CIO February 15 2009 Issue

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From The Editor-in-Chief

So, you’re feeling the impact of the slowdown. So, your budgets are a

The Silver Lining Experience outside IT is going to be critical this year.

fraction of what you’d like them to be. So, this year management is driving home the fact that IT is indeed a ‘support function’. So what?

When the bubble bursts, the chips are down, and the economic mood turns from nervous to nasty, you’d have to be stoned silly or overly optimistic to reflect on the upside that the situation represents. But, there’s no denying that the downturn has opened a path to your future career growth. And how? By getting CIOs to focus on issues outside their IT fiefs.

Veteran IT leader Prince Azariah believes that “A good fallout of the situation is that I, a non-accounting person, have had to learn costing to present cases to my top management to prove ROI, since times are tough.”

The MRF CIO seems to be on to a good thing. But, I believe that this initiative can be about more than just picking up an additional skill.

Simply put, this moment of economic A P&L responsibility or flux that we are passing through is a a customer-facing role is great point in time for CIOs to target a smart way to gain the roles outside of IT. For one, given the business savvy that CEOs stretch that organizations expect of their are starting to expect. staff, taking on an additional profit-andloss responsibility or better still a role that’s customer facing is bound to gain you brownie points. Second, it’s a smart method to gain the business savvy that organizations and their CEOs are beginning to expect from their IT leaders. Then again, it’s an opportunity to take your career and point it CXO-ward.

In fact, last year, when research firm Gartner quizzed IT recruiters on what their clients were looking for in future (and current) CIOs, it discovered that organizations are increasingly on the look out for CIOs with experience outside the IT department. Many wanted CIOs who had managed a non-IT business unit at some point.

Gartner’s analysts also found that while professional qualifications and competence are necessary for those wanting to become CIOs, these qualities will not be sufficient in the coming years.

Interestingly, the IT recruiters observed that the experience that CIOs had gained through rolling out ERP systems meant that many had particularly good knowledge and a horizontal view of their organization. Many, they pointed out have reached the position where they are equipped to take on broader, business responsibilities.

What do you feel? Write in and let me know.

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

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content FEBRUARY 15 2009‑ | ‑Vol/4‑ | ‑issUE/07

I PhoTo by SrIVaTSa Shan dIlya

2 8 IT Value

Executive Expectations

COvER StORy pRICE It RIght | 28

vIEW fROm thE tOp | 38 Raman Roy, Chairman, Quatrro BPO Solutions, says constantly changing the rules keeps his company ahead of the competition and IT helps it stay distinct.

Why IT cost management and chargeback technologies can help CIOs eliminate wasted resources without hampering innovation. feature by Denise Dubie and Kanika goswami f

CoVEr: dESI gn by bI nESh SrEEdharan

pLuS:

hOW tO Run A ChARgEbACK pROgRAm | 36 Because it’s easy to digest the concept of a chargeback, CIOs can be lulled into thinking that it is easy to implement. Here’s how to ensure your chargeback doesn’t bite back. feature by Kathleen Lau f

Interview by Sneha Jha

Career SuRvIvIng A LAyOff | 48 To help you mentally and emotionally, a career coach offers seven tips for surviving a layoff and finding a new job. feature by meridith Levinson f

Cloud Computing StORm In A Cup? | 52 As fears around cloud computing’s reliability. grows, it’s got CIOs wondering if it is worth their time. But are these fears just hot air? feature by Stephen Lawson f

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(cont.) departments Trendlines | 11 Data Breach | Slowdown Speeds Up Data Theft Quick Take | Vikas Gadre on Datacenter Collocation Voices | Balancing Data Security With Accessibility Research | SaaS Contracts:Big Deal Internet | Tracking Those Dirty Google Searches Opinion Poll | What is Your Top Priority This Year?

Study | Inline With Online Selling Web 2.0 | Enterprise Wikis: Busting Myths Networking | Optical Chip Leads to Terabit Ethernet Web | Internet Bus for Indian Villages Alternative Views | To Spend on Innovation or Not

Essential Technology | 55 Customer Focus| A New Look at CRM

Feature by Bill Snyder Pundit | Be a Partner

Column by Michael Hugos

From the Editor-in-Chief | 2 The Silver Lining

By Vijay Ramachandran

NOW ONLINE

4 4

For more opinions, features, analyses and updates, log on to our companion website and discover content designed to help you and your organization deploy IT strategically. Go to www.cio.in

c o.in

Case File Rural connect | 44 Reach and speed are two market differentiators that are key to Mahindra & Mahindra Financial Services’ thriving financing business. Empowering its field force with wireless handhelds, the financial institution is widening its lead from its competitors in rural India.

2 4

Feature by Gunjan Trivedi

The Strategic CIO Focusing On the Big Picture | 18 CIOs are well-positioned to help companies take better advantage of all investments — not just IT. Column by Chris Potts

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ADVISORY BOARD

Advertiser Index

Abnash Singh Publisher Louis D’Mello Associate Publisher Alok Anand

Editor ial Editor-IN-CHIEF Vijay Ramachandran

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Kanika Goswami

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Chief COPY EDITOR Sunil Shah Copy Editors Deepti Balani,

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VP & CIO, Mahindra & Mahindra

SENIOR Designers Jinan K Vijayan, Jithesh C C

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

P C Anoop, Prasanth T R Photography Srivatsa Shandilya Production Manager T K Karunakaran DY. Production Manager T K Jayadeep Ma rk eting and Sa l es VP Sales Sudhir Kamath GENERAL Manager Nitin Walia

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Managers Ajay Adhikari, Pooja Chhabra

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55, 56 & 57

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

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

4&5

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Lead Designers Vikas Kapoor, Anil V K,

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Alaganandan Balaraman

Des ign & Production Lead Visualizer Binesh Sreedharan

President, IT Operations & Center of Excellence, UCB Pharma

Microsoft

IFC

Molex

IBC

Novell

9

C.N. Ram Rural Shores Chinar S. Deshpande CEO, Creative IT India Dr. Jai Menon Group CIO Bharti Enterprise & Director (Customer Service & IT), Bharti Airtel Manish Choksi Chief-Corporate Strategy & CIO, Asian Paints M.D. Agrawal Chief Manager (IT), BPCL Rajeev Shirodkar CIO, Future Generali India Life Insurance Rajesh Uppal Chief GM IT & Distribution, Maruti Udyog Prof. R.T. Krishnan Jamuna Raghavan Chair Professor of Entrepreneurship, IIM-Bangalore S. Gopalakrishnan CEO & Managing Director, Infosys Technologies Prof. S. Sadagopan Director, IIIT-Bangalore S.R. Balasubramnian Exec. VP (IT & Corp. Development), Godfrey Phillips Satish Das CSO & Director ERM, Cognizant Technology Solutions Sivarama Krishnan

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Slowdown Speeds Up Data Theft Although, layoffs can fray employee loyalty, and there certainly is money to be made selling all kinds of corporate data. But according to Bromberger, companies that have their employee exit processes in order have less to fear from laid-off workers. It's just that with the current economic squeeze, people's motivation may be changing An economic slowdown can create other computer security problems too. As businesses fail and are bought, that churn can lead to management chaos within IT groups. Workers aren't sure how to report security concerns, or to whom, and existing controls may not be monitored as roles are switched and jobs are lost. In addition, workers may not want to report security issues for fear of jeopardizing a co-worker's job or drawing unwanted attention to themselves.

Ignoring security problems can be costly. The average security breach results in a loss of $4.6 million ( about Rs 25 crore) in intellectual property and costs about $600,000 (about Rs 3.3 crore) to clean up, DeWalt said.

"We don't have the good risk models and as a result people are taking risks," said Eugene Spafford, a professor of computer science with Purdue University who contributed to McAfee's report on its survey data. —By Robert McMillan

IllUStratIon by MM Shan Ith

D a t a B r e a c h Is the worsening economic situation going to turn some employees into data thieves? That's a top concern amongst IT decision maker. A McAfee-sponsored worldwide survey of IT decision makers, found that 42 percent of respondents felt that the laid-off employees represented the biggest IT security threat caused by the recession.

And 36 percent said that they were worried about security problems caused by employees in financial stress. Crime rates spike during hard times, and with thousands of workers being laid off each week now, there may be an added incentive for fired employees to take intellectual property with them to bolster their chances of getting hired with a competitor, to use with a start-up company of their own, or maybe even to sell.

"The economic downturn across the board is going to provide additional motivation for people who would want to do harm," says Seth Bromberger, an information security manager with PG&E.

Quick take

Vikas Gadre on Datacenter Collocation I n f r a s t r u c t u r e Datacenter colloction is gaining traction as a preferred technology solution. Sneha Jha spoke to Vikas Gadre, CIO, Tata Chemicals, to find out why he decided to collocate his datacenter. Here's what he had to say:

offerings of our IT outsourcing partners are all based on stringent SLAs, which ensure the availability of IT systems and applications as and when the business needs them. Moreover, we are insulated from various retention and recruitment related problems.

Why did you collocate your datacenter?

Instead of managing and maintaining our IT infrastructure indigenously, we decided to outsource all of our infotech services.

We not only saved costs in terms of deploying workforce to maintain IT infrastructure, we also managed to ensure higher availability and higher performance with minimal investment in resources.

Today, I am the only employee in Tata Chemical's IT department.

Is it a viable option for CIOs from any vertical?

In my opinion, datacenter collocation can be quite a practical technology option for any CIO who has adopted IT to enable commercial transactions. However, I believe it may not be a viable for certain super-sensitive institutions such as the RBI, the Income Tax department, stock exchanges or defense establishments.

What were the other benefits?

The most prominent benefit is SLA-driven high performance of IT services, aptly mapped to the business requirements of Tata Chemicals. The service

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Vikas Gadre

Did you need specific security arrangements?

Security arrangements are a critical component of SLAs with an outsourcing partner. The threshold of optimal security is continuously monitored and maintained by the partner, ensuring IT services are completely secure and available to the enterprise.

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How Do You Balance Data Security With Accessibility?

People, processes, business: everyone and everything has to stay connected. But how does a CIO know when access is too much access or when security stifles growth? Snigdha Karjatkar asked some of your peers and here’s what they had to say: securIty

“Clearly defining the processes to users helps every one. When data is clearly defined — for public domain and authorized personnel — it is easier to define accessibility. Then, the onus is on users. ” trenDlInes

Virender pal p Cto, Spicejet

“We use tools like MPLS network, IVPN, and digital signatures. Data security is important but at the same time data must be available where ever and whenever it is needed.” rajesh Munjal head- It, t, Carzonrent (India) t

“The balance is obtained by ensuring that VPN access is given

to personnel after proper signoff from department heads and the IT head.

External users have to pass the multifactor authentication to gain access to selected applications.”

Veneeth purushothaMan business head-technology t technology hypercity retail

lend Your

Voice

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SaaS Contracts: Big Deal research As SaaS applications continue to gain momentum, customers should take certain precautions when negotiating contracts, a Forrester Research analyst has said.

Forrester found that 16 percent of large enterprises in North America and Europe were using or piloting SaaS in 2007, and nearly half were interested, said analyst Liz Herbert.

But those usage number may be on the low side because SaaS deals are sometimes made under the corporate radar screen, she added.

Meanwhile, SaaS contracts have been getting longer, Herbert said. "In the past, I saw a lot of contracts that were trial-based, month-to-month. Companies didn't want to commit," Herbert said. But more recently she says she has seen deals as long as five years.

Vendors are using deep discounts, even beyond 50 percent, to help seal such pacts, she said. But steeper price cuts generally go to key customers and are on more expensive products, she added.

Companies that do sign long-term SaaS deals should consider what will happen after the term expires. For example, it is wise to include language in the original pact that limits price increases for subsequent contracts, she said.

Also make sure to get an exit clause, the terms of which might be surprisingly flexible, she added. "I've even seen exit clauses go in [that require] no cause and no fee."

Other contract considerations include a clear sense of expectations around service levels as well as support, such as the number of customizations the vendor will cover.

Above all else, make sure your company's sourcing group and legal team are involved in SaaS negotiations, said Herbert. That's because SaaS contracts today are more like marriages than experimental flings.

In the past, many SaaS applications were "pretty basic, and companies had much easier time switching, which was a huge problem for SaaS vendors," she said.

These days, a customer who wants to switch SaaS providers will likely end up with just their data, she added. To that end, however, SaaS contracts should disclose any fees associated with getting their data back, Herbert noted.

A Forrester report on SaaS by analyst Ray Wang touched upon the worst-case scenario of a SaaS vendor going bankrupt. "Choose a financially viable SaaS vendor or seek a software escrow-like mechanism," Wang wrote. "Most contracts do not include the software escrow protection mechanisms found in on-premise contracts."

—By Chris Kanaracus

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Tracking Those Dirty Google Searches Two Google searches produce the same amount of CO2 as bringing water to a boil on your stovetop, according to research from Harvard University, which Google claims is flawed. According to the report just carrying out a typical search through Google can generate about 7 grams of carbon dioxide. Alex Wissner-Gross, the Harvard University professor that authored the report, says that even just browsing a basic Website can generate about 0.002g of CO2 for every second it is viewed. Sites with complex video can bring even more CO2 in the atmosphere, somewhere around 0.2g per second.

Google, however, is arguing 7 grams is way off and is trivial compared to other CO2-spewing activities, such as driving.

One search query releases the equivalent of 0.2 grams of CO2, wrote Urs Hölzle, Google's senior vice president of operations on a company blog. It's difficult to see how either Wissner-Gross or Google come to their conclusions since no technical detail is provided.

However, the disparity may come from the fact that Google and Wissner-Gross are measuring different things. The

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researcher's study covers a search query from a desktop computer, which could include the emissions caused by running that PC. Google's response focuses on the datacenter.

Google estimates one search, including a share of the energy spent building the search engine's index, uses 0.0003 kWh of energy, or 1 kilojoule. An average person's body consumes around 8,000 kilojoules of energy a day, and so one search would use the same amount of energy a person burns in 10 seconds, Hölzle wrote.

The energy consumption of a search query pales in comparison to vehicle travel, Hölzle wrote. The European Union standard for vehicle emissions is around 140 grams of CO2 per kilometer driven, so most cars generate enough CO2 for a thousand Google searches just traveling one kilometer, Hölzle wrote.

"We've made great strides to reduce the energy used by our datacenters, but we still want clean and affordable sources of electricity for the power that we do use," Hölzle wrote.

Google uses a metric called power usage effectiveness (PUE) to gauge its

datacenter efficiency. PUE is a ratio of the total power consumed by a datacenter to the power consumed by all of the IT equipment used in a facility. A PUE of 2.0 shows that for every watt powering IT equipment, one watt is used to cool and distribute power to the equipment.

The US Environmental Protection Agency estimated in 2006 that typical datacenters have a PUE of 2.0 or higher, but that figure would drop to 1.2 by 2011 due to new cooling techniques. Google says that its PUE average now is around 1.13.

That efficiency has been gained by using more efficient power supplies, efficient voltage regulators on motherboards and by designing server racks to use as little fan power as possible, says Google.

Estimates put the IT industry's greenhouse gas emissions around 2 percent of the world's total, about equivalent as the airline industry. But technology companies have come under increasing pressure from environmental organizations and consumers to become more conscious about emissions and other issues such as equipment disposal.

—By Jeremy Kirk

What is Your Top Priority This Year?

21%

Create top line revenue growth

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33%

Enable business process innovation

24%

Lower the operating cost of IT

23%

Manage IT infrastructure more efficiently

Source: CIO IT Budget and Staffing Survey

Infograp hics BY p c ano op

At a time when everything seems crazy, CIOs are turning to business process innovation.

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inline with online selling Poor economic conditions and shrinking marketing budgets are giving way to online advertising in Singapore, according to a Frost & Sullivan study.

The report found out that online advertising is being recognised for its ability to achieve precise targeting, measurable ROI and its cost-effectiveness. As today's youth is being hooked onto the Internet, advertisers and media agencies alike are cashing in on this. This age group has subsequently become one of the primary drivers of online advertising in recent years, said Frost & Sullivan industry analyst Kamlesh Kalwar.

The study found that the market was worth $142 million (about Rs 710 crore) in 2007 and forecasts it will reach $413 million (about Rs 2,065 crore) by end-2013, growing at a compound annual growth rate (CAGR) of 19.5 percent from 2008 to 2013. In 2008, Singapore's online advertising industry was estimated to have raked in $190 million (about Rs 950 crore) in revenues, representing a year-on-year growth of 33.7 per cent.

Paid search advertising, by far the largest online advertising segment, accounted for 44 percent of Singapore's online advertising revenues in 2007. This segment is expected to continue growing at a CAGR of 22.1 percent between 2008 and 2013.

"Companies have not only started to see the value of online campaigns, but also recognise the importance of tracking campaigns. This is driving the growth of paid search," pointed out Kalwar. As the segment rapidly grows, the number of search engine marketing advertisement networks and agencies has also risen exponentially, leading to more innovative search and targeting options for advertisers, he added.

Although Singapore's online advertising sector accounted for a paltry 4.8 percent of the total advertising expenditure in 2007, the outlook for this young industry is promising.

"As users spend increasingly more time online, a growing number of companies are launching commercials online to grab their attention," said Kalwar. By 2013, online advertising is expected to account for more than 9.3 percent of Singapore's total advertising expenditure.

Fraud, however, is a major challenge for the industry, noted Kalwar. Issues such as advance fee fraud, click fraud, credit card fraud, foreign exchange scam, employment scam, phishing and wire fraud, among many others, affect online businesses.

"It is important for the online industry to make a united effort in curbing online fraud to increase advertiser confidence in the online media," said Kalwar. —By Jack Loo Study

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2 . 0 A member of research firm J. Boye says she's encountered an organization that, after implementing an enterprise-wide employee wiki, realized it didn't exactly have the right culture to bring it to life. She lists three myths surrounding wiki implementation that might make some organizations rethink the expectations they've built around their platform: Myth 1: Wikis will motivate users to contribute content.

It won't happen automatically. Jespersen describes the "Empty wiki syndrome," or when a wiki is deployed without a clear purpose or is too general in its focus, resulting in a site with almost no activity. It helps, says Jespersen, to appoint someone to manage the wiki, ensure there is structure, and that it is launched with content already posted because "it's very hard to just react to this empty space for the user."

Successful wikis are often driven by IT-savvy employees, notes Jespersen. But in general, those tasked with driving the project will be determined by the scope of the wiki, which could be either enterprise-wide or group level. The former, she said, will require a person like an intranet manager, whereas the latter can be managed by a member of each group.

Myth 2: Employees know how to contribute.

The concept of a wiki may be simple, but contributing content is not necessarily logical for casual users. Jespersen says some organizations prefer to refer to existing written policies around content creation that say, for instance, employees are responsible for the content they produce. But policies can be tricky given that the goal is to strike a balance between governance and structure and flexibility, said Jespersen, "but it's difficult not to fall into either extreme."

Myth 3: Wikis will always provide the information employees need.

Although searchability is often a selling point of wikis, Jespersen says the reality is wikis are difficult to search through, unlike a content management system. Content on a wiki can grow faster than the organization can keep up, she says, therefore the wiki managers must perform regular searches and quality checks of the content. —By Kathleen Lau web

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Optical Chip Could Lead to Terabit Ethernet

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N e t w o r k i n g Danish and Australian researchers have developed a chip that efficiently reads 640Gbps optical transmissions and could help pave the way to terabit Ethernet.

The breakthrough comes not on the laser end of the connection by boosting the speed of transmission, but at the receiving end where very high speed, error-free reception is required to sort out multiple wavelengths of signals.

The discovery comes just as 100Gbps Ethernet is in its infancy but predicted to become more common over the next three years.

The new receiver technology relies on a 5 cm optical waveguide, a dramatic

reduction in size over competing technology that requires 50 meters of special optical fiber and is inherently unstable, according to the Optical Society of America.

The researchers say the compact size of their waveguide makes it possible to integrate it with other components to make faster optical chips.

Current top-speed optical networking employs optical time-division multiplexing (OTDM) that creates 64 10Gbps channels on a single wavelength, according to Leo Spiekman, a co-chairman of the Optical Fiber Communication conference. In order to de-multiplex such an OTDM stream, a second control

wavelength of light is introduced to the signal stream to read a particular channel.

In current de-multiplexers, that process takes place on spools of fiber where the length is so great that the signal and the control streams get out of phase, he says.

"You need this type of technology to make terabit speeds on single channels," Spiekman says. "This is one of the enablers for you to go to terabit Ethernet at some point in the future."

The researchers are led by Leif K. Oxenløwe of the Technical University of Denmark and scientists at the Centre for Ultrahigh Bandwidth Devices for Optical Systems in Australia.

—By Tim Greene

Internet Bus for Indian Villages In a bid to make India's rural masses Internet savvy, Google launched an 'Internet bus' that will roll into 15 towns in the state of Tamil Nadu over a period of one and half months.

The bus has Internet connectivity using satellite, says a spokeswoman for Google India. At stops, the bus will provide local people with content in English and the local language Tamil, which will give them an understanding of how the Internet can be used to meet their needs, says Google.

People will be shown videos of how a variety of people including grandparents, small entrepreneurs, and students are already using the Internet to their benefit.

In many cases, people have access to the Internet through cyber cafes in the locality, but they do not use it because they are not aware of the benefits, says the Google spokeswoman.

Depending on the pilot in Tamil Nadu, Google will figure out how to go forward with the bus program.

The move by Google comes even as Internet companies are seeing an increase in demand from rural India for Internet services and content in local languages. A large number of these users are using mobile phones to access the Internet.

About 30 percent of traffic to Yahoo's news portals, for example, is to the local language portals, says a spokeswoman for Yahoo. Most of the users still use the

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English language site besides the site in their local language, she adds. Yahoo has in India portals and tools like e-mail and chat that support over eight Indian languages.

More people are now accessing portals and tools using mobile phones, and about 40 percent of these come from smaller towns, says the Yahoo spokeswoman. People in small towns are more at ease using mobile phones than PCs to access the Internet.

Facing a saturation of demand in the cities, Indian mobile services companies are targeting rural markets.

The rural mobile subscriber base in India grew by over 28 percent to 91 million in the third quarter last year from 71 million in the previous quarter, according to the Telecom Regulatory Authority of India .

Google and some other Internet companies are offering technology to allow access to the Internet using local languages.

Google offers, for example, transliteration in five Indian languages, news in four Indian languages, bi-directional machine translation for English to Hindi, and soft keyboards for a large number of Indian languages.

It also offers versions for mobile users of its search, maps, and Orkut social networking applications.

—By John Ribeiro

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alternative views B Y S n i g d h a K a r j at k a r

Is This a Good Time to Innovate?

Innovate Today Vs Laying Low

"This is the best time to take on projects that will provide business benefits because during a downturn, CIOs aren’t as rushed with the everyday chores."

Prince Azariah CIO, MRF

the best time to take on projects with business benefits because during a downturn, CIOs aren’t as rushed with the everyday chores. For example, during the good times most of the company is normally focused on driving for new business and collect dues, etcetera. But if people don’t buy cars, we can’t sell tires. And when business slows down, everyone’s focus skews to collecting money.

That however, leaves IT with more time to innovate.

My users aren’t the type to bother us with everyday problems, so we can do something innovative, or take on a project which we wouldn’t even think of doing under regular business circumstances.

At a time like this, I would work on getting my MIS to perform better so that my heads-of-departments can get a clearer picture of what’s happening. Each department head needs transparency of process and that is the best piece of process innovation I can give them during a slowdown. I’ve also implemented video conferencing to shrink our huge travel bills, given that we have six factories and over 120 sales offices.

Getting money, of course, for these projects is a big effort. Earlier, I never had to demonstrate ROI. Today, I have to show how much I can save for every one lakh I spend. But one good thing that’s come out of this situation is that I — a non-accounting person — have had to learn costing. It’s actually pushed me to learn something new.

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technologies if we cannot do without them. If it doesn’t directly help the business, I’d rather wait."

Umesh Khandelwal GM-IT, BMW India

At BMW we are not doing anything

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CIOs should not wait for the economy to pick up before innovating. This is

"Given the conditions today, we will only try out new

drastically new at this time, that will only take place when the industry picks up. Given the situation, we believe in putting on hold any project that’s not business critical. If we can run a project without technological innovation, we’ll do that. Given the conditions at BMW India today, we will only try out new technologies if we cannot do without them.

More specifically, business critical means applications that can impact sales volumes — and even then ROI has to be in place. However, innovations with processes or manufacturing technology — those are being put on hold till the slowdown is past us. Even when we’re talking about IT that can help cut costs, we would not choose to buy into expensive innovative technology. Take for example technologies around green IT, and others that can help cut cost in IT. The point is: if it doesn’t directly help the business, I’d rather wait.

There are things that I’d rather have now but management wants me to slow down. There’s been a slash in budgets across the board and we, at the technology level, have to agree to manage with what we get.

Our India office is new — we have only been here for two-and-a-half years — and the overall situation in the auto industry in India is depressed, which is why projects, except for business critical applications, are on hold.

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2/12/2009 7:33:05 PM

Chris Potts

The Strategic CIO

Focusing On the Big Picture CIOs are well-positioned to help companies take better advantage of all investments — not just IT.

S

Illustration by pc an oop

uccess in exploiting technology is rooted in a company's investment culture. The more mature this culture, the more value everyone will see from investing in change and IT. The opposite is also true. Executives that are unhappy or unsure about the value coming from the changes they are investing in need some cultural leadership. As the old IT strategy evolves into the corporate strategy for investing in change, up steps the CIO. In response to long-standing concerns about the costs and value of IT, IT service delivery has matured. Supply-side IT culture is now much more mature than that of many of its customers. Ongoing innovations and improvements in the design and delivery of IT tools are often unmatched by the exploitation of those tools once delivered. As an illustration, Gartner recently noted about business intelligence technology: "after years of investment and implementation no more than 20 percent of business users actually use BI proactively." In such instances, the delivery of IT has not been integral to a successful investment in business change.

Now it's time for CIOs and their executive colleagues to switch focus, from culture change in IT to the investment culture of the business as a whole.

For companies that succeed at integrating IT with all business investment decisions, the benefits will extend beyond better IT decision making.

Culturally, many companies still misunderstand deeply the linkages between spending money on IT and creating value by investing in change. Such misunderstandings reach all the way to the top. As the Financial Times astutely observed back in 2005, "Boards have clamped down on IT spending because of

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Chris Potts

The Strategic CIO

dissatisfaction about the results, as investments fail to deliver on their promise." Now, as boards face up to today's economic challenges, there's every indication they are doing the same again.

Yet the business changes that mean investments deliver on their promise happen outside of IT, and a clampdown on IT spending does not make those changes any more likely to happen.

Change the Business Culture A company's culture is powerful, deep-rooted and potentially ruthless. For those who challenge an incumbent culture, the battle scars are many, but the outcome can be worth it. There may be nothing more rewarding for a corporate strategist than seeing people release themselves from cultural constraints and achieve more of their true potential both as individuals and as a business.

Most CIOs have already taken one or more IT departments through a culture change. They are equipped better than many for leading culture change in the wider company, but need to be aware of some differences. Culture change in IT has typically focused on service delivery and business operations, whereas the CIO's role is evolving into investment management and corporate strategy. It is also very different to lead culture change in your own department with like-minded external suppliers, than it is collaborating in an interdependent network of culture changes across the business as a whole.

It is essential that a CIO, leading a strategy about investing in change, coordinates her tactics with other executives. There's a high risk of unplanned conflict between them, and if it erupts, they will end up battling each other while the corporate culture watches, metaphorically, from the sidelines.

Also, the executive-level culture may need to change first, and collaboration is one of the CIO's options for achieving this.

Thankfully, the CIO's strategy only needs to work on some dimensions of the corporate investment culture, not change the entire culture. So the CIO's first step is to pinpoint the specific cultural dimensions that her strategy needs to change or preserve. For example, what is the predominant focus of the company's innovations? What drives the current strategy for investing in change? How are investment initiatives targeted?

How prominently does the exploitation of changes figure in the culture? I use a one-page diagnosis exercise with 10 questions and four possible answers to each one. After no more than an hour, we have a view of the investment culture that can be verified and then used to set tactics.

consider carefully the value of an investment (whether in IT or something else) at the beginning of the process, in a business case, then let the focus slip thereafter. Even companies with benefits realization in place at the end of the investment process often lose focus on value between investment approval and implementation. By the time changes are delivered, there's no guarantee that the original benefits can still be achieved, or even that the change is still worth making.

Another striking feature of many companies' cultures is the assumption, evident both in the investment portfolio and individual initiatives, that every change will deliver the value in its proposal. Yet a proportion of investments are bound to fail. This can be because assumptions in the proposal turn out to be flawed, the business context has changed, or it becomes clear that the company will not know how to exploit the changes once they have been made. In some companies, it can be taboo for a project manager to report that a change is not going to deliver its expected value after all, and recommend stopping the investment.

At the moment it seems rare to find a company where the exploitation of change is center stage. It is a support act at best, with the main focus on making changes happen on time, to scope and within budget. While many companies

The next level contribution of the CIO beckons. Having changed the culture in IT, it's now time to develop the corporate culture to fully exploit the technology and everything else that the company invests in. It won't be easy. have benefits realization as the final stage in their investment process, especially when IT is involved, few have made the exploitation of change a systemic part of managing business as usual. Only when they do will they see the true value of the investments they are making, whether these involve IT or not.

The next level contribution of the CIO beckons. Having changed the culture in IT, it's now time to develop the corporate culture to fully exploit the technology and everything else that the company invests in. It won't be easy. The existing culture will drive you to behave in a way that preserves the status quo, or even take you down. But with the right strategy, you can change it for the better. And then you will be ready to move on and do it all again. Or something even more rewarding. CIO

Where Companies Need Fixing Having worked this through with many organizations, some patterns are apparent. It's common for a company to

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Chris Potts is corporate IT strategist and CIO futurist with consultancy Dominic Barrow. Send feedback on this column to editor@cio.in

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2/12/2009 6:50:53 PM

Vincent Biddlecombe

Applied Insight

Virtualization Keeps DR Afloat Vincent Biddlecombe, CTO of Transplace, explains how his company used virtualization in a four-step disaster recovery plan — and saved plenty of money.

D

Illustration by pc anoo p

esigning a disaster recovery plan has traditionally forced companies to strike a delicate balance. To create a plan that restores operations quickly, an enterprise needs to invest significant capital. On the other hand, costs can be cut dramatically if an enterprise is willing to withstand longer periods of operations downtime.

During the planning stages and while the computer network runs properly, the forces to reduce costs are felt the strongest and often prevail. But when disaster strikes and the network goes down, everyone starts screaming to get the network up and running again, as fast as possible. Finding a way to walk this tightrope is a major challenge, but with the advent of virtualization, deploying disaster recovery plans that restore operations quickly — and at a reasonable cost — is quite possible.

At Transplace, we developed a new disaster recovery plan based on virtualization when we moved our infrastructure to a new production datacenter in 2007. We also took that time to refresh our hardware and review our overall architecture.

Previously, we ran daily backups and physically moved the data to an off-site location. With this process, we risked being down for a half day if we experienced a problem in the middle of the day. This type of plan also limited us in that we only backed-up once a day, which meant we risked losing a day's worth of work. This plan also required us to have dedicated servers that sat idle except when we executed a recovery.

After we moved into our new datacenter at the end of 2007, we began to plan our new disaster recovery datacenter, into which we moved in February 2008. At the storage level, we deployed network-attached storage and SnapMirror software 20

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Vincent Biddlecombe

Applied Insight

from Network Appliance to create virtual storage for our database and application servers. The former allows us to send copies of all changes to our backup facility on a near real-time basis without impacting the performance of the applications.

Anytime a record changes in production, it sends a copy to our disaster recovery facility. This shared-storage approach also allows us to manage storage centrally. We buy storage only when we need it.

At the database level, we deployed IBM P570s with AIX as the operating system, leveraging its logical partitioning technology. This combination allows us to partition each server to look like multiple servers, and we can run multiple database servers by sharing the capacity of the individual servers. In the disaster recovery facility, the database server runs four to six copies of Oracle that we use for testing and development most of the time, but if the need arises, we can shut down the virtual servers and run the disaster recovery instance of Oracle on that same server. This also allows us to make the most efficient use of our Oracle licensing costs, which are charged by each physical CPU core.

At the application server level, where we run VMware and Windows on Dell servers, the content of each virtual machine is also replicated to the disaster recovery site anytime an update occurs. With VMware and IBM database servers, we use a set of servers for testing and development. When we need to run a disaster recovery restore, we turn off the virtual servers for test and development, bring-up the ones for disaster recovery, and we're good to go. All the data and content of the servers is quickly copied over.

least once per quarter. You also need to determine how to measure success so that you can evaluate the testing and document the findings to compare one test to another with a high level of validity.

Step 3: Cutover Documentation You need to document exactly how you will cut over if and when a disaster strikes. There will be some elements similar to the test process, but there will also be differences for how you

We have achieved the ultimate balance: a simple way to recover operations fast — at a relatively lower cost.

Virtualization played a vital role in helping us achieve this.

Four-Step Disaster Recovery Process For enterprises ready to develop a disaster recovery plan, we recommend a four-step process that helps frame the project and ensures a reliable disaster recovery process: Step 1: Enablement Make sure all the data is properly transferring to the disaster recovery datacenter. Ensure that all the proper hardware in the disaster recovery datacenter is in place, will remain stable and is running on up-to-date operating systems. Also, review all applications and decide how long you can you go without each one. This helps prioritize the most crucial applications.

Some applications might need to be restored in less than an hour while you might be able to do without others for up to 12 hours. This part of the plan becomes an internal SLA. Step 2: Testing Develop detailed procedures and processes on how and how often to test the disaster recovery plan. We recommend at

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execute procedures while under a live disaster recovery. With all the pressure your IT staff will be under, it's critical that this step be clearly and thoroughly documented.

Step 4: Returning to Normal Production Infrastructure Just as important as how to cut over to your disaster recovery infrastructure is knowing how to return to your normal production infrastructure. It's not always a case of doing things in reverse, and it's a process you should also test.

Lessons Learned It's important to bring all of the key vendors and your internal IT team into the same room at the same time. This gives everyone a chance to voice concerns, explain how their piece of the puzzle contributes to the overall project, and to understand the functions of the other parts of the project. If you get yourself into a position where you act as the go-between among your vendors, important information will undoubtedly be lost in translation.

Enterprises should take a good look at compression technologies. With all of the data that needs to be copied to the disaster recovery site all day long, it's important to reduce the amount of bandwidth you require so that your network runs efficiently.

Looking back on the disaster recovery plan we started in 2007, we feel we have achieved the ultimate balance: a simple way to recover operations fast — but at a relatively lower cost than traditional disaster recovery systems.

Without a doubt, virtualization played a vital role in helping us achieve this mission. CIO Vincent Biddlecombe is the CTO of Transplace. He has more than 15 years of experience in IT consulting with an emphasis on transportation management systems. Send feedback on this column to editor@cio.in

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2/12/2009 6:52:22 PM

José Carlos Eiras

Peer to Peer

Surviving Tough Times Like a Hero The world is divided into heroes and the scapegoats. How you live through this recession will define who you are.

I

Il lustration by unnikrishn an AV

always thought that I was lucky to be born in Brazil, but the real value of my ancestry became apparent to me only after I became CIO of General Motors Europe. As you can imagine, a lot of my energy was consumed by the process of managing a large, decentralized team that was both multinational and multicultural.

As a native Brazilian, I was considered a ‘foreigner’ by everyone.

That perception offered me a cloak of neutrality that came in handy whenever I had to resolve disputes. It also provided me with a unique perspective on the skills required to manage a busy IT shop in a global economy.

Now seems like a good time to share some of the insights that I acquired at General Motors and other global organizations such as DHL, General Foods and Philip Morris. I hope you will find them useful as you confront the challenges of today.

As the global economy unravels, IT executives face dilemmas of truly mythic proportions. Despite understandable feelings of helplessness, they must still choose their destiny. Whether they emerge as heroes or scapegoats is up to them.

Many CIOs will find themselves trapped in a labyrinth from which there appears no hope of escape. On one hand, they must focus on cost reduction. On the other hand, they must produce tangible results for the business.

Striving for cost reduction, their decisions are driven more by panic than logic. Some of those hasty decisions can make it nearly impossible for IT to deliver the results necessary to sustain the business in times of great stress.

As a survivor of four previous recessions, I can testify that hard times present excruciating business challenges. Hard times also bestow incredible opportunities for building the infrastructures

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2/12/2009 6:53:07 PM

José Carlos Eiras

Peer to Peer

required for future growth. Do you hunker down and wait timidly for fate, or do you seize the moment and act like a hero?

To the sacrificial lambs, I offer my condolences. To the would-be heroes, I offer two pieces of advice: Cut IT expenses deeply, but remember to set aside adequate funds for development and revamping of your systems and infrastructure. Think of those funds as seed money for growing the business.

Whatever you do, make sure that you keep enough money in the budget for retaining your top performers. They will get you through the hard times.

Even if you stop reading now, I hope that you consider those two pearls of advice and take them to heart. If you do, you will increase your chances of surviving through the next couple of rough quarters. For CIOs with genuinely heroic souls, I also offer the following suggestions: Build a great team. As the manager of an indispensable organization within a larger business, one of your primary responsibilities is attracting nurturing, promoting, motivating and preserving talent. This responsibility to find and manage talent extends well beyond the traditional boundaries of the company. A deep pool of talent is a great asset and the best hedge against the uncertainties of a bad economy.

Proactively establish goals for IT. Don't wait for someone to tell you what to do or you'll always be trailing the pack. In a downturn, it's actually easier to set realistic goals and accomplish them than it is during periods of growth. Since all areas of the business are in cost-cutting mode, now is the perfect time to simplify your IT landscape by eliminating legacy systems and redundant components.

Hold all of your vendors accountable.

Make certain they are delivering on their promises to you.

Remember, they're part of your team. If they're not delivering, dump them or renegotiate the price. In today's economy, you can get two projects done for the price of one.

Extract maximum value from existing IT investments. OK, maybe you inherited a bunch of clunky mismatched systems from your predecessor. Go back to the vendors (or their parent companies) and get them to show you how to get the most value from the systems they installed. If they're smart, they'll see your request as an opportunity to build deeper relationships with your team, and they'll jump at the chance to help.

Make sure that everyone knows that you are responsible and accountable. It might seem counter-intuitive, but now's the perfect time for you to step up and take on more responsibility.

Don't be afraid to define your role broadly, and don't hesitate to be accountable. Let's face it: you're going to get blamed anyway if something goes wrong, so there's no point in trying to duck. You own IT, so act like a leader and show your pride. Demonstrating ownership and accountability makes it less likely that someone

else will try to usurp your legitimate role as the company's technology czar. The last thing you need in today's environment is some self-appointed ‘expert’ from a business unit telling you how to run IT, or recommending which systems to purchase from which vendors. I have a simple rule for establishing boundaries: if it looks like IT, feels like IT and smells like IT, then IT-and the CIO is responsible for it.

Build and manage relationships up, down and sideways across the enterprise and beyond its traditional boundaries.

Usability and user acceptance will always be critical issues, so don't forget to include the user base in your considerations.

Act like a CEO. Maybe it will be different in the future, but for the time being, CIOs are the chief executives of complex businesses that exist within larger complex businesses. When you act like the CEO of IT, you generate respect for the IT organization. That respect usually translates into more cooperation from all the various constituencies required to keep IT running smoothly.

Acting like a CEO also makes it easier for you to sell your programs to other C-suite executives, making it more likely that your budget requests will be approved and funded.

Last but not the least, I urge you to think green. Sustainability is more than a trend; it's a reality of global business. It's also a smart strategy, especially when you consider the amount of money that will likely be spent by the US government on green construction and green energy projects in the next four

Don't wait for someone to tell you what to do or you'll always be trailing the pack. It's actually easier to set realistic goals and accomplish them now than it is during periods of growth.

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years. IT can play a crucial role in developing, managing, auditing and analyzing green projects across the enterprise, so do yourself a favor and don't surrender this opportunity to accumulate more responsibility.

When I began my career back in the early 1970s, I never dreamed that IT would evolve into the driving engine of a global economy. Even as the global economy falters, it seems to me that IT is more important then ever.

This puts a heavy burden on the shoulders of CIOs. A couple of years ago, people wondered if CIOs were adequately prepared for their new roles as C-level executives. Now people wonder if CIOs are prepared to face a complex set of evolving challenges in a radically altered economy. CIO

José Carlos Eiras was most recently CIO at DHL Express.Send feedback on this column to editor@cio.in

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2/12/2009 6:53:08 PM

Chris Howard

Applied Insight

Make Every Dollar Count Recession is a good time to prioritize IT spending choices and lay plans for future growth of your organization.

A

Il lustratio n by MM Shan ith

s Caesar Augustus chastised generals who rushed into battle: Festina lente! (make haste slowly!). In these confounding days, with banks collapsing around us, global markets spinning into oblivion, and the shadow of greed darkening the promise of capitalism, this admonition is good advice for us now. Translated into the realm of enterprise IT management, Caesar is telling us to hold up on projects, IT spending and staffing decisions, determine how far ahead we can see, avoid knee-jerk reactions, and take stock of what we have. Acting too quickly without sufficient rationale may expend precious resources in the wrong direction, inhibiting our ability to react when needed.

Even though some organizations will feel greater impact from the tightening economy than others will, this is a good time for all to assess IT spending choices. By continuing to invest wisely during a downturn, an organization strengthens its long-term future. Thanks to virtualization technology and outsourcing, there are some obvious easy wins in the datacenter. Collaboration technologies make it easier to be productive without being co-located.

Deep within the IT infrastructure, cost can be contained by reducing the number of moving parts and redundancies.

In addition, as people and partners move into, out of, and within an organization with greater frequency, well-designed identity management and other security controls for the virtual enterprise add considerable value.

Careful stewardship over existing assets and frugality concerning new investments is good policy — in both weak and strong economic times. Reduced spending doesn't mean that 24

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Chris Howard

Applied Insight

IT has to stand still, but it will force a necessary examination of priorities.

Consider Consolidation Consolidating across and within datacenters is at the top of the list for cost savings. Reducing the number of machines, and even the number of datacenters, provides clear, quick bottom line benefits. Consolidation initiatives usually begin with server virtualization and are now extending to storage virtualization. Burton Group believes that a new wave of client virtualization will soon follow, with greater flexibility, manageability, and cost savings than client virtualization scenarios of the past.

Outside the datacenter, consolidation can also be achieved by: Reducing the number of vendors and suppliers, especially of overlapping technology and services.

Reducing the number of applications installed on users' machines, especially if those applications are not core to the user's job function. This will reduce licensing costs.

Examining and, where possible, renegotiating new enterprise agreements with major vendors to ensure that unnecessary fat is trimmed.

Reducing the number of redundant data sources (also related to data management).

Performing data de-duplication.

Reducing the amount of business process redundancy.

Consolidation efforts are most effective when undertaken within an overall portfolio management discipline. Portfolio management tracks and assesses existing applications and the demand for new functions, with the goal of rationalizing the set of applications to remove redundancies and maximize value.

Manage Your Data Most organizations are inundated with data, with more flooding in every day. This exacerbates an already difficult problem: how to manage data and extract meaningful information from it. Users typically find ways around this by generating extracts, massaging data in secondary tools, proliferating copies, and sometimes correcting the copy so it disagrees with the original. Ever-increasing regulatory pressures force retention for compliance purposes, so data deprecation becomes an important consideration that impacts storage requirements. Reducing the number of data sources and de-duplicating the data in those sources will lead to fewer errors, greater efficiency, and reduced maintenance costs. Organizations should take advantage of advances in database management systems (DBMSs), which provide extended capability for managing and securing data, data analysis, and reporting.

Business intelligence (BI) is used to analyze and report on multiple data sources (both data at rest and in motion)

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To avoid slipping down the 'IT-as-nothing but-anexpense' slope,IT staff must be able to advocate for investment in business terms. to enhance business processes and inspire changes to the organization's business model. Effective BI should keep the organization from missing opportunities for business innovation. In the heightened competitive pressure that accompanies a constricting economy, BI is a wise investment.

Make sure you know what you desire to know, however; otherwise, what appears to be great data mining may tell you nothing at all.

Rent When It Makes Sense Cost-sensitive organizations are taking a hard look at commodity — those functions and capabilities that add no competitive edge or value, but cost a lot to maintain — in their IT shops. Enter cloud computing and SaaS. Cloud computing is best understood as dumb utility computing. That is, it provides compute power but without any business applications or processes provided by the hosting partner. SaaS, on the other hand, combines both external hosting with externally provided business processes and applications. Salesforce.com is perhaps one of the bestknown SaaS applications, although many others provide a host of common enterprise functions.

The rationale behind cloud computing and SaaS is this: it is cheaper to rent capabilities from a provider rather than to build, staff, and operate those capabilities within the enterprise.

As tools to manage dynamic computing in virtual environments improve, Burton Group expects that more organizations will eventually take advantage of moving load around within and outside their datacenters in response to transaction requirements. Today, only about 25 percent of enterprises use virtualization. The benefit of highly dynamic resource allocation is that the organization pays only for what it uses. The more automated this allocation, the more cost savings can be realized.

Emphasize Business Capabilities The more clearly an IT initiative supports a business capability, the better an investment it is. For many IT shops, effectively providing this support requires a shift in the conversation around IT away from purely technical details and toward the business contexts IT supports. For IT to remain relevant to the business and avoid slipping down the 'IT-as-nothing but-an-expense' slope, IT staff must be able to advocate for investment in business terms. IT leaders must understand REAL CIO WORLD | f e b r u a r y 1 5 , 2 0 0 9

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Applied Insight

the investment requirements and map them onto required business capabilities.

Business capabilities are also subject to consolidation.

The non-technical processes of the business domain must be rationalized in the same way as the applications and system functions within IT (that is, using a portfolio management discipline). Over time, and especially in environments with merger and acquisition activities, redundancies across business capabilities will be introduced. It may not be desirable to consolidate all redundant business processes, but some level of normalization will lead to more efficient IT implementation.

In the end, this will reduce cost.

Collaborate Without Collocation New and improved tools for collaboration make it easier to reduce travel. From videoconferencing to sophisticated ubiquitous computing scenarios, users have more options for gathering virtually without loss of productivity.

Certainly, collocation is sometimes more effective, especially when concepts are very abstract, or there are significant human resources issues involved (don't lay someone off via videoconference). This may mean re-alignment of people and roles so that they are co-located and can easily participate face

to face when needed. For those teams that are co-located, it is worth stating the obvious. Don't use conferencing and other tools designed for virtual team meetings when everyone is in the same building (that doesn't happen does it?). There is a cost, both financial and social, associated with inappropriate use of these technologies.

Web 2.0 technologies are a great and relatively inexpensive way to encourage collaborative design and brainstorming.

They (should) also make it easier to find out who knows what, especially when a team member is trying to solve a tough problem. Many organizations are experiencing higher productivity using Web 2.0 techniques. Blogs and wikis also enhance enterprise knowledge and should be indexed for search. If information is easier to find, it will be put to use more quickly.

Remember, collaboration is a human activity. Tools exist to support that activity, but will not create value on their own. In your organization, you may need to solve cultural and political issues before collaboration becomes a natural pursuit. CIO

Chris Howard is VP & service director of the Executive Advisory Program at the

Web Exclusive Burton Group. Send feedback on this column to editor@cio.in

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Cover Story | IT Value

Why IT cost management and chargeback technologies can help CIOs eliminate wasted resources without hampering innovation.

Il lUStratI o n by pc ano op

By DenIse DuBIe

ith no fat left to trim, how can IT leaders keep cutting costs without damaging an enterprise's core services?

Many industry professionals say implementing processes around IT cost management or deploying chargeback technologies can provide the insight that IT and business teams need to better understand how to spend what's left of budgets. These systems can help identify what services IT offers, how much those services cost to deliver, which services are most in demand by the business, and how to intelligently reduce expenses without hampering innovation.

"Cost cutting is not over yet for this year; 75 percent of companies right now are thinking about it, so cost management should be on many CIOs' minds," says Barbara Gomolski, managing vice president at research firm Gartner.

Cost management isn't solely about cutting expenses. It encompasses a set of processes designed to identify services and curb spending on unnecessary or less critical resources. Best practice frameworks such as ITIL have guidelines around cost management as well as IT chargeback, which is a different discipline that involves IT departments assigning a price to each service and billing departments for the services they consume. With such cost transparency, IT can prove its value to the business, and show those it serves what their application or service demands ultimately cost the business.

"Chargeback could be considered a kind of behavior-modification tool. We wanted people to know what the price of services were, because if they knew how much it could cost their department, they would be more cautious about requesting less critical services," says Jake Seitz, enterprise architect at The First American in Santa Ana, California.

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Reader ROI:

Why chargebacks is a way IT can prove it’s value to the business The multiple uses of a chargeback project Why just going through the motions is enough

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Cover Story | IT Value ClarIfy IT CoSTS IT departments struggling with fewer resources might not be in a position to implement a full chargeback system, but many can begin the process of tracking costs and developing a service catalog, industry watchers say.

By putting existing asset and performance management tools to work — add perhaps importing data into a spreadsheet or other document — IT leaders can begin to

see what departments or end users require which services and start to calculate what IT resources are required to deliver the services.

"An intermediate stepping stone is reporting. That means providing periodic reports to their end users showing resource consumption and using this as a means to have discussions to address excesses," says Cameron Haight, research vice president at Gartner.

by tracking, monitoring and charging for IT services, the IT dept at Polaris Software Labs helped project directors bill clients more accurately. It was meant to do that. Then there were other benefits.

Two yearS yearS ago, the It t department at polaris decided to apply a chargeback policy to all our It t functions in order to evaluate the services we provide. We identified four different cost areas. First there was the basic hardware including the desktop and connectivity. Second was special software (which is often expensive). this covers a large list of all the software users can choose from. the third area was network elements like wide area links that are special to some projects. these can be very expensive so they are charged only to users who request it. the fourth area was the UnIX environments, where we need proprietary servers. We use an online method to receive requests and grant each service. Each of these has a fixed rate and a fixed measure, so if users ask for any of them, they know what it is going to cost them.

It took a year to get the basic matrix right. During this time we gained user confidence, identified various processes like software metering, hardware

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metering, and we tracked unutilized resources and missing hardware.

Earlier when It t was a free service, everything started with “install this on my pc.” t today, exchanges with users don’t start that way; conversations with users start with “what will be the cost if I do this.” the finance department, with the whole management team, was a part of the policy structure from the beginning.

Having them on our side made it easier to explain the rationale and get clearance from the management team. but when we introduced the policy, the immediate user reaction was that their demands were being monitored. this resulted in a significant reduction in demand. t two other benefits became evident: users didn’t waste resources, and they were able to demand more accurate rates from their customers thanks to a higher level of transparency. polaris has made two decades worth of contributions to the global financial services marketplace. We realized that assessing the cost of It t services can make a critical difference to a project’s

cost. that was one the motivations behind the chargeback policy: we did not want to hit low-cost projects with heavy It-usage t-usage expenses (which happens if t all projects are billed a flat It t fee). the idea is to get more realistic estimates of profitability for project directors, largely to help them negotiate projects more correctly. In the absence of this policy, we were subsidizing some projects and over-charging others. take for example, a project we ran for t a leading bank that was always under margin pressure because we laid It t cost as a flat charge. the project manager kept telling us there was nothing wrong with the project's margins, but with the It t cost-charging system. after analyzing the project, we realized that it did not use expensive It t services like Wan and Internet links, expensive design and testing tools, shared servers with expensive server software, or the global voice infrastructure. the project benefited immensely when we started charging It t services based on use. as an extension, an employee working at a client’s site and not using in-house

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applications should be removed from the costing process.

Internally, the chargeback policy also made for good model for project capex, since I know exactly what’s being demanded and what’s being used. this data helps me project accurately. additionally, it has given us a way to identify idle resources. one of the keys to the chargeback policy was tracking assets and their utilization. now, we can cut down the maintenance costs of some of those assets. but to stress the biggest business advantage: we now have a pragmatic approach to check the profitability of our

may suspect that the IT spend is not in line with the perceived value. The challenge for IT is to demonstrate the value lost if the IT budget is cut."

Depending on the IT department, the level of detail needed is discretionary, analysts say. Gartner's Gomolski explains that many IT groups make the mistake of assuming cost management and/or chargeback is a project too large to undertake, when in reality it doesn't

projects. We are able to get better realization from customers in whose projects we’re sinking more resources.

Some projects require almost double the It t of others and we are now able to identify which projects are more profitable and those that aren't. that’s why a chargeback policy can directly help with both the top and bottom line. there here is also a compliance angle to this. We have to charge clients realistic figures because they relate to the cost of an item and a chargeback process helps us do that. now ow we don’t subsidize or make a profit. these hese are very real figures, we cannot even make a profit by over-deployment. and although the It t team at polaris olaris has never had an identity issue, appreciating It t is always very difficult. It’s a tough job to handle, but today everyone knows its true value — if a project can afford it, they ask for It t assistance, if not, they keep quiet. Earlier, when there weren’t any figures to depend on, everyone thought that we were judging their demands. t today, oday, that's gone, eliminating some friction at the working level. that’s how a chargeback policy can be conducive to creating

a better working environment. It’s a point our management acknowledges.

For companies of our profile, it’s the right thing to do. In a very uniform company, with no — or almost no — diversity, it may not be so useful; maybe in a manufacturing organization costing out It t resources may not work too well.

For software services companies, this is the way to go — there’s no other way.

Finally, the chargeback has proven to be a timely venture. t today, I’d say most companies have about 20 percent to 30 percent of their resources lying idle. Fortunately, we woke up early to that fact and today we can monitor our resources. We have found ways to better utilize 15 percent to 20 percent of our assets in the last year alone, because we had tracked each asset.

In the current financial year, we have introduced the chargeback policy to finish that. looking back, I’d say it was an act of providence, because today, under the new economic order, when most others have high percentage of idle resources, this policy has given us the benefit of utilizing all our assets optimally.

pH otoS by Sr IVatSa SH an DIlya

Finance teams should also be brought into cost-management discussions to better illustrate for end users how their demands directly impact the company's bottom line.

"Measuring costs helps us manage expenditures and gives us a baseline to compare alternative service-delivery options, including outsourcing," says James Kritcher, vice president of IT at White Electronic Designs in Phoenix.

"With current economic conditions, senior management

V. balakrishnan is cIo, polaris Software lab — as told to Kanika Goswami

e chargeback Looking back, th use ovidence, beca was an act of pr r ou s we utilize today it ensure . ly an — V. Balakrishn assets optimal

are lab cIo, polaris Softw

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Cover Story | IT Value have to be an intricate or sophisticated undertaking.

IT departments should work with business leaders to determine which details are pertinent. The information is readily available today, but what still needs to happen is an organized collection and rationalization of the data within each company. "The most popular cost management or chargeback tool is often Microsoft Excel, and that is OK. It's a start," Gomolski says.

"And for many, beginning a chargeback project doesn't immediately result in charging for IT services. It's about controlling demand."

Doing nothing shouldn't be an option. "IT departments can't afford not to explore chargeback in this economy," Gomolski says. "They cannot continue to operate in an environment where people can basically get as much IT as they want, when they want, and expect to succeed."

direction; gone are the days that IT can be a bottomless pit of resources to other departments," says Rick Vanover, systems administrator at Safelite Auto Glass in Columbus, Ohio. "Finance knowledge is an important part of being an administrator, and chargeback tools will help admins get a grip on what resource are being used or not used."

Vanover uses VKernel's Chargeback Virtual Appliance to manage resources and prevent over- or under-provisioning in his virtual environment. The product works exclusively with virtual resources. Vanover's department doesn't exchange money internally with other groups, but he says the product helps him establish a standard for cost allocation that quantifies resources and educates end users.

"You can put price tags on disk, CPU and memory for such resources, and the value of the information is clear.

You get a good grasp of what is being used in the virtual footprint," he says.

Others say understanding costs and providing a clear follow The Money picture of IT's expenses to a survey of 100 non-It professionals revealed that about the business presents both 75 percent wanted more information about how It budgets benefits and challenges for IT were spent, and that 33 percent felt It investments were leaders. One benefit of tracking not maximized. More than 40 percent said that It doesn’t expenses is that IT could find reveal its technology plans to the lines of business it serves. areas in which it is needlessly spending too much. Then cutting costs wouldn't equate to How is your line of business charged for IT expenditures? cutting resources.

"What IT needs to do is 5% optimize costs. They could other find areas in which they can 24% per Service lower spend while increasing 10% per Seat services," says Donna Scott, VP and distinguished analyst at Gartner. "But 16% without an intelligent and per orderly inventory, IT can 24% application not Directly do nothing but cut blindly, charged and when doing that they 21% might cut the innovation and Flat Fee ultimately the company's Source: appitio competitive advantage."

On the other hand, IT will also be held more accountable for its decisions.

CurB non-CrITICal SpendIng "Knowing these costs encourages responsible use of For many in IT, responding to end-user requests for service desk resources — particularly if consumption applications and services seems like the right thing to do, detail is reported on a regular basis," Kritcher says. but with budgets shrinking IT will be called upon to pick "Transparency also reinforces accountability on the part and choose which requests best serve the business. of IT to provide services as efficiently as possible."

For instance, several IT leaders are seeing an increase in demand for virtual server resources, the thinking being that virtual machines are easy to provision and BrIng ChargeBaCk BaCk don't require an investment in hardware. But that IT chargeback is an old concept that's getting new life doesn't necessarily mean they can be rolled out at no cost as enterprise IT teams struggle to get more visibility to IT. "There is constant financial pressure from every into where their monies are being spent. And some are 32

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Cover Story | IT Value turning to tools from newcomers such as Apptio and VKernel to gain the much needed insight.

"As departments start to lose funding and lose their own dollars, they are coming back to lean on us more and more due in part to the economy," says Jeff Grigsby, systems administrator at Cleveland State University in Ohio. Historically, the university supported ‘mini-IT groups’ across various departments, which now are turning to the centralized IT team for resources such as virtual servers.

"We can't give them the resources for free, we are not set up that way, but we couldn't just guesstimate either.

We needed to get a solid idea of what is being used and what it costs us," Grigsby says.

Grigsby turned to VKernel's Chargeback product to better estimate the cost and assign a price tag to virtual resources. He says the tool has turned up resources that have been going unused and enabled IT to recover those costs. The exercise is managing virtual machine sprawl, and demand is changing how resources are allocated for the better, he says.

"The uptick in demand for virtual resources forced us to go through the process of defining what our services are and who our customers are, and how much hardware,

a chargeback policy can come with a hefty price: it could start a chain reaction in which everyone want to be paid for their services. Worse it could degenerate into a power tool. So, are chargebacks worth the cost? Why J. Sivashankar, Vp and Head IS, Infosys, doesn’t think so.

aT InfoSyS y , our annual It business plan is walked through with the executive yS council for strategic goal alignment before parsing though the board of directors. postapproval by our cEo, we budget for non-discretionary and discretionary spends. nondiscretionary spend typically focuses on ensuring that our digital business engine is healthy, safe and secure at all times, while providing reliability, availability and scalable performance. this spend also includes mission-critical applications, regulatory compliance and projects of strategic importance. Discretionary spend includes the cost of enhancing automation, the continuous improvement of specific business processes and perfective maintenance. post-budgetary approvals, we execute according to plan. business leaders from across the company are involved in the prioritization and finalization of major elements of discretionary spends. this way, strategic alignment with the company is addressed and the non-discretionary and major discretionary spends are well aligned to the company’s operational and strategic aspirations. at Infosys, It is like the air we breathe — it’s essential for our survival. like air, you can’t do without It. and, like air, It isn’t in the limelight but is still everywhere. and air doesn’t charge back!

Having said that, our actual expenses are apportioned back to all business functions as part of a standard accounting process. It’s just that we don’t use the conventional It chargeback method. and if we did decide to go down that road, all other business-enabling

(Continued on Page 34)

Cover Story | IT Value software, CPU and more is used," he says. "It's enabled us to treat IT more like a utility."

For Ravi Ralwada, vice president of on-demand operations at SumTotal Systems, a learning management systems provider in Bellevue, Washington, chargeback provides a way to accurately associate customers with the cost of services provided. He deployed Apptio's softwareas-a-service offering, which provides modeling and simulation features to help companies determine what the cost of a service would be based on differing variables.

"We are not at the point yet of doing chargeback, but for budgeting and cost-analysis purposes, we could evolve our IT group into an internal service provider and better

optimize resources," Ralwada says. "There is an obvious need for this kind of tooling and technology that pulls data from finance, asset, IT and other systems and correlates it all to truly dissect and manage the costs."

First American's Seitz started the chargeback system at his company several years ago when designing and deploying a new datacenter. Aaron Andrews, director of distributed systems, Windows systems and virtualization at the company, helped devise models for units of consumption for the internally developed system. The team now offers other departments a catalog of 135 services that each has been assigned a definitive value. At first, the customers they served pushed back, but now Seitz and Andrews say the IT department benefited overall.

(Continued from Page 33) "Whenever you provide services to people for free functions from marketing to finance, accounting to facilities, Hr and planning, and then there is a bill for quality — every department would charge back too! Just imagine Hr charging those services, it is inevitable It folk for recruiting and placing a recruit in It team. the It team would then that they will experience charge Hr for the use of the recruitment system. the quality team would some type of initial sticker charge It for inspecting the quality of an application and charge Hr for shock," Seitz says. inspecting the quality of the process! the finance department would charge But with the chargeback Hr for making a paycheck to the new recruit, the marketing team would charge system his team developed, corporate for designing ad copy, and so on.

Seitz says the IT group is If you have a mature and It-savvy company, good governance practices able to show the money including business leadership that co-owns It — it reviews portfolios, prioritizes sp e nt and services requirements, steers alignment and drives the realization of business value from delivered — and prove that It — chargeback mechanisms become irrelevant. billing departments isn't In my opinion, when It and business are not aligned, cIos look at chargeback about generating profits. as a governance tool to control and optimize discretionary spends. In most Additionally, the system cases, it is probably done to drive certain behavior — say to make people enables his group to become appreciate the business value of It It or make an advocate for the business people appreciate “IT is like th e air we bre by cost-effectively providing the worth of the I It athe — it’s essential fo r our surviv needed applications department.

It’s my al. And air doesn’t cha rgeback! ” and technologies. honest opinion that "IT was always looked at the overheads of — J. Sivashan Vp and Head In kar formation Syst as a bit of a black hole, but accounting and the ems, Infosys now we have the power of continuous auditing scale to our advantage as one of the mechanism IT organization speaking itself is not worth the trouble if you have the guiding principles well established on behalf of roughly 200 and the organization understands that It matters. plus, there is always the risk of business units," Seitz says. the chargeback mechanism degenerating into a power and control tool.

"By showing zero profit Having said that, cIos still need to control and optimize discretionary annually for the services spend. but there are other methods to tackle this than applying chargebacks provided, we prove the value as a deterrent! of the cost of IT." CIO If the community at large can discern what is good for the company, knows how It facilitates their business, can co-own the realization of business value from It spend and can spend responsibly — you don’t need to have a chargeback policy.

—J. Sivashankar is Vp and Head Information Systems at Infosys.

Denise Dubie is senior editor. Send feedback on this feature to editor@ cio.in

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How to Run a

ChargebaCk

PRogRam

Because it’s easy to digest the concept of a chargeback, CIOs can be lulled into thinking that it is easy to implement. Here’s how to ensure your chargeback doesn't bite back. By Kathleen lau Ian bellard's motivation

Reader ROI:

why transparency in a chargeback program is crucial the importance of assigning costs to things users relate to How to alleviate the complexity of a chargeback process

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for revamping Scotiabank's IT chargeback system was primarily defensive. He wanted to rid the "noise" from client functions that stemmed from the perception of charges as "opaque and not understandable and hence wrong.

"Scotiabank did have a system in place, albeit not transparent, says the vice-president of the office of integration. "The problem is we'd send it back as a block of technology charges. And at that point, a big honking technology charge comes across."

But there were proactive reasons too. Line of business leaders were not taking ownership of their IT expenses, and were not altering their department's consumption of services based on those charges.

IT chargebacks are technology costs that are typically billed back to the departments requesting IT hardware, software or services. The chargeback process is, in part, about managing IT demand, but it's also about managing the behavior that drives that demand, says Craig Symons, vice-president with Forrester Research. As a result, IT departments with crude cost-recovery systems that offer little control often find demand outstripping supply, he says.

CreaTe a SerVICe CaTalogue Creating a chargeback system should begin with IT departments building a service catalogue that forms part of overall service portfolio management, says Symons. The catalogue should convey identified services, associated costs and the level of service that IT can provide.

A catalogue is useful for two reasons. First, IT can begin accumulating data around services consumed, by whom, how often and when, and therefore identify where the demand is high and

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Cover Story | IT Value prevent bottlenecks. Second, line of business users can begin to alter their departments' consumption of services once they see the cost breakdown that tells them "in this new world, I'm paying $10,000 a month for e-mail services, $5,000 a month for help desk services, etcetera," says Symons.

But creating that service catalogue can be tricky, he says, because IT departments often don't understand how to define those services and allocate costs.

Determine Service Costs Scotiabank's approach was to translate charges into services that were relevant to the lines of business leaders, says Bellard.

For instance, they won't care to know about license costs, rather "what's the cost of that thing that's sitting on my desk?"

The general philosophy that was applied to calculating charges, says Bellard, was to assign a cost to things you could "see, touch or feel" and that were associated with cost. For instance, departments were billed for CPUs, disks, and IT staff workdays (estimated daily cost based on salary). Outsourced projects are also charged back in their entirety to the line of business.

The University Health Network (UHN)'s chargeback system determines cost by dividing the overall infrastructure cost between all departments — a formula based on the number of assets (desktops, laptops, phones) in each department, says Cara Flemming, senior director of risk management and decision support with UHN, & controller for shared information management services.

Determining the overall infrastructure and telephony costs was easy for UHN, given the services were managed by external providers who billed the organization, providing a concrete charge, she says. Support services, however, were not charged back to users but instead funded from a central IT budget because support, Flemming explains, was not as strongly influenced by the number of users in each department as was something like hardware.

"So we tried to keep it linked as much as possible to services that were driven by the number of desktops," she says. UHN introduced its chargeback system to allow

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IT to better control asset growth and not lose assets across the multi-site hospital. The move was also to encourage departments to take better care of their technology. Before, all costs were borne by a central IT budget.

Manage Culture Change Symons acknowledged the difficulty with identifying services and costs, but says given the "zero precision" that has traditionally plagued chargeback systems, arriving at a close approximation is a good place to start.

Dissatisfaction with a chargeback system may arise when allocations don't reflect usage of services and hardware, says Symons — as with factors like headcount, revenue, operating expense, and square footage occupied. "The problem is none of those necessarily translate into the actual consumption of IT." But culture often compounds the issue, he adds, making it difficult for IT, which has been operating as a captive technology provider for years and years, to make this shift all of a sudden to become a service

Facilitating the Chargeback Process

T

here are some approaches a company can take to facilitate the whole chargeback process, says Ian Bellard, vice-president of integration at Scotiabank.

When first implementing a system, don't overthink the model — instead, just bear in mind that chargebacks should only include "discrete, measurable things, and not a wildassed allocation formula."

It's also handy to outsource IT infrastructure because the resulting bill includes detailed charges that are easily broken down and conveyed to each department. When determining the cost of a service, bear in mind that someone within the organization might already be calculating it. Find out who tracks it and input the data in the chargeback process.

provider. Also, Symons says, IT departments are reluctant to define services and costs knowing they won't be competitive with third-party providers, causing some departments, if permitted, to choose cheaper alternatives external to the company.

Often software can alleviate the complexity of a chargeback process by making it sustainable and repeatable, and by providing line of business leaders with transparent charges, says Ian Robertson, senior regional consulting manager with Acorn Systems, which provides an application that allows companies to allocate accurate IT costs to operational areas.

The company also provides consulting around business strategy, defining the chargeback process and implementing the software. Besides ridding an organization of too many manual and labor-intensive processes for determining costs, a repeatable methodology is also great for calculating the effect that expanding operations will have on the departmental budget, says Robertson.

Achieve Buy-in Introducing a chargeback system involves typical change management in that it starts with the realization that the IT organization can't keep functioning as status quo, says Flemming.

The heads of IT and finance should champion the new system, she says. "I don't think you can make a wholesale change in a large organization without that."

But on IT's end of things, a chargeback system can mean bringing in new expertise to manage that process, such as service, account and product managers, says Symons. "You really have to start thinking at IT as a third-party service provider."

Some IT organizations have gone as far as to make a profit from services, says Symons, an approach he doesn't recommend because it only amounts to moving funds from one pocket to another. But worse, he says, is when CIOs who are paid based on profit levels make decisions that benefit IT, rather than the organization as a whole. CIO

Send feedback on this feature to editor@cio.in

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VIEW

from the TOP

Raman Roy, Chairman, Quatrro BPO Solutions, says constantly changing the rules keeps his company ahead of the competition and IT helps them stay distinct.

No Risk No Gain

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

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By Sneha Jha

There’s a thing or two people will tell you they know about Raman Roy: that he’s the father of the Indian BPO industry and — if they’re trying to impress you — that Quatrro BPO Solutions, the name of his current company, comes from the Latin for four, because Quatrro’s the fourth company he’s created from ground up.

And then there’s the little-known fact that the double R’s in Quatrro, (the Latin original is spelt with a single R) are the initials of his name. But they could very well stand for risk and reward, which describe the man just as closely as his initials.

In the early nineties, after badgering his bosses at Amex for years, Roy finally convinced them that starting a captive BPO in India made business sense. Everyone said it wouldn't work. He was given the chance, he says, more to shut him up. But he was playing for broke. “I was told I would lose my job if the operation back fired,” he remembers. The BPO became a success and Roy continued to redefine what was 'risky' with his success at GECIS and Spectramind. With Quatrro, he’s at it again: his concept of home agents is changing the rules of the BPO game.

He was there when it all started and he’s still relevant. He’s ensured that his opinion continues to count — not because he’s an old-timer — but because he’s still stretching the contours of the industry.

CIO: You've started four outsourcing organizations from scratch. What keeps you motivated?

Raman Roy: Being an entrepreneur is not about starting a business and

making money from it. It’s about an attitude. Being an entrepreneur begins with belief in yourself. It’s about having an inner drive, about wanting to prove a point. Take for example how many years ago, I had a disagreement with my bosses and I grit my teeth and said

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Raman Roy expects I.T. to: Be a partner in product design and development Be part of the sales process Understand the company’s goals and priorities and manifest them

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how to tackle it. As you attempt different things, trying to actualize your belief, you realize that the challenges are linked to what you are trying to prove and what you are trying to actualize.

That’s why ‘creating value through innovation’ is at the core of Quatrro’s philosophy. If it is something worthwhile, if we believe it has intrinsic value — we want to participate in creating that value. We don’t do business for social service or money, we do it because we want to prove a point to ourselves and to

the world. It’s our belief that if the point we want to prove is relevant then it will have value and it will generate money in the process. This is our fourth venture if you look at the past three; you’ll find that even in the depressed market scenarios, their market value is well in excess of $5 billion (about Rs 27,500 crore).

In this journey, one of my big learnings is it isn’t the end that matters. The journey to the goal is equally exciting.

You must not only enjoy the fruits, but the journey too.

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Photos by DR LOHIA

“I’ll prove to you that this can be done out of India” (That effort culminated in American Express’ captive BPO in India, among the first, of its kind).

Being an entrepreneur stems from a desire to create something unique and different — the events that help identify that can be very different. But once you have that and the belief, finding a path to the unknown and the solutions — that’s what is incredibly exciting.

It isn’t just one challenge. I wish it were then I could have said that I knew

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View from the Top

You referred to a disagreement, what was that about?

During my days at American Express (1984-96), there were doubting Thomases who did not believe that India could be a location for outsourcing, who thought we could not do something international out of India because the country did not have the robust technological infrastructure or the intellectual capital needed to deliver work of international standard.

Then at GE, people had only heard of India as an IT hub — not as a location to establish global call centers. We had to prove that India could be a location by proving that it could handle scalability. Till then, the thinking was that you can get 500 to 700 people but not 3,000. In the next five years, we grew it to about 9,000 people.

But, at the end of the day, American Express and GE were captives. I had an entrepreneurial aspiration to run a true profit center. So, in March 2000, I started Spectramind. The third-party challenge is what we took on at Spectramind. Until then everybody believed that India was only a location for captives. Despite what Amex and GE had proved, doubts prevailed. But we were right about the potential because in less than five years, we became the largest BPO provider in the country, with 16,500 people. We went go on to prove how fertile the ground was for the right kind of services.

Where does the challenge lie today?

Every time I have taken on a new entrepreneurial venture, the challenges have been numerous and diverse. Each of the companies I set up evolved at a different stage of the evolutionary cycle of the BPO industry. In my fourth venture, Quatrro, I wanted to show that different types of models and capabilities were possible.

The challenge this time is to show that 40

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“Outsourcing and offshoring will become an integral part of the solution to the global financial turmoil.

This is going to be a big boon for the industry.”

— Raman Roy sophistication is possible. The challenge at Quatrro is doing things that haven’t been done before — work that is based on knowledge and competency. We do mortgage foreclosures, which is an unknown, nascent and very high-end activity. Quatrro is a nextgeneration sourcing provider. We’re among the few that offer risk management services.

We provide legal solutions and we’re also into interactive gaming.

What about the global financial turmoil? How is that affecting the industry?

It is our belief that outsourcing and offshoring will become an integral part of the solution. We are convinced that countries like India will be a part of the solution. Therefore, for the entire industry, this is going to be a big boon. But that boon will only show after the bottom has been hit, which unfortunately is still sometime away. The BFSI segment will grow four to five times in the next three years. It is a great opportunity for the industry. Right now,

there is turmoil and decision-making has frozen. What will happen in the near-term and what will happen in the medium-term are vastly different. In the near-term, there will be more challenges: a lack of decisionmaking and total inertia, which in the medium-term will lead to newer needs from customers. In my opinion, the downstream in the medium-term will convert into very significant revenue opportunities.

What’s your strategy to get to those opportunities?

We constantly seek new ways of outpacing competition by playing with new rules. We act on the basis of a combination of lateral and vertical thinking. We have always challenged assumptions, generated alternatives, spurred change and found new entry points from which to move forward.

And in doing all of this we have led to a change in perception.

In any venture, there is only one person that matters: the customer. Everything else is a consequence. If you can identify an unmet customer need, and are able to propose a way to fulfill that need in a manner that’s more productive — it could be better quality, better price, better timing, or better time-to-market — you have cracked the secret of engaging your customer. This is what I call readiness to serve.

We kept changing our model to be able to serve our customers better. Success lies in identifying what is more productive for the customer. If the customer wants value for his money and you can create that value for him in way that it creates profitability for yourself — that’s a recipe for profitability.

This is competition at its purest because you are striving to meet a customer’s aspirations.

This is central to a winning strategy.

What is your vision for Quatrro?

The value we deliver provides us competitive distinctness in an increasingly

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View from the Top

cluttered market space. We bring specialized service in whatever we do. We aspire to create value that can act as a catalytic activity to start a reaction. We are looking to create something that adds value and makes path-breaking progress. We want to create something that we can look back at and feel proud and fulfilled about. We want to prove a point to the world.

of this industry. I think it’s a game changer for the outsourcing sector.

SNAPSHOT

What do you think are the major trends in the outsourcing sector?

Headquarters:

Is the concept of home agents that you pioneered part of the game plan? Why did you risk it?

We will see consolidation 83 (both inhouse and others and on the flip side, we will also see niche players emerge, IT is the lifeblood of our CIO: Sunil Gujral which don’t necessarily have company. Since our offerings scale but bring competency are technology-dependent, *Jan-Dec 2008 and capability at a high end. It it is important for us to is not an ‘either-or’ scenario — develop robust technology both will happen. You will see niche players, infrastructure. Speeding up IT competence specialization, scale, dramatic growth, and is the key to enhancing our competitiveness. you will see different business models. In Hence, we make sure that our internal IT some segments, you will see increasing team sits on the panels that devise new customer participation and in others less. products and service offerings. The executive council does not develop new product and service offerings in isolation and then put Speaking of consolidation, it on the lap of IT to find solutions. IT is Quatrro has grown an equal collaborator in product design inorganically. How do and development; it is an equal partner in you manage integration selling to the customer as a part of the sales challenges? process. IT is a significantly higher partner in delivery. They play a predominant role Inorganic growth is a chief component in our success. of our strategy. We have made seven acquisitions in three years. In order to realize the benefits of this strategy, What do you expect of post-acquisition challenges need to be your CIO? addressed effectively. Often, integration challenges are a result of a lack of Sunil Gujral, who heads the technology clear, concise, transparent, honest, and initiative at Quatrro, is a part of management, timely communication. Poor internal from product innovation, to new product communication can undermine all identification and customer acquisition. post-acquisition integration efforts.

It’s a large, holistic thing — giving a CIO Communication is the glue that holds membership to the executive council does not everything together. It encourages trust. resolve everything. Like every other member Articulating a strategic vision and of the team, it is important that Sunil Gujral growth targets is a prerequisite if you understands what our end game is, what want to foster clarity. When we articulate our goals and our priorities are and is able to a situation well, many apprehensions are bring his capabilities to bear. CIO dissipated. This facilitates effective postmerger integration and helps a company Sneha Jha is correspondent. Send feedback on this execute its aims. It is essential to be a patient interview to sneha_jha@idgindia.com

Pioneering is perhaps a better term than pioneered because this is a long process.

The initiative was propelled by our realization that there is a huge amount of latent talent sitting at home. Whether it’s the educated housewife or the educated in non-metros, we saw a vast, untapped talent pool that was not part of the mainstream.

When we pioneered the concept six years ago, our path was strewn with multiple challenges. We worked with the government to overcome regulatory hurdles. Today, Quatrro is the only company licensed to test home agents. There are technological hurdles like the availability of broadband connectivity and robust infrastructure.

We are working with HR to surmount training hurdles and resolve supervisory and talent management issues. Monitoring the quality of work and training home agents is an enormous challenge. We are also working with finance companies to get PCs for all our home agents. There are a lot of aspects that we are trying to architect but the concept has been immensely beneficial. The initiative has the potential to unleash the latent intellectual capital in non-metros.

It has also helped us prune operational costs while enhancing the availability of trained manpower. It has not only optimized costs, but also bridged the metro-non-metro divide. We can leverage this to overcome a spiraling attrition rate that is characteristic 42

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Quatrro BPO Solutions Gurgaon, Haryana Revenue:

Rs 276.4 crore Employees:

2,751

IT Staff:

listener. Acknowledging, assimilating, and attending to what the acquired entity says, is very important because this inspires trust in them. This has been one of our learnings.

What role does your internal IT team play?

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Reach and speed are key to Mahindra & Mahindra Financial Services’ thriving business in rural India.So, it empowered its field force with handhelds, creating 3,000 mini-branches in nine months, and reaped new business benefits. By Gunjan Trivedi

O

ur main business is not to see what lies dimly at a distance, but to do what clearly lies at hand.

– Thomas Carlyle Carlyle, a Scottish essayist and historian, explained the essence of running an effective business, way back in the Victorian era.

A couple of hundred years on, a leading non-banking financial company (NBFC) has taken Carlyle’s ideas literally. Mahindra & Mahindra Financial Services, with its business cemented in rural and semi-urban India, wanted to expand its reach and quicken the delivery of its services across remote areas of the country. So, Suresh Shanmugam, the national head of Business Information Technology Solutions (BITS) and CIO at Mahindra Finance, led a team that helped the organization keep its customers clearly in hand.

Instead of setting up more branches to cover rural India, Shanmugam and his team transformed about 3,000 of Mahindra Finance’s on-field workforce into roaming mini-branches. Armed with wirelessly online handhelds, this mobile workforce ensures that Mahindra Finance reaches the doorstep of its consumers, living in far-flung villages or semi-urban locations. They also act as mini-branches 44

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Reader ROI:

Why agility and transparency are important How automation improves turnaround time How innovation aids in gaining a competitive edge

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(the brick-and-mortar ones can be as far as a couple of hundreds of kilometers away) equipped to conduct financial transactions and update the central servers at the company’s headquarters in Mumbai, all in a jiffy.

The IT team enabled the enterprise to increase Mahindra Finance’s 300-odd fully networked branches to a whopping 3,000 in less than nine months. And that was achieved — without any investment in brickand-mortar infrastructure or headcount.

Missing Links Mahindra Finance, part of the Mahindra & Mahindra conglomerate, is a leading rural NBFC and has about 430-odd branches and about 4,000 employees. The financing major offers personal, vehicular and housing loans, insurance and mutual fund products to rural and semi-urban customers of the country. The nationwide distribution network of the organization soon proved a challenge forMahindra Finance which wanted to rollout out branches faster, deploy IT applications quicker and manage their operations with more granularity.

It is a known fact that agility and transparency are paramount for

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any business to succeed. Adequate interconnectivity and the seamless flow of information help organizations become competitively agile and transparent enough for their senior management to take quick business decisions.

But the expanse and reach of the company looked like an insurmountable roadblock.

The problem wasn’t new. Shanmugam and his team had already ensured seamless interconnectivity with about 418 branches riding on various networking technologies, such as MPLS-based leased lines, VSATs and ISDN connections.

However, despite core business apps interfacing with the systems deployed at remote branches, Shanmugam realized that the organization was wasting a lot of time gathering data in the last mile — between the consumer and the employee. It made all their work look like it just wasn’t enough.

“A l t h o u g h , most of our branches were

networked, we found that we missed crucial information related to business transactions happening outside of our offices. We only had data regarding transactions that happened within our premises. A large portion of our on-field employees and agents were reaching out to consumers at their doorsteps to either initiate business or collect EMI payments. The information captured in that last mile was getting either delayed or lost in translation,” recalls Shanmugam.

The problem also increased the NBFC’s risk exposure since it only had a fudgy picture of how its executives had

Il lustration by unnikrishnan AV

Case File

2/12/2009 7:04:42 PM

Photo by Srivatsa Shandilya

Case File collected from existing “Such last minute updates not only pressurized the consumers in EMIs. branch staff during monthly “Connectivity between our financial closing, but also office and our field executives overloaded the networking was one of the biggest issues SNAPSHOT infrastructure between the we faced. Other than that, MMFSL branches and the datacenter. there was no proper control Employees: 4,899 Further, management couldn’t on cash flow and monitoring get its hands on a timely of performance,” remembers No. of Branches: 436 review of the collection status Santanu Roy, business regional as the information, coming in head (Chandigarh).

IT team: 138 from the branches, overshot That was because, with monthly closing time by consumers staying as far Business Income (2007-08): about 10 days. Monthly books as about 300 kilometers Rs 1,200 crore were taking about 40 days away from their nearest to close. Such manual MIS Mahindra Finance branch, management lost us value in terms of both collection teams traveled for days to meet time and money,” says Shanmugam. multiple consumers and get back to the branch with updates on EMI collection.

These updates, whether cash collection, Reaching Out verbal negotiations, future payment The existing investment in a robust network commitments, consumer queries or any was clearly not delivering benefits because other communication, were then noted of the lost last-mile information. That’s when and entered into the NBFC’s systems.

Shanmugam decided that it was about time This process created a world of they did some out-of-the-box thinking — paperwork, delays and old data. Worse it got and fast. The longer they waited, the more in the way of work at remote branches. consumers and business they were losing.

“MFConnect-3000 ensured that monthly closing of financial books happens on time with less stress on people and technology.”

— Suresh Shanmugam National Head - BITS & CIO, Mahindra Finance

MFConnect-3000, Shanmugam’s brain child, was devised to fix the last-mile problem. This networked mobile workforce initiative promised to take care of all Mahindra Finance’s problems. “Instead of increasing the number of branches to further our reach, we decided to transform our on-field executives into mini-branches to bridge the last mile gap,” says Shanmugam.

About 2,800 employees were equipped with Wi-Fi and GPRS enabled, VisionTek handhelds, running Linux as an operating system, and weighing about 750 grams. The handheld was pre-loaded with indigenously developed custom-made, multi-lingual business application modules to capture on-site data and update the central servers directly through the Internet.

With handhelds at their disposal, a collection executive gets details of the consumers beforehand, enabling him to plan his time and route appropriately. Once on-site, he can either issue receipts to the consumer from the attached thermal ink printer after collecting an EMI payment.

He can also create information trails, address business queries, record customer commitments and note relevant information for further follow-ups, undertaken with the customer at his doorstep.

All this information, riding on a GPRS network, is updated on Mahindra Finance’s central servers directly from the device.

This provides business heads — from the controllers of the collection team to senior management — with up-to-date status in real time.

Once an executive is back at the branch, the cash collected is deposited with an accountant, who in turn updates the systems.

The automated MIS management based on online data flow enables the enterprise to have complete visibility of cashflow. This has a bigger impact than most people assume as the typical size of an EMI is between Rs 10,000 to about Rs 2 lakh. The enterprise can leverage the information captured right from the door-step of a customer to adequately plan business actions and maximize ROI.

Chain of Rewards MFConnect-3000 eased Mahindra Finance’s operations. But that was not it. It brought with it an additional set of benefits.

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Bridging the Gap MFConnect-3000 has reducedMahindra Finance’s turnaround time by 75 percent.

Capturing data on-site ensures the security of payment-related information in case of a loss of manual receipts. The errors at the time of capturing information are avoided by having a customer crosscheck his details.

It also takes away the duplication of work by data entry operators. The day-end cash handover process and the collection of postdisbursement documents and renewal follow-ups have also been made easier.

“This made sure that we are able to relieve significant back-office strength to attend to other critical business activities.

This has reduced our turn-around time on addressing customer queries and requirements by about 75 percent. Moreover, monthly closing of financial books happens on time, without too much of a stress on both human resources and technology infrastructure,” says Shanmugam.

The efficiency and performance of the collection teams can also be examined through timely information updates coming in from their devices. An executive’s incentive is also automatically measured using the data related to the cash collection being captured by the handheld devices. “We justify the efforts of executives to update information and aid timely reconciliation and closing of books as an ‘earn-for- yourself’ endeavor,” says Shanmugam. “Ever since the launch of the handheld devices, we have had proper

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This data, or other information like a change in payment terms travels on a GPRS network to Mahindra Finance’s central server.

updates directly from the field, minute by minute. We tactically capture these updates into our system to generate various types of MIS reports for senior management to address various business scenarios with lower turnaround time,” points out Khalid Abdul, business project head (mobility), Mahindra Finance.

Next Step Keeping in mind the impact mobility has created on the payment collection process at Mahindra Finance, Shanmugam is planning to address the business demand of introducing handhelds to the business initiation teams as well.

Executives who meet customers for the first time want to initiate them into the various programs of the company. This can range from applying for various financial products, seeking thumb impressions, scanning documents for collateral and taking pictures of the applicants. Mahindra Finance wants to enable its executives capture this data on their handhelds.

“Though we planned to make this move within this financial year itself, incorporating functionalities required to initiate business in the handhelds pose technological and cultural problems,” points out Shanmugam.

Creating digital thumb impressions, for example, requires large memory on the

All this data provides business — from the controllers of the collection team to senior management — with increased decision-making ability.

devices. And lowering the resolution of the impressions makes it difficult for the systems to match and authenticate later on.

“Also, photography can be a tricky cultural issue. Since many rural superstitions scare people from being photographed, executives can’t directly photograph an applicant,” says Shanmugam.

Nevertheless, the IT team has already embarked on its testing and trial phase to figure out adequate solutions to various problems before introducing similar mobility infrastructure to generate business in rural India.

In the meanwhile, end-user experience has definitely improved. The organization is also keen on enhancing customer services by delivering new products quickly. “We are now looking to leverage mobile connectivity to better our return on investment,” says Shanmugam.

“Our focus is on the future and we are implementing ideas for tomorrow. We consider IT as our tactical and strategic support as it will help the objective of achieving business growth in a smarter way,” says Roy. Not exactly what Thomas Carlyle prescribed, but just as smart. CIO

Infographics BY pc anoop

After collecting payment from a customer, a MMFSL executive can now issue receipts from a thermal printer attached to his handheld. The payment is simultaneously updated on a central server.

Gunjan Trivedi is assistant editor. Send feedback on this feature to gunjan_t@cio.in

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SecretS S ecret

to Surviving a Layoff

Losing your job can be hard, especially when the economy is bad, but a negative attitude will only hurt your chances of finding a new job. To help you mentally and emotionally, a career coach offers seven tips for surviving a layoff and finding a new job.

By Meridith Levinson

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Career

Don't Leave Without these

I

t's easy to view a layoff as an end-of-the-world situation. Few experiences are scarier than losing your job and the financial security it brings.

The fear and desperation that grip you after you've been laid off are destructive emotions. They distract you from doing the work you need to do to find a new job. That's why you can't let those emotions consume you, says Dr. Richard Bayer, a former professor of economics and ethics who currently serves as COO of The Five O'Clock Club, a career coaching and outplacement network.

"Resist the urge to think of unemployment as the end of the world, no matter how upsetting it may be," he says.

"Think of it instead as an opportunity to improve yourself and to make a fresh start.

Maybe you're going to find out that what you enjoy doing and do well is different from what you were doing. You can end up better off than you were before."

The key, says Bayer, is maintaining a positive attitude because potential employers can detect a candidate's desperation as easily as a shark can smell blood, and they don't like it. To keep a stiff upper lip, Bayer offers the following seven tips for thriving after a layoff, even in a bad economy.

1 NegotIate for the best possIble severaNce package Don't think that you have to accept whatever severance package your manager or HR puts in front of you as is, says Bayer.

Your severance package is negotiable, he

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If you do get laid off, make sure you gather the following documentation before you're escorted out the door.

1 references from co-workers, superiors and subordinates in writing.

2 Past performance evaluations.

3 Letters and e-mails from customers expressing positive feedback.

4 your job description. —M.L.

already included in your HR manual, Bayer suggests politely asking other employees who've been let go what they received for severance.

When it comes to actual negotiations, Bayer advises negotiating one perk at a time, whether it be the money, healthcare or career coaching, rather than going after the whole package. "You always get more if you look at one thing at a time," he says.

"Your mantra should be, 'I just want to be treated fairly.' " Finally, Bayer recommends conducting negotiations on your own, without a lawyer, not just because of the expense. "Once you get lawyers involved, it's lawyers talking to lawyers. You lose a certain amount of control," he says. "Try to work it out with the firm in a congenial way."

says, so don't feel pressured to immediately sign on the dotted line. Take the time to read the severance package, even if it's 20 pages long.

If your employer gives you a hard time, Bayer says to hold your ground and tell the manager that it's not reasonable for 2 the employer to ask you to sign something without first reading it.

DoN't secoND-guess "Sometimes employers will say, 'If you yourself sign this right now, you'll get your best After you've been laid off, you feel deal. If you don't sign it, you'll get a worse vulnerable. When you feel vulnerable, deal'," says Bayer. "I wouldn't buy into that. it's easy to second-guess yourself and to Tell them you have to sleep on it. There's sink into depression. What's difficult is nothing that should surprise them about resisting those negative thoughts. But for you wanting to sleep on it." your own well-being and the success of To help you prepare for severance your job search, you have to, says Bayer. negotiations, Bayer recommends Instead of dwelling on all the reasons consulting your HR manual for why your employer might have selected information about what kind of severance you for a pink slip, Bayer says to remember package you should expect from your that the fundamental reason you lost your employer. That way, you can plan ahead of job was because your employer was having time what other elements of a trouble competing during severance package (e.g., career Reader ROI: this economic downturn, not counseling, health insurance) because you're a bad worker.

What not to do when you might need.

Bayer says to keep in mind that you’ve been fired.

If you require more How to find a new job lots of other talented, hardinformation than what's that you like working professionals are REAL CIO WORLD | f e b r u a r y 1 5 , 2 0 0 9

49

Career

How to Keep

YoUr Job Make a SaCrifiCe Mark Cummuta, who writes CIO.com's CIO Job Search blog, says he gave up several paychecks while serving as CTO of a software and services company that fell on hard times after September 11 so that the company would have money to pay the team. He also paid for servers and networking equipment using his credit card to make sure his company could meet clients' needs.

Making sacrifices certainly shows dedication, but be careful of offering to take a pay cut, says Joanne C. Dustin, a 25-year veteran of the IT industry who's now a career coach. you risk being perceived as having less value if you're willing to accept less money, she says. "you're earning what you're earning because you're worth it."

Be PoSitive "People who are bringing the team down and stirring the rumor mill are definitely the ones who are going to be on the list to go," says Kirsten Dixson, author of Career Distinction: Stand Out by building your brand. "I've noticed that the people who tend to get laid off are those who have been vocalizing their dissatisfaction with their jobs or their company for some time."

Dustin says having a history of playing devil's advocate can also work against you during a recession. She suggets you find a gentler way to express your opinions.

Lead "executives are expected to set the vision and reassure people of the path the company is on," says Dixson. "This is not the time to go in your office and shut the door. Show decisiveness, strength and integrity. Show that you're combating the rumor mill."

Show enthuSiaSM for Your ProjeCtS "The project you're working on right now is really important because you're only as good as the last project you worked on," says Dixson. and let's face it: That's the way personnel decisions are made.

Be a teaM PLaYer Getting along with others is critical during downsizing, especially for IT pros who tend to be independent, says Dustin. "These times require cooperation, flexibility and a willingness to go the extra mile," she says. ed Longanacre, senior vice president of IT at amerisafe, a provider of workers' compensation insurance, says IT professionals who "just sit at their desk or in the server room and do their 8 to 5" are at risk. The problem with hunkering down, he says, is that it gives the impression that you aren’t is not interested in the organization.

adaPt to Change QuiCkLY "If you can develop an attitude that nothing is going to stay the same and that your organization and your job will always be in flux, that will help you cope," says Patricia Stepanski Plouffe, president of Career Management Consultants. "be ready for whatever change may come up." —M.L.

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getting laid off and that you can still be a valuable employee at another company.

"There are still plenty of companies that are in desperate need of quality employees," he says. "There is something else out there for you, and chances are, it's a great opportunity that will improve your future."

3 examINe your fINaNces Take a close look at your expenses and your savings to determine how much money you'll need to cover your expenses during the time you're unemployed, says Bayer. He recommends planning for an extended period of time, like more than three months.

Knowing how much money you have on hand could put some of your anxiety about having lost your job to rest. If instead the exercise of managing your money sends your blood pressure through the roof, you've got new motivation to find a new job.

4 make job-huNtINg your New job Another way to prevent getting depressed about your circumstances is to stay active, says Bayer. That's why it's so important to devote the time you previously spent at your old job to looking for a new job.

"Your new job is 40 hours a week looking for employment," says Bayer.

"Keep busy at it and don't let yourself get down. Try to keep a routine."

By working toward getting a new job, you bring structure and discipline to your life and you'll feel better about yourself because you're taking control of the situation.

"If you do this, you'll find that you have less time to lament your recent layoff and less time to sink into the negative thought patterns that are associated with it," he says.

5 expaND your search Bayer recommends making a long list of industries and organizations in those industries where you could put your

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Career skills and experience to use. "Don't worry too much about who might be hiring," he says. "Just develop a long list even containing companies you don't want to work for."

The reason to include less desirable companies in your search is to put yourself in a stronger negotiating position in the event one of those firms suddenly wants you.

6 approach oNlINe applIcatIoNs aND search fIrms wIth cautIoN Though the Web is an invaluable resource for researching companies, it's not the best medium for submitting job applications and résumés, says Bayer. "If you can do it, about a million other people can do it, too," he says. "I've talked to companies who get hundreds, even thousands, of résumés for one posting. That is not the way to get a job."

Instead, he recommends using your network to make contact with hiring managers inside the companies where you're interested in working.

Search firms may yield little help in connecting you with a new job, says Bayer. "Search firms work best in an up economy, when there's competition for labor," he says. "Right now, there's not a lot of competition for labor. There's nothing wrong with going to search firms. They just don't have jobs right now."

Instead of spending a day at search firms, attend a conference or networking event, says Bayer, where you have the opportunity to make personal connections.

7 stop reaDINg about the ecoNomy Bayer cautions job seekers against paying too much attention to news about the economy because the news is so bad.

"It makes people discouraged when they need to stay optimistic," he says.

"Discouragement is the biggest obstacle to finding a new job."

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SignS your Job Hunt

ISN'T WorKINg...

And ways to improve.

Sign 1: y you spend your time at your computer searching job sites. fix: Mine your network for opportunities. be sure everyone is aware you’re looking for a new job and understands the position you want so they can help you better. Ask your networking contacts for referrals. Use your alumni database to identify contacts at the companies on your target list. Join professional associations to make new contacts.

Sign 2: y you apply for whatever catches your eye. fix: Take the time to write down the position you're seeking, the skills required, the industry you're targeting and ideal locations. Figure out the companies most likely to offer you work and best fit your style. This document will help you focus and direct your efforts.

Sign 3: y you send out a lot of résumés but don't get called for interviews. fix: Tailor your résumé and cover letter to each position you apply for. recruiters will notice you if you customize your résumé and cover letter according to the company and position you're applying for. Articulate why you're the best candidate for job. Focus on what you can do for them. leverage what you have learned about the organization.

Individual cover letters and résumés are time-intensive, but much more effective.

Instead of focusing your résumé on the responsibilities you've held in each job, emphasize your unique accomplishments. Every bullet point should start with an action verb, and you should include quantitative measurements where possible. Include appropriate keywords in your résumé and cover letter. Many recruiters use software to scan for keywords. Finally, proofread your résumé and cover letter carefully. Typos can quickly eliminate you from consideration.

Sign 4: y you manage to land interviews but never get called back. fix: Do mock interviews. You may be coming off as desperate or cocky. Ensure that you are clearly differentiating yourself. Think about what makes you uniquely qualified for the position and how you can address the employer's needs. research the company. Know the names of the executive leadership and the company's competitors. Memorize the company's key financials and understand its challenges. Interviewers want to know you know something about their company. Demonstrate your interest in the position and the company. listening attentively and asking informed questions helps. You show your enthusiasm by telling the interviewer what excites you about the opportunity.

Send timely thank-you notes to each interviewer, reinforcing your interest in the position. Send an e-mail thank you the same day as the interview and a handwritten note within 24 hours. Even if you don't get the job, you will be remembered for future opportunities.

—l lynne Sarikas What's more, prospective employers can sense discouragement and negativity in candidates, he says, and it turns them off.

"If they sense that you're negative or in a panic, they're much less likely to think that you're a good candidate," says Bayer.

"They want someone who's resilient.

They don't want an employee who's discouraged and negative and who will hurt morale." CIO Send feedback on this feature to editor@cio.in

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51

Storm

In a Cup?

As cloud computing grows in popularity so are fears around the technology’s reliability. It’s got CIOs wondering whether it is worth risking dependability for more efficiency. But are these fears just hot air?

By Stephen Lawson

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Cloud Computing

S

Illust ration by ANIL T

ervices that store enterprise data in a cloud on the Internet raise questions that organizations are just beginning to ask, but for all their limitations, they may be no more risky than on-site storage platforms.

The technology behind cloud storage, as well as cloud computing, lets enterprises tap into IT resources without regard to where they're located. So cloud computing typically means relegating primary or backup data to an undefined repository outside the enterprise. By using cloud storage services, organizations can save on capital expenses and on complex setup and administration tasks, proponents say. Putting data in the cloud can also make it accessible from more locations.

Saving work and expense is a key reason why cloud services are expected to grow in the next few years. Last year, 4 percent of worldwide IT spending went to cloud services, and by 2012 that figure will be 9 percent, says IDC. Because of its cost and space needs, data storage is a prime candidate for a cloud solution, and IDC predicts storage will grow from 8 percent to 13 percent of cloud spending in that same period.

huge advantage," McDerment says. "Any business owner needs to figure out what business they're in."

Vaporizing Gains

But handing off any IT function involves some loss of control, and storage raises particular worries. For many companies, information is a core asset, and if employees and customers can't get to it, business grinds to a halt. "Nobody's perfect. The best clouds in the world have downtime," acknowledges John Engates, CTO of Rackspace, a 10-year-old hosting company that has a cloud storage service in beta testing.

So what happens if things go sour with the service provider that's holding on to your data? How easy is it to get the information back or move it on to another provider? There are some dangers that enterprises should prepare for, but it turns out cloud storage may not be as risky as it seems, and possibly no more troublesome than an in-house system, according to users and industry analysts.

If it does come to the point of changing providers, there is likely to be work involved, says IDC analyst Benjamin Woo. "It's much more involved than just saying, 'I don't like this provider. I'm going somewhere else,'" Woo says. For one thing, you may have to change the backup software you use Seeding the Clouds on your own premises, if your new cloud provider's system Vendors are stepping up to fill that demand. Amazon.com doesn't support it. Internal policies and procedures may also made an early splash in cloud computing and now includes have to change, he says. a storage service, called S3, in its offerings. Nirvanix started As for the process of getting back the data held in the cloud offering a cloud archiving and backup service in 2007, and or moving it on to another provider, there are no standards some of the biggest names in storage, including EMC's Mozy used in common across the industry, analysts say. unit and Seagate, have also entered the game.

There's no equivalent in cloud storage of a common Anyone who's pondering how to deal with a cloud storage transport mechanism like SMTP (Simple Mail Transfer provider is already ahead of the game, according to analyst Protocol), says Joe Kvidera, founder and CEO of Procedo, Henry Baltazar of The 451 Group. "Right now, people aren't which provides data migration software and services. Because really (looking out) for this, because they're still weighing out the industry is still in its infancy, vendors are choosing their whether they want to use cloud storage or not. ... It's still a own compression, encryption and transport mechanisms to brand-new market," Baltazar says. differentiate themselves, says Kvidera.

But some companies are getting ready to dive in. Some form But some vendors are taking steps to give subscribers of cloud storage is likely to be a part of the data management more control and make migration easier. McDerment plan now taking shape at Adventist Health. It could be believes it would be easy to move his archived files to another something as simple as hosting videos by hospital chaplains cloud. Rackspace provides a Cloud Files API (application on YouTube, says Adventist CTO Greg McGovern. It makes programming interface) that could be used to write a new no sense for a healthcare company to develop its own video script, he says. Meanwhile, the API allows FreshBooks to player and hosting platform when it can take advantage of the manipulate and arrange its file by changing code, most popular one on the market, he says.

Reader ROI: he says.

FreshBooks, an online invoicing company, is The benefits of a Nirvanix also provides a set of APIs, and it a beta tester of Rackspace's Cloud Files storage cloud has worked out integration deals with vendors of service and will start using it soon to store copies What to prepare backup and archiving software such as Atempo of large files. That will save it from having to for when shifting so customers can keep using the utilities they're manage the files and infrastructure, which is not providers familiar with, says Nirvanix President and CEO FreshBooks' area of expertise, says CEO Mike Inflated fears of cloud downtime Jim Zierick. In addition, Nirvanix offers CloudNAS, McDerment. "Being able to outsource that is a

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Cloud Computing a bridging software that can make the Nirvanix cloud look like any NAS (network-attached storage) drive. Using the Nirvanix API set, it mimics commonly used file systems such as CIFS (Common Internet File System) and NFS (Network File System), Zierick says.

Still, migrating a large amount of data from one service provider to another, or from a cloud to in-house storage, is a major undertaking. The basic Nirvanix service uses the public Internet to move files around, but the company has helped individual customers to rent high-bandwidth lines to handle large one-time shifts to the Nirvanix cloud, Zierick

Tips for Safe Cloud Storage

E

ntrusting enterprise data to a storage provider's online cloud may be no more risky than putting it in a proprietary storage platform in your own datacenter, according to some analysts and users. But there are specific steps you should take to prevent problems.

Rebecca Wettemann, Analyst, Nucleus Research Before you sign on, do a clear assessment of how difficult it is to get your data out.

Find out if there are proprietary tools required to move your data.

Make sure you know about any fees for data migration.

Look for specific terms in the contract covering migration.

Henry Baltazar, Analyst, The 451 Group Ask for a provision that says you can get your data put on a removable hard drive and sent to you at the end of the contract.

Benjamin Woo, Analyst, IDC Don't outsource primary storage. Use a hybrid strategy so primary storage is rapidly available from in-house infrastructure.

Ask the same questions about your cloud provider's datacenter as you would about your own: backup routine? Generator?

Greg McGovern, CTO, Adventist Health Ensure the service fits your company's data management strategy.

Try to use open file formats if possible.

Go through regular exercises to make sure you can retrieve your data.

Make sure you get a service level agreement that suits how you'll need to use the data.

Never outsource something until you are confident that they can actually take better care of your stuff than you can.

—Stephen Lawson

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says. It has even helped customers load the data on a server at their facility and then physically transport that server to Nirvanix for offloading. The company is now talking to storage consulting firms about offering migration services.

Procedo's Kvidera says demand for migration services, which can cost between US$5,000 and $40,000 per terabyte (about Rs 2.5 lakh to Rs 20 lakh), is growing rapidly.

Arguments That Hold No Water Worries about availability and being able to back out of your current platform are actually as old as data storage itself.

Adventist Health CTO McGovern remembers working with mainframes 20 years ago, when critical data was backed up to tape. Two copies had to be made of everything, because some tapes turned out to be unreadable, and the nightly backup process would tie up the mainframe for as long as seven hours, he says.

"The Internet storage model is more reliable, more costeffective and more assured than anything we've done in the past," McGovern says.

Using in-house resources to maintain data gives a feeling of safety and quick availability, but that may be just an illusion, he says. A tape stored in a leaky company warehouse may be less retrievable than data stored in a third-party cloud. Either way, the IT department should go through regular drills to make sure archived data is usable, McGovern says.

Internal storage, one of the most proprietary areas of IT, still has its own costs and pitfalls, says Nucleus Research analyst Rebecca Wettemann. "If all my data is in a proprietary storage architecture within my own architecture ... is it less difficult to get it out and move it to another vendor? The answer is probably no," says Wettemann. The costs are likely to be higher, too, because a company may have large investments in specialized training, hardware and software, she says.

In addition, enterprises are likely to have more leverage with cloud storage providers than with companies that sold them storage infrastructure, Wettemann says. If there's a problem, a service provider will have more incentive to make the customer happy because it needs the next month's subscription fee, she adds.

If push really comes to shove, a cloud storage provider might hold a customer's data hostage. At Rackspace, it's never come to that, says Engates. Nirvanix includes language in its contracts that lets it block a customer's access to data, but the company would do everything in its power to resolve a dispute before it came to that, Zierick says.

IDC's Woo thinks serious conflicts between a cloud storage provider and a customer are unlikely because the service is so simple. "The most optimal relationship to have in a backup scenario ... is a non-existing one," Woo said. CIO

Send feedback on this feature to editor@cioin

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Essential

technology The 360-degree view of the customer used to be a marketing slogan. But SOA and a better grasp of how to align business with IT are making it a reality.

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From Inception to Implementation — I.T. That Matters

A New Look at CRM

By Bill Snyder Customer focus | If customer data is the lifeblood of modern business, Ice.net, a Stockholm provider of mobile access services, was strikingly anemic. The young company was adding customers across Scandinavia at a brisk clip, but its IT infrastructure provided little insight into who those customers were and how they could best be served.

"The definition of a customer can differ quite significantly depending on what department of a company you talk to. It may be something completely different to the logistics department than it is for the sales department," says Thomas Norberg, CIO of Ice.net, formerly known as Nordisk Mobiltelefon in Sweden.

Norberg realized that building systems to enable a unified view of customer data was a critical need. But not so long ago, he and his team would have been out of luck. Building what customer relationship management (CRM) vendors like to call the ‘360-degree view of the customer’ used to be a painstaking process that generally revolved around monolithic products from a single vendor.

What's changed? Ice.net's transformation relied on a number of widely applicable trends and breakthroughs that include the rise of service-oriented architecture (SOA) and the use of shared-information data models. Companies are also learning that the keys to REAL CIO WORLD | f eb r u a r y 1 5 , 2 0 0 9

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essential technology

developing a flexible and unified CRM system include mapping IT to business processes and bringing IT and line-ofbusiness organizations closer.

It'sAllAbout the Data Ice.net had only been providing service for a few months when Norberg joined in early 2007, but its IT infrastructure was already incapable of supporting the young company's growth. "Even companies with no legacy systems can wind up with data in silos," says Gartner analyst and Vice President Ted Friedman. As a result, "they get the opposite of the 360-degree customer view."

SOA, when empowered with strong data management practices, can enable that 360-degree view since it can breach the walls separating data with reusable services. But Friedman adds that "we see a lot of SOA projects and investments being

customer is finding a common language. In the last few years, various industries have developed shared information data models, or SIDs, that give exact definitions of categories such as customers or suppliers.

Ice.net drew on the work of the TM Forum, which represents companies in telecom, cable, media and the Internet.

Ice.net needed to build its systems architecture around that data model.

Norberg chose two products from Progress Software, an enterprise service bus (ESB) called Progress Sonic, and a data integration tool called Progress DataXtend Semantic Integrator.

Looked at schematically, services such as credit control are plugged into the ESB like Lego blocks, says Norberg. When a new service is ready, the old one is pulled out and replaced.

DataXtend is used to create exchange models or mediations between applications

SOA,with strong data management practices,can enable a 360-degree view since it can breach the walls separating data with reusable services. made without a lot of thought about data.

Ask the average [IT] guy what SOA is about and he'll talk about business process and componentizing applications."

Norberg would agree. "The key is to realize that [a modern IT architecture should be] all about information and how it relates to other information." Step one in developing a data-oriented approach to the

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and services with different structures and semantics, or definitions.

The first pilot project, integrating the company's online store with the customer and product databases, began in March 2007, and was rolled out in under four weeks. The company used an agile development methodology to add other segments quickly so that by April 2008,

70% The number

of large businesses that deployed SOA in their organizations in 2008.

Source: Forrester Research

nearly all of Ice.net's departments were able to access clean, consistent data, whether it be related to the customer, order intakes or order fulfillments, in real-time.

Align BusinessWith IT Financial services giant Capital One has approximately 50 million customer accounts roughly 100 times that of Ice.net, but it faced a similar challenge. Capital One had diversified from its core credit card business and, by the end of 2006, had made several acquisitions, including two banks.

"We really need to know who the customer is across different products and what our relationship is," says Capital One CIO Robert Alexander, who saw that storing data in isolated silos was a business obstacle. First on the list for transformation were online services and e-mail. Customers with multiple Capital One products did

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essential technology

not want to navigate multiple Websites to transact business, and the company needed control over the content, volume and intensity of e-mails it sent to customers.

Alexander's team created what he calls “a single point of truth" about customers by linking the data warehouses in each line of business with a unified data warehouse that reflects information from them all.

To limit data replication, Capital One selectively pulls the data from the lines of business and adds it to the central, or analytical, warehouse. (Capital One chose not to disclose its technology partners.)

SOA, and its use of standards and reusable services, is a best practice that the company has implemented across its IT infrastructure, including the new enterprise customer management team, says Alexander.

The team focuses on using technology to enhance customer experience through channels and activities that no single line of business owns, such as Internet marketing and sales, online servicing, customer e-mails, and mobile banking.

What's striking about the transformation is Capital One's move to align business processes with IT. Alexander created a team of representatives from marketing, IT and operations, all of whom ultimately report to him. Why marketing? Their closeness to customers means they are in a position to spell out IT requirements needed to improve customer-related issues, he says.

Creating the single point of truth took about seven months in 2007, as part of an ongoing effort to deliver a new enterprise online servicing platform.

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SOA Adoption Covering Ground in APAC A Springboard Research study says that service-oriented architecture and Web services are gaining attention in APAC software development communities.

Organizations in the region have indicated a higher state of readiness for adoption of serviceoriented architecture (SOA), according to survey by Springboard Research.

"We found high incidence of IT best practices like standardizing IT infrastructure and middleware technology, deploying Web services and a strong awareness of products and technologies critical to SOA deployment, which augurs well for increased SOA adoption in the coming years," said Balaka Baruah Aggarwal, senior market analyst-emerging software at Springboard Research.

The survey also revealed that the overall pace of SOA adoption has slowed as it has become more mainstream, with many planners yet to deploy SOA and a majority of SOA implementers expecting to increase their investments in SOA this year.

"The adoption cycle for SOA in APAC is going through the natural maturation process typical of most IT-related markets," said Michael Barnes, vice president of software research at Springboard Research.

"We find that SOA initiatives here are less a specific objective or design point and more of an approach that has quickly become an integral part of other IT projects, such as new application development, business process management, and application and data integration," Barnes added. The survey revealed that the biggest primary reasons for SOA adoption by APAC enterprises are for application integration (18 percent), data integration (12 percent) and reducing the time and cost of delivering new services (9 percent). Further, 72 percent of overall respondents have deployed Web services (and adopted Web services standards), helping to ensure a steady, ongoing demand for SOA-related initiatives that leverage those standards. These findings are from a Springboard survey of 343 CIOs and business managers of SMBs and large enterprises in ASEAN (Singapore, Malaysia, and Philippines), Australia, India, China and New Zealand.

—Jack Loo

The creation of that 360-degree customer view is a big step forward for Capital One, as it was for Ice.net. Five years ago, that leap would not have been feasible.

It's still difficult, but a new approach

to architecture and business alignment is making what was once a marketing slogan a reality. CIO Send feedback on this feature to editor@cio.in

2/13/2009 10:20:39 AM

Pundit

essential technology

Be a Partner Business isn’t going to walk hand in hand with IT until we’re ready to truly partner with them.

Here’s how.

By Michael Hugos alignment| I’ve had some interesting conversations about the role of business analysts and the best practices most of them use for requirements-gathering. And I’ve noticed a major contradiction between our desire to be effective partners with the business and the way we go about gathering system requirements.

The contradiction is this: current best practices lead us to gather requirements for a new system by using procedures that, right from the start, cause tension and adversarial interactions between IT and business people.

For example, best practices recommend that business analysts conduct one-on-one interviews with stakeholders. The business

try to predict the future anywhere from nine months to two years and describe all the possible system capabilities they will need. Then, when the world turns out to be different from what they predicted and they come back with new requirements, we call it scope creep. We shove the hundreds of pages of written requirements back at the users and ask why they didn’t think of them during the interviews. Is this any way for IT and business to work together in a real partnership?

Relations between business and IT people are seriously strained by all of those best practices: the one-on-one interviews, the requirements documents that rely mostly on lengthy text descriptions, and traditional waterfall project lifecycles. If we address these

can show workflows, entity relationship diagrams can define logical data models, and storyboards of screen layouts can illustrate how people will interact with a system. Words are always prone to misinterpretation, and we all know that a picture is worth a thousand of them. So we should primarily use diagrams and pictures, turning to text only for notes that clarify particular details.

And finally, instead of long systemdevelopment lifecycles where you ask business people to predict the distant future and identify everything they could possibly need months in advance, use a short, development approach that delivers working systems every 30 to 90 days. This way, business people have to identify only

The current requirements-gathering process is about as friendly as being grilled by a police detective. People know that what they say will be used against them. analyst proceeds to conduct one or several interviews and produces a lengthy (and often incomprehensible) written document, which interviewees must then read carefully and sign. Imagine the impression this makes: the process is about as friendly as being grilled by a police detective. People know that everything they say will be used against them.

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three problems, IT will go a long way toward establishing the productive and mutually rewarding partnership.

Instead of one-on-one interviews, business analysts should facilitate joint application design sessions with groups of business users. As people brainstorm and share their ideas, real creativity and outside-the-box thinking can occur. Instead of writing textheavy requirements documents, we should rely mostly on graphic formats for capturing requirements. Business process maps

what they need right away, and we in IT give them fast solutions to their most urgent current problems.

Then, as users gain experience with the new tools we have given them, and as the world unfolds, business and IT people can continue working together to define, design and build ongoing releases of new system features. Now that is what a real partnership between business and IT looks like. CIO Send feedback on this column to editor@cio.in

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2/12/2009 7:08:10 PM