caution But seeking the advice of virtual strangers also creates new risks. For example,

Send feedback on this feature to editor@cio.in

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4/14/2009 6:23:12 PM

Pundit

essential technology

KnowYour SaaS Facts If you don’t have all the SaaS facts, you could look like an ass. By Thomas Wailgum

| New research from Gartner attempts to throw some cold water on the hot software-as-a-service (SaaS) market. In Gartner Fact Checks the Five Most-Common SaaS Assumptions, VP and distinguished analyst Robert DeSisto writes about the assumptions the IT industry has made about SaaS apps. He is concerned that if companies are deploying SaaS based on false assumptions, and they'll be seriously disappointed. I've been bullish on SaaS apps. I'm excited because it SaaS offers companies more choice and greater flexibility in satisfying business users' needs. I'm well aware that SaaS isn’t perfect. But it’s improving. Perhaps I've made some assumptions about the SaaS market. And as my father always says: never assume anything, because you can make an "ass" out of "u" and "me." Assumption 1: SaaS is less expensive than on-premise software. DeSisto says that SaaS is only less expensive than on-premise software during its first two years in operation. "SaaS apps will have lower TCO for the first two years because SaaS apps do not require large capital investment for licenses or support infrastructure," he says. But after three years, he continues, an on-premise deployment can actually be less expensive from an accounting perspective, because companies can write down hardware depreciation costs associated with the deployment on their balance sheets. My take: I wonder how much companies care about five-year TCO right now.

I.t. Delivery

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Companies may be willing to take the twoyear TCO savings and worry about the fiveyear TCO later. Assumption 2: SaaS is faster to implement than on-premise software. Simple SaaS implementations will be faster, says DeSisto, but SaaS deployments are becoming increasingly complex as companies require greater customization and greater integration with existing systems. That complexity slows down deployment. "Vendors neglect to say that SaaS deployments can take seven months or longer," says DeSisto. My take: With ERP and CRM on-premise installs still being measured in 12- to 18-month standards, I don't see a seven-month long SaaS deployment being too problematic. Assumption 3: It is priced like a utility. Many SaaS providers say customers are only charged on a pay-per-use basis — similar to electric companies — but for most SaaS deployments, the pay-as-you-go model isn't the case, says DeSisto. "In the vast majority of cases, a company must commit to a predetermined contract independent of actual use," says DeSisto. "In some cases, the app lends itself to metered use but for the most part, utility examples are in the minority." My take: DeSisto makes a great point here, and it is one that companies need to check out before signing any SaaS contract. Assumption 4: SaaS does not integrate with on-premise app and/or data sources. This is false. DeSisto says there are two primary ways to integrate SaaS offerings with

After three years an on-premise deployment can actually be less expensive. on-premise applications and/or data sources. "The first method is batch synchronization, which initially involves loading the SaaS app with data. Once this initial data load has been made, data can be incrementally synchronized on a scheduled basis," he says. "The second method is real-time integration using Web services. Another way to combine the two methods is by having a Web service trigger based on an event occurring in the SaaS service," DeSisto adds. "Yet another method is emerging that involves integrating SaaS apps at the userinterface level through mashups." My take: If business users and CIOs are assuming that this is the case, then they need to talk to a SaaS vendor ASAP. Integration technologies have a come a long way. Assumption 5: SaaS is only for simple, basic needs. In general this assumption is false, but there are still limits to what companies can do with SaaS, says DeSisto. "There are industry examples in which complete custom apps have been built using SaaS APaas (application platform as a service)," he notes. "However, some gaps remain for complex, end-to-end processes that require complex workflow or business process management capabilities." My take: As DeSisto correctly notes, SaaS vendors have been dogged by a reputation that their products were simply for limited CRM applications. And that has definitely changed. CIO Send feedback on this column to editor@cio.in

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4/14/2009 4:59:33 PM