CIO March 1 2009 Issue by Sreekanth Sastry

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11/18/2011 11:45:07 AM

From The Editor-in-Chief

India is probably the only country in the world where you can send e-mail to a

The Solution is ‘Jugaad ’ A great response to a world out of control.

person who doesn’t have access to the Internet, a computer, phone, or heck, even electricity. And, how? For Rs 10 and an A4 sheet, postmen will receive, print and hand deliver e-mail anywhere in India (or vice versa), typically within a day. How do you provide ‘last mile connectivity’ in a nation where only six percent of the people can access the Net and fewer still can read? India Posts’ admirable reply would be: ‘With our feet, and privacy be damned’. It’s jugaad. A quintessentially Indian response to a world that you do not control. Jugaad ’s as much about making do with the hand life’s dealt you as it is about coming up with a creative response to a challenging situation. This is jury-rigging, this is side-stepping, this is making do, this is working around. But, it’s a whole lot more as well. At a basic level it’s about creating redundant systems, like the way urban India puts in water purification devices at home and at work as it doesn’t trust the fluid that comes out of the tap. At another level, it’s Jugaad ’s not just about a about thinking on your feet for assured work around or creating continuity. So that when the chips are redundant systems. It’s down the business of life can go on. about thinking on your feet That’s why when Mumbai got hit by for assured continuity. the flood of the century, smart BPOs were simply able to get staffers in other cities to support customers by intelligently switching voice and data calls their way. That’s how many years ago, my friend Tamal was able to keep sales spreadsheets secure even in a DOS environment by typing ‘Alt 0255’ thrice, thus keeping them invisible to all but those who knew they existed. And, that’s why Tamal didn’t blink when as the CIO of a cola major he watched 25 servers fry in a reversal of electrical polarity. A few hours later all their systems were back in action. Jugaad ’s key attribute is to never say die and believe that there’s always a way out. Given the economic climate these days, it’s easy to lapse into a blue funk. I guess this edit is to remind myself — and you — that the situation, while grave, is not without hope. That we’ll see this state of affairs through, the way we’ve seen off worse.

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

m a rc h 1 , 2 0 0 9 | REAL CIO WORLD

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content MARCH 1 2009‑ | ‑Vol/4‑ | ‑issue/08

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Cove r: desi gn by b in es h sreedharan

I Photo by Srivatsa Shan dilya

MindTree’s CIO, Sudhir Reddy accelerated the organization’s billing process, allowing it to close its monthly books 16 days earlier — despite a 250 percent growth in the number of projects.

ERP

IT Management

COVER STORY Need for speed | 24

Superusers to IT’s Rescue | 38 Your organization is filled with IT rogues and tech renegades. Instead of fighting them, join them — they could be angels sent to save you.

If MindTree wanted to maintain its scorching 40-percent-growth of projects, it would need an ERP system to pull it together and give decisionmakers the data they needed fast. It’s speed-happy CIO knew just the trick. Feature by Gunjan Trivedi Plus:

Feature by Dan Tynan

Alignment Navigating the storm | 42 How airlines are deploying more flexible IT to support new customer-focused business strategies and manage risk in a volatile economy.

ERP via SaaS: bump ahead | 32

Feature by Kim S. Nash

Career Strategist

Feature by Thomas Wailgum

Column by Martha Heller

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Cover: Motorcycle and biking accessories courtesy Orion Motors, Bangalore

Happy Together | 16 Want to get closer to the business? The SVP of technology and operations represents an opportunity for IT leaders to push for organizational integration.

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content

(cont.) departments Trendlines | 07 Study | Still Banking on Technology Quick Take | P.A. Kalayanasundar on Alternative

Essential Technology | 52 Enterprise Apps | Software Development:

The Virtual Way Feature by Daniel Dern Pundit | Exit Business Analysts

Column by Michael Hugos

From the Editor-in-Chief | 2 The Solution is ‘Jugaad ’

By Vijay Ramachandran NOW ONLINE

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

c o.in

Case File Deboarding Risk | 34 Because it operated in a fiercely-competitive low-margin segment, SpiceJet could not afford to let fraudsters gnaw into its profits. So it automated its online credit card screening system and caught fraud mid-air.

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Feature by Sneha Jha

The Strategic CIO Building Your Agile IT Team | 14 The CIO at transportation company Con-way took her development team on a nine-month ride to implementing Agile — a journey that required well-honed change leadership skills. Column by Jackie Barretta

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Advertiser Index

Abnash Singh Publisher Louis D’Mello Associate Publisher Alok Anand

Editorial Editor-IN-CHIEF Vijay Ramachandran

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Correspondents Snigdha Karjatkar, Sneha Jha,

Chief COPY EDITOR Sunil Shah Copy Editors Deepti Balani,

Shardha Subramanian

VP-HR & Process Architect, Britannia Alok Kumar Global Head-Internal IT, Tata Consultancy Services Anwer Bagdadi Senior VP & CTO, CFC International India Services Arun Gupta

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VP & CIO, Mahindra & Mahindra

SENIOR Designers Jinan K Vijayan, Jithesh C C

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P C Anoop, Prasanth T R Photography Srivatsa Shandilya Production Manager T K Karunakaran DY. Production Manager T K Jayadeep Mark eti ng and Sal es VP Sales Sudhir Kamath GENERAL Manager Nitin Walia Senior Mananger Siddharth Singh, Assistant Manager Sukanya Saikia Marketing Priyanka, Patrao, Disha Gaur Bangalore Kumarjeet Bhattacharjee, Arun Kumar, Ranabir Das, Manoj D. Delhi Saurabh Jain, Aveek Bhose Gagandeep Kaiser Mumbai Parul Singh, Hafeez Shaikh, Suresh Balaji, Dipti Mahendra Modi Japan Tomoko Fujikawa USA Larry Arthur; Jo Ben-Atar Events VP Rupesh Sreedharan Senior Manager Chetan Acharya Managers Ajay Adhikari, Pooja Chhabra

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IFC

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new

hot

unexpected

S t u d y Despite tight budgets, banks will still spend on technologies that allow them to blunt the adverse effects of the crisis, build business despite the slowdown, and operate efficiently in a crisis environment. A new report highlights pockets of growth in lending in several Asia-Pacific markets, shifts in customer deposits, which allow aggressive banks to gain market share, and opportunities for generating fee income. "A thorough review of the market reveals some opportunities for revenue growth, and for further expansion of customer base and product portfolios despite the economic crisis," says Michael Araneta, senior research manager, Financial Insights Asia Pacific. "The environment however

is by no means bright and rosy, and significant risks need to be considered. Market conditions are volatile, causing opportunities to shift quickly. The game will be won by those agile and capable enough to execute strategies efficiently," Araneta adds. The report stated that deposit mobilization will proceed impressively in under-banked countries such as India (where industry deposit growth is expected to be at about 20 percent year-on-year in 2009) and Vietnam (estimated to be 11 percent). In most other Asia Pacific markets, however, it will be about acquiring market share from competing banks, or attracting customers away from savings and investment alternatives. This is according to the report titled

illUstration By MM shanith

still Banking on technology

Asia Pacific Banking in 2009: Opportunities amid a Crisis released by independent research and advisory firm Financial Insights, an IDC company.

â&#x20AC;&#x201D;By Zafar Anjum

Quick take

P.A. Kalyanasundar on Alternative Energy I t Electricity is a basic necessity for the smooth functioning of organizations. Without power, it is nearly impossible to keep IT up and running. So depending on a single source of energy to cater to ITâ&#x20AC;&#x2122;s increasing requirements is not always viable. Snigdha Karjatkar spoke to P.A. Kalyanasundar, GM-IT, Bank of India, to find out how his solar power initiative helped him .

Green

Do most CIOs have enough confidence in alternative sources of energy to power their mission-critical systems? A stable supply of power is a serious concern in major parts of the country, barring the metros. Consequently, CIOs will have to look at other possible options to power their systems. Is a large initial investment in implementing solar power an impediment in its adoption? In order to cope with power cuts, one has to invest substantially in generators, fuel and UPSes. But after calculating the TCO, CIOs can themselves conclude that alternative sources of

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energy are more beneficial. It is definitely cost-effective for a small set-up but for larger infrastructures, the expenditure is sizeable. What drives the adoption of alternative energy in an enterprise â&#x20AC;&#x201D; higher availability or lower costs? Neither. It is corporate social responsibility that is driving our organization. Going green is not just a buzz word but a real motivational force for our organization to adopt non-conventional sources of energy. Higher availability and lower costs are complimentary to the initiative.

P.A. Kalyanasundar

How do you strike a balance between adopting conventional and non-conventional sources of energy? It is absolutely critical for IT systems to have a clean and stable supply of power. With non-conventional sources giving CIOs exactly the same advantage, it is wise to run IT systems on them. With other power consuming equipment, CIOs can continue to use conventional sources of energy. REAL CIO WORLD | m a r c h 1 , 2 0 0 9

Is this a better time to invest in hardware or extract the most out of your existing infrastructure? Just like every cloud has a silver lining, the slowdown has brought with it something to look up to: falling hardware costs. While some IT leaders think this is the best time to buy, others don’t want to invest unnecessarily. Snigdha Karjatkar spoke to some of your peers to find out what they thought: It

Budget

“Right now, CIOs should prioritize needs

trendlines

and segregate investments for projects. This is the time to invest in hardware inventory, buying software licenses can wait till the next quarter.” Jawed Ahmed Head-IT, Power Transmission Business, Sterlite Technologies

“This is a good time to pick up hardware and software at very good prices, provided, of course, that companies and their IT departments have sufficient budgets.” Ajay K. Dhir CIO, Jindal Stainless

“I believe in continuing with existing infrastructure. Unless a

product's mandatory, prescribed end-oflife is attained, we leverage the existing investment to the full.” Muralikrishna .k Head-CCA, Infosys Technologies

Lend Your

Voice

Write to editor@cio.in 8

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m a r c h 1 , 2 0 0 9 | REAL CIO WORLD

PC Power

Tweaks Can Save a Packet E n v i r o n m e n t Saving money using power management has been a well worn mantra in the datacenter for some time, but now Gartner has put a cash figure on the likely cost savings from managing an organization’s PC power consumption — $43,300 (about Rs 22 lakh) per year. The analyst company said that the total power consumption (per year) for a "well-managed 2,500-PC organization is 43 percent lower than an unmanaged one." This, Gartner has calculated, means that organizations actively employing power management functionality can expect to save $43,300 per year, compared with an unmanaged 2,500-PC organization. Another $6,500 (about Rs 3 lakh) can be saved per annum by turning off and unplugging machines from electrical sockets (even when switched off, PCs consume some power when left plugged in). However, Gartner warns this could affect staff productivity because updates will need to be carried out during working hours, and it is somewhat impractical to do this in reality. "Much attention on power consumption has focused on the datacenter, but PC power consumption in an organization can also be significant, especially given steadily rising electricity prices," said Federica Troni, principal analyst at Gartner. "IT organizations should recognize that the greatest savings come from employing power management features. They should investigate the power management capabilities of their PC lifecycle management tools and PC power management point solutions to implement these policies and to better support management activities." Gartner has even created a model — actually an Excel spreadsheet — to assess the impact of different variables on an organization’s total PC power use, although this model is only available to Gartner's customer base and not the general public. The model makes use of a number of common assumptions in order to make these calculations. These assumptions include that there are 2,500 staff in the organization; the ratio of PCs to employees is 1-to-1; staff work an eight-hour business day 230 days per year; and active use of the PC during working hours is 70 percent of the time. Using these parameters, Gartner's model can calculate the power consumption for desktops, notebooks and associated monitors during the workday and after hours. The model is based on three different scenarios — the wellmanaged, unmanaged and unplugged organization. —By Tom Jowitt

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Security Jobs Immune to Economy forecast that their organizations wouldn't hire any additional security personnel during 2009, says SANS. "I was expecting to see the number [of security jobs] going down significantly," says Alan Paller, director of research at SANS. "But most people are not changing anything at all." The security skills that appear to attract the most interest, Paller says, are the more "hands-on" ones, such as computer forensics, penetration testing, intrusion detection and incident handling. And the salaries being paid to security professionals continue to "show that security skills are highly valued," Paller says. Meanwhile, Foote Partners says its report noted a continuing steady increase in the total amounts companies are willing to pay certified IT security professionals. The increases are still coming even as the average amounts paid to IT pros with 175 other tech certifications have continued a decline that began in 2006, says Foote. The firm tracks the pay premiums earned by more than 22,500 IT workers

and provides quarterly updates on its findings, breaking out the results on the basis of 354 different skills and certifications. In 2007, "we started to see a real uptick in spending for security labor," says David Foote, the firm's founder and CEO. Over the last six months of 2008, employees with security certifications saw a 2 percent increase in the premiums that companies were willing to pay them above and beyond their basic salaries, Foote says. He added that such premiums have risen by an aggregate of about 3.4 percent over the last 18 months. The security certifications that are attracting the largest premiums include ones related to network and wireless security, incident handling and ethical hacking, Foote says. However, interest in workers with security management certifications — including the popular Certified Information Systems Security Professional and Certified Information Systems Auditor ones — appears to have cooled off a little bit, based on the latest statistics gathered by Foote. —By Jaikumar Vijayan

trendlines

Information security jobs may not be the most glamorous but at least they appear to be a lot more secure than many other IT positions are during the ongoing economic recession . Two reports, one from the SANS Institute and the other from Foote Partners, say that the size of security staffs and the money companies are willing to pay them remain have remained surprisingly steady. Helping to ensure that IT security workers have job security, say the reports, are factors like compliance demands, increasing data protection needs stemming from wireless deployments and rollouts of virtualization technology, and growing consumer angst over data breaches . SANS says the survey showed that through the end of November, 79 percent of respondents predicted no immediate reductions in their IT security staffs. And even among respondents that said they expected to cut security jobs, the number of positions due to be cut was very small. Less than 3 percent said they would be cutting 15 or more security jobs this year. On the other hand, slightly more than half of respondents — 54.8 percent —

Career

Won't Give It Up

D e v ic e s As corporate budgets tighten, companies could start cutting back on the tools they provide their employees. A survey asked IT employees to choose the four devices they needed the least and the most.

Least needed

Most Needed BlackBerry

Desktop PC

20%

Desk phone

18%

46%

Mobile Phones

74%

In fograp hics BY b in esh sreedharan

Videoconferencing

23%

88%

Assigned Desk VPN Access

68%

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37%

Source: On Relay

Laptops

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leadership: SOA Rocket Fuel r o l e implementing a services-oriented architecture (soa) has much in common with the world of rocket science, said an executive with software ag. during a recent Webinar, Miko Matsumura, VP and deputy cto with the infrastructure software provider, explained that a big-picture perspective is a must for an soa implementation, much like nasa's goal of landing on the moon was not merely about the technology, "but the United states as a country. " soa is not just a program spanning multiple projects, said Matsumura, rather it's about transforming the business. again, making a rocket analogy, he said nasa may not have started with a rocket. having then-president John f. kennedy vow to put a man on the moon within the next decade was a much-needed "leadership statement" that ultimately drove the program to success. an organization should create a small group of individuals people or a strong personality to champion soa, said Jignesh shah, VP of soa product management & marketing with software ag. "that's a key ingredient to soa success." those champions, said shah, can emerge from a variety of areas within the business, but integration managers in it tend to be popular choices "because integration tends to be a top use case for soa" and those integration managers are equipped with the technical expertise and experience of delivering in a shared services environment. Matsumura, shah, and Bjoern Brauel, also with software ag, are co-authors of soa for dummies ummies, a 100-page book providing practical methods to making soa a reality in organizations. shah cautioned that while soa's value may be evident, that's not to say it will be an overnight transformation. there "will be hurdles, there will be roadblocks," he said. one such hurdle, said Matsumura, again making a rocket science analogy, is the point after take off when the soa rocket must fight gravity lest the business falls back to the old way of doing things. so, following the investment in an soa implementation, before significant business traction is gained, the initiative risks losing motivational energy, he explained. among the potential factors endangering an soa initiative, he said, are leadership changes, funding cut-off, and vendor and consultant backlash. But, Matsumura said, "appropriate measurement and reporting can continue to feed this initial success and turn it into a sustained success." and Matsumura thinks now is a good time for an organization to invest in its infrastructure because of the available talent in the market and infrastructure vendors offering good deals. "downturn is actually the perfect time to invest because you are separating yourself from your competition." â&#x20AC;&#x201D; By kathleen lau CIo

Fast Chip Runs Longer Mobile computing devices that need charging once a day would need it just once a month with a new type of chip that uses a thirtieth of the power of conventional chips and is seven times faster by virtue of underlying logic that embraces error in its calculations. This combination of features makes these chips ideal for battery-powered devices and running apps that don't require 100 percent accuracy, says researchers at Rice University who contributed to the technology. For example, streaming video to a cell phone using one of these application specific integrated circuits (ASIC) would conserve battery life because of its low power consumption. It would be able to generate a sufficient video image as well, given the small size and low resolution of cell-phone screens in combination with humans' ability to fill in gaps in information that is provided from the screen, researchers say. Using a thirtieth of the power means devices that now need charging every day would need it once a month instead. Called probabilistic complementary metal-oxide semiconductor (PCMOS), the technology was developed by a team headed by Rice University Prof. Krishna Palem and Prof. Yeo Kiat Seng of Nanyang Technological University in Singapore. Rather than using the Boolean logic of traditional chips, it uses probabilistic logic that is less sensitive to the increased electrical noise generated within chips as they get smaller. The solution with traditional chips was to pump more power through the smaller chips so the signal could be heard over the noise. PCMOS chips use less power and the probabilistic logic takes into account errors that might be introduced by noise intermixed with signal, the researchers say. So far the teams have made an ASIC dedicated to encryption, a suitable application because the chip logic generates the random numbers required by encryption algorithms. The chips would be used to power specific tasks rather than performing as the CPU of a device such as a laptop, the researchers say. They would be used within video cards, medical scanners and electronic toys to process specific tasks. "Our goal is green computing," Palem says. "We're looking for applications where PCMOS can deliver as well as or better than existing technology but with a fraction of the energy." Palem said he hopes PCMOS technology will enter the embedded computing market in as little as four years. â&#x20AC;&#x201D;By Tim Greene

illUstrat ion By Unn ikrishnan aV

trendlIneS

ChIpS

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CubA develops own free linux C Software at Cuba's University of Information Sciences, told Reuters. "I would like to think that in five years our country will have more than 50 percent migrated (to Linux)," he said. Cuba chose Linux generally because it is free, its source code is accessible and it is less vulnerable to malware, Rodriguez said. "Private software can have black holes and malicious codes that one doesn't know about," Rodriguez told Reuters. "That doesn't happen with free software." Rodriguez also said that free software better suits Cuba's politics. Nova Baire is a source-based distribution, meaning that the Gentoo operating system is downloaded and compiled on each individual computer. That can offer performance benefits for enthusiasts, though it may be complicated for less technical users. According to Distrowatch.com, a Web site devoted to Linux enthusiasts, Gentoo

was the third most popular Linux version in 2002, behind Mandrake (now Mandriva) and Red Hat. Last year, it ranked 18th among Distrowatch.com readers. Ironically, Gentoo's creator, Daniel Robbins, went to work for Microsoft's Linux lab for eight months in 2005 after resigning from the Gentoo organization. Robbins later left, reportedly "frustrated" because he "wasn't able to work at my full level of technical ability." Some government ministries and the Cuban university system have already switched to Linux. But some governmentowned companies have grumbled about incompatibility with their own custom applications, Rodriguez said. Cuba isn't alone. The governments of Venezuela, China and Nigeria have also turned to Linux or open-source software as alternatives to expensive proprietary software. —By Eric Lai

trendlIneS

o p e n S o u r C e Cuba released its own distribution of the free Linux operating system as the Communist island seek to wean its citizens and institutions from what it says are insecure, capitalist-produced Microsoft software, according to a Reuters report. The new version is called Nova, and was introduced at a technical conference in Havana. Based on a Linux variant called Gentoo that is popular with highly technical users, Nova has been in development since 2007, according to the Associated Press , after Free Software guru Richard Stallman visited the island and persuaded government officials to move off Windows. Microsoft software, such as Windows, is widely used in Cuba, though much of it is pirated, according to Reuters. About 20 percent of the computers in Cuba, where PC sales to the public only began last year, run Linux, Hector Rodriguez, dean of the School of Free

Slapped in the Facebook

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to attack other applications and an application can be used to view your entire file if the privacy settings are off," he said. "even if you put the privacy settings in place, you should assume you are screwed." the demonstrations the duo ran included: creating imposter profiles on linkedin, assuming the identity of someone prominent, and be-friending as many people as possible. for the sake of experimentation, the researchers created a fake profile for a well-known security leader (with permission) and accumulated 50-plus connections in less than a day, many of them csos and other bigwigs. rummaging through a site that accumulates old direct messages originally sent out through t twitter. With enough patience, the bad guy can find and exploit such discoveries as phone numbers, e-mail addresses and other personal information that was originally meant for individuals rather than the general t tweeting public.

il lUstrat ion By Pc an ooP

n e t W o r k I n G for many people, social networking has become as much of a daily routine as brewing coffee and their brushing teeth. it administrators dislike it and cyber crooks depend on it. that's because most of the time people spend on Myspace, facebook, linkedin, t twitter and elsewhere is during work hours — on work machines. in a presentation called fail 2.0: further Musings on attacking social networks, security researchers nathan hamiel and shawn Moyer demonstrated how easy it was to attack social networks because users can upload and exchange pictures, text, music and other content with little effort. "social networking sites are meant to get as many users in one place as possible on one platform, and for attackers there's a lot of roi in going after them," Moyer said. through a variety of easy tricks, attackers can hijack a person's social network account to use as a launching pad for additional attacks against other users, other Web 2.0based applications, and so on. "any application can be used SoCIal

—By Bill Brenner REAL CIO WORLD | m a r c h 1 , 2 0 0 9

Online at

Your Own Risk Nearly three-quarters of Asia Pacific business executives regard their company's reputation as vulnerable and nearly all of them use the Internet to assess other firms, according to a survey. While 99 percent of executives in Asia use the Internet to assess company reputation, only 50 percent rate the Web as useful in such evaluations. About 12 percent still believe that traditional media plays a greater role in deciding company reputations. The research indicated that Asia business leaders 'are either unaware or do not want to admit that employees are bad mouthing their companies online'. Risks that did not exist a decade ago are now on full display — internal e-mails going astray, negative online campaigns by dissatisfied customers, and online grumblings from disenchanted employees, bloggers and anyone else who has an opinion to voice. The research also highlighted that far fewer global CEOs — chairmen (21 percent) are more concerned than nonCEOs — chairmen (43 percent) about employee work-related discussions on social networking sites, video-sharing sites and employee grievance sites. In Asia, employee criticism is considered a clear risk to the company's reputation, according to more than half (53 percent) of respondents."Global CEOs may be fooling themselves if they think that employee sabotage and hearsay is not taking place online every day," said Dr. Leslie Gaines-Ross, chief reputation strategist at Weber Shandwick. Respondents reported that the best uses of the Internet are for investigating business rivals (64 percent) and partners (60 percent), capturing customer feedback (63 percent) and exploring new employment opportunities (60 percent). Notably, global executives believe that only one-half (49 percent) of information in corporate blogs is accurate and much fewer (14 percent) trust them as a good source for assessing reputation. The research also found that all levels of employees have had a hand in potentially harming their company's reputation online. A high 87 percent of executives admit to having erroneously sent or received at least one electronic message (private e-mail, text or Twitter). These are some of the results of the research entitled Risky Business: Reputations Online conducted by public relations and communications firm Weber Shandwick, in cooperation with the Economic Intelligence Unit (EIU). The survey canvassed more than 700 senior executives within more than 20 industries in 62 countries spanning North America, Europe, Asia Pacific and other markets. —By Ross O. Storey Research

Treading On Danger

Il lustrat io n by ANIL T

trendlines

B u si n e ss I ss u e s As the worldwide financial fiasco unfolded over the past year, risk became the buzzword in boardrooms around the globe. And as analysts began circulating whitepapers on the need for risk-adjusted compensation, the question for many C-level leaders has become: how will this affect my personal bottom line? The rationale for a no-pay-for-non-performance system stems from the idea that there is a tendency for leaders and individual employees to focus on their short-term compensation and not think about the long-term risks that their choices create for the company. Under a risk-adjusted compensation system, salaries are adjusted downward in the short term, in accordance with the level of risk being generated for the firm. If that risk doesn't materialize, the executive or employee receives the deferred compensation. "There's definitely a trend toward more risk-adjusted compensation in financial services in particular," says Gerard McNamara, managing partner of the CIO practice for executive recruiter Heidrick and Struggles. Risk-adjusted pay plans will increase in any industry where regulatory control and scrutiny are on the rise, says Howard Rubin, president and CEO of Rubin Worldwide and a Gartner senior advisor. "It's all very hazy, but with the whole financial industry going crazy right now, everything is being looked at," says McNamara. Rubin predicts that risk-adjusted pay is more likely to increase for executives who have an influence on enterprisewide risk, not those leaders, like the CIO, who only has an influence on operational risk. "Where you will see it for CIOs is in companies that have the belief that all compensation across the enterprise needs to be risk-adjusted and everyone's pay should be adjusted downward if bets don't go right," says McNamara. In those cases, "it's a group motivator," says Rubin, and "the CIO can play a creative role in using IT to manage firm risk more effectively." Of course, deferred compensation based on performance is nothing new for many IT leaders. A CIO typically has a compensation package including base pay, short-term bonuses and long term bonuses in a mix of cash and equity, commensurate with other executives at their level, says McNamara.

—By Stephanie Overby 12

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Jackie Barretta

The Strategic CIO

Building Your Agile ITTeam The CIO at transportation company Con-way took her development team on a nine-month ride to implementing Agileâ&#x20AC;&#x201D;a journey that required well-honed change leadership skills.

Il lustratio n by MM Shanith

n the old days, we could spend months planning a technology project and then months or even years implementing it. Not anymore. Strategies are far more dynamic these days, especially as we respond to these challenging economic times. When someone has a good idea, they want to see it come to fruition right away. At Con-way, almost all good ideas require technology to implement. Yet historically, ideas would become cold by the time they made it through IT steering committees, project planning and design reviews. Then we became agile â&#x20AC;&#x201D; that is, we adopted Agile development practices. Using Agile, software development is no longer accomplished through lengthy projects. Instead, the overall concept of the desired system is defined at a high level up front and then developed in short iterations. An iteration is typically no longer than one month, and the software is released for use after each iteration. As people use the software, they determine which features should be built next, providing a feedback loop that results in the highest priority functionality being built. The adoption of Agile requires significant change in the work practices of both IT team members and business users, and this created a change-leadership challenge for me as the CIO. One big change for IT is that with Agile, there is always an impending implementation date: there is never a feeling of being able to relax on a project. Meanwhile, developers, used to having private space, can feel that space violated due to 'pair programming,' which has two developers constructing the same piece of code at the same time, and to collocation,

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Jackie Barretta

The Strategic CIO

which has team members sitting as close together as humanly possible. As for the business users, Agile requires them to take a much more active role through the entire process. They must work jointly with IT to determine the priorities for each iteration, and they must provide daily direction to IT on the needs for the functionality being built. The challenges in transitioning the IT teams to Agile was primarily overcoming their resistance. They had become comfortable with their old techniques, and they had been successful with them. In addition, they had heard about many failures of Agile initiatives, so they were skeptical. Selling it to the business executives was equally challenging because the price tag for consultants to teach us the new methodology and for the new tools we would need to implement it was pretty steep. Plus, they had to accept that new projects would take longer, temporarily, while IT people learned the new techniques.

Selling the Benefits I made the case for change in IT by explaining how the business would benefit if we delivered the highest priority functionality faster. I also kept reiterating what was in it for them â&#x20AC;&#x201D; and there was a lot. Agile automates many of the mundane tasks that are not popular with software developers. For example, when changes are made to code, Agile techniques automatically integrate the code with surrounding functions and execute pre-defined regression tests. Most IT professionals are not fond of performing these mundane tasks manually. I made the case for change to the business by preparing a solid ROI that quantified the benefits of increasing the efficiency of development processes, delivering the right functionality more quickly and reducing the overall amount of work in progress. For instance, I proposed that Agile would improve developer efficiency by 35 percent. In many forums, I repeated the business drivers and showed my colleagues how we were tracking on achieving the ROI. Even though we have dozens of project teams and hundreds of developers, I made a commitment to spend time (during some periods about a third of my time) with the development teams and listen to their concerns. From this I learned about their resistance to the strict adherence to the Agile definition prescribed by the consultants we hired. The developers especially didn't like being forced to work in pairs or sit near each other, and they believed they should be able to decide individually whether to adopt those practices.

I was concerned we'd miss out on significant benefits of Agile if we didn't follow those practices, so I made a rule that every person had to initially follow the practices precisely. I told them that as they became knowledgeable in the practices they could tweak them, and when they really understood them they could decide which ones to adopt. So far most people who have experienced the practices have decided to adopt them for the long term.

Calming the Storms Not everything has gone smoothly. New teams typically go through four stages: forming, storming, norming and then performing. What I didn't know was that when you change an existing team's fundamental work practices, they start over again in the forming stage. Teams that had been working well together for years suddenly began exhibiting 'storming' behaviors, including fluctuations in attitudes, arguing over trivial issues and excessive tension and concern about being overworked. Now I'm making sure that as teams go through the transition, they are conscious of the fact that they need to reset their norms and that they set aside time to do it. The change effort has been worth it: after nine months, Agile is delivering on its promises. The iterative approach

Agile is creating greater alignment between IT and the business because of the constant, daily interaction and because Agile techniques help IT personnel understand the business much better.

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to software development is providing a feedback loop that results in us building the right functionality. We no longer have the waste problem that was inherent in the old waterfall method. Agile is creating greater alignment between IT and the business because of the constant, daily interaction and because Agile techniques help IT personnel understand the business much better. Like anything that's really going to pay off, Agile is a huge change for IT and the user community. For CIOs who want to lead their organization down the Agile path, it's essential to brush up on change leadership best practices. Most importantly, create an environment where your teams are comfortable with venting their concerns so you'll know what's working and what you need to modify. CIO

Send feedback on this column to editor@cio.in

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Martha Heller

Career Strategist

Happy Together Want to get closer to the business? The SVP of technology and operations represents an opportunity for IT leaders to push for organizational integration.

Illustratio n by un n ik rishn an AV

have always found the phrase ‘IT and the business’ to be ironic. ‘And’ typically connotes connection and unity, yet in this context, it is a divider. IT, as this phrase suggests, may work alongside and support the business, but it is certainly not one and the same. But now that companies are getting smarter about IT's importance to the business, there is a new ‘and’ in town. The SVP of technology and operations role is springing up in all sorts of industries. It represents not only a new level of organizational integration between IT and the business but a new career opportunity for CIOs as well. Some heads of tech and ops preside over a newly merged organization, and others keep the organizations separate but have accountability for both. I spoke with three such ambidextrous executives to gain their perspective on the role. Pat McNamee joined Express Scripts, a $19 billion (about Rs 95,000 crore) pharmacy benefits management company as SVP and CIO in 2005. Two years later, he was named SVP of operations and technology, responsible both for IT and for client and patient services; less than a year later he was promoted to EVP of operations and technology. In his current role, McNamee runs an integrated organization of 1,200 IT staff and more than 5,800 operations staff responsible for making sure the company's 40 million members receive their prescriptions on time. "In IT, we had improved our reliability and our ability to develop new applications. But there was still a disconnect between the capability of the systems and their impact on operational effectiveness," says McNamee. "So our CEO made the decision to integrate IT with operations, and he made me

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Martha Heller

Career Strategist

accountable for the whole thing. His thinking was that we could accelerate change and improve processes more quickly with a team that is focused on an integrated set of objectives." A case in point: prior to the integration of operations and IT, regionally distributed operations groups were using unique applications instances, and every regional GM had his or her own order management processes with a unique set of metrics. "When we merged IT and operations, we looked across all of the sites and found the five or six best practices on turnaround time and defect reduction and built an applications road map across all of the regions. We then held the GMs accountable for the new standards," says McNamee. "Having an integrated approach and control over so many levers put our process improvement on steroids." His advice for CIOs interested in a similar role: Turn a cost center into a corporate investment. In addition to the age-old wisdom of knowing the business and building relationships, McNamee points to something more specific. "As CIO, you are responsible for a significant spend in IT. If you can build a process for engaging the company in how most strategically to spend that money and how to bring a return on that investment, suddenly the discussion moves away from mainframes and infrastructure, and you become a leader in driving operational improvements," he says. "If you build a successful governance process, you have just worked your way up to the point of controlling a corporate investment that drives business value and revenue." Less an order taker and more of a business driver, you are one step closer to the integrated role. Mark Goldin joined the financial services company Green Dot as CIO in 2005. Six months later, he added customer care, retail production, logistics, supply chain and sourcing to his plate and became CIO and EVP of operations. In January, CEO Steve Streit wanted to increase his strategic role and made him chief operations and technology officer. Green Dot is a rapidly growing young company. With customer activity increasing steadily, call center operations were struggling. "It was unclear to our CEO whether our call center issues were due to systems problems or operational management, so he wanted one executive to be accountable for both," says Goldin. "Once I moved into the new role, I sat down with the VP of customer care and together we designed a call center strategy for redundancy and scale. We sorted out our staffing issues and turned the corner on service levels." His advice for CIOs who have just moved into an integrated role: Hire a CIO. IT people represented more than 70 percent of Goldin's newly integrated organization so some of the senior call center managers thought, 'Now I work for IT.' "That is not the perception that I wanted," says Goldin, "but I was reluctant to let go of the CIO role. Had I hired a new CIO, it might have

been clearer that IT was not simply absorbing the call center, but that we were integrating." Go for the sudden impact. As head of IT and ops, you have a number of opportunities to add value. But, says Goldin, "You want to choose the areas where you can make a quick impact. Having had the initial call center success, I felt I had the time to focus on other issues like reducing cost. The call center bought me the time to tinker with the areas that I understood less."

Go for the sudden impact. As head of IT and ops, you have a number of opportunities to add value.

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From 1993 to 2000, Rob Autor was CIO for Nellie Mae, a Massachusetts-based student-loan provider. He joined Salle Mae following its acquisition of Nellie Mae in 1999 and has served in a number of senior roles, including vice president of consumer operations and CIO. In late 2007, Autor was named EVP of operations and technology and heads up the company's loan origination, servicing and call center operations, corporate procurement and IT. In addition, he has full profit-and-loss responsibility for the company's guarantor services business and financial institution sales. With both of these business lines and a CIO reporting to him, he is responsible for reducing costs by 20 percent and for restructuring the business in response to the recently signed College Cost Reduction and Access Act. To Autor, giving accountability for IT and operations to one executive makes good sense for Sallie Mae. "Both IT and our loan servicing operations are service organizations, and both require a strong degree of process discipline and design," he says. "When so many of our customers experience us through our technology, it is important to look closely at how both organizations can work together for a seamless customer experience." His advice for executives interested in a similar role: Get both IT and ops under your belt. "I have moved between business and IT roles and deliberately made choices to broaden my experience," he says. "When I had some IT consulting under my belt, I went into business consulting. When I took on the CIO role at Nellie Mae, I took on operations responsibilities as well. The great thing about IT is that it gives you the opportunity to demonstrate that you can deliver on big, broad, complicated, expensive projects. Make the most of that exposure." CIO

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

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With ERP project 'mPower', Sudhir Reddy, CIO, MindTree, created an engine that could track client projects â&#x20AC;&#x201D; ultimately saving the company Rs 2.5 crore a year.

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Cover Story | ERP

If MindTree wanted to maintain its scorching 40-percentgrowth of projects, it would need an ERP system to pull it together and give decision-makers the data they needed fast. It’s speed-happy CIO knew just the trick. by Gunjan Trivedi

Speed thrills. Ask the people at NASCAR. Or Sudhir

PhoTos by sRivaTsa shandi lya iMaging by unnikRis hnan av

Kumar Reddy. It’ll get you a grin that breaks into a smile and maybe a story about his stripped-down, liquid-cooled, 12-valve, 1050cc, Triumph Speed Triple. Although, he was forced to leave his motorcycle in the States when he moved to India a few years ago, the CIO of MindTree still cranks his head back to watch the occasional monster bike power its way through Bangalore’s sluggish traffic. It might be sometime since Reddy rode a motorcycle for the sheer exhilaration, but he hasn’t lost his passion for speed. And it’s beginning to show up at work. When Reddy returned to India to join MindTree in 2005, he was tasked with taking the Rs 1,150-crore organization through the twists and turns of its first ERP implementation. His aim: to pull the organization closer together and get critical information to move in the right direction — as fast as possible. It was an aim that sparked with MindTree’s management, which was beginning to feel the drag created by hordes of manual processes and spreadsheets. But they also needed the project to take off quickly — which is exactly what Reddy and his team have been doing. They’ve been rolling out a module a month for about two years. That sustained effort, christened Project mPower, has given MindTree almost real-time visibility into the profitability of all its projects and how every resource is being used.

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Reader ROI:

The criticality of having quickly demonstrable results Ways to beat buy-in blues Managing functions not available in standard ERP packages

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Cover Story | ERP mPower also impacted MindTree’s top-line. Within two years of the implementation, MindTree reduced its sales-outstandingdays by 33 percent — the interest on that alone saved $500,000 (about Rs 2.5 crore) a year. It also increased resource utilization by 3.5 percent and the accuracy of sales forecast data by 95 percent. In an organization of software developers, the project has been watched closely, which enabled managers to calculate the impact mPower had on its profit after tax margin: a full one percent. Here’s how an ERP implementation changed MindTree forever.

ZERo to 100 MindTree is one of the fastest-growing global IT and R&D services companies in India.

When MindTree, which was founded in 1999, crossed the $100 million-in-revenues mark in April 2006, it broke a record among Indian IT companies. Much of that was driven on the back of a phenomenal plus40-percent-a-year growth in the number of projects it handled. But as welcome as the business was, the unprecedented growth created new problems. Business managers found it increasingly hard to keep pace with the growing complexity and diverse nature of MindTree’s operations. Because it tracked the cost of its services with manual processes and because it lacked an integrated technology platform, MindTree's ability to gauge how it was performing on a monthly basis was limited. Over time that began to hamper the

Milestones on the Highway to Efficiency greater visibility into project and opportunity pipeline better project tracking with reliable, real-time decision-support system Reduced manual billing effort in spite of 100 percent growth in number of projects Real-time visibility from mPower enabled a series of operational enhancements which improved utilization by 3.5 percent over a period of one year Forecasting accuracy improved to 95 percent in-house payroll processing leading to annual savings of $130k (about Rs 65 lakh) Reduced dso from 120 days to 80 days

Financial and Strategic Benefits

Impact

days sales outstanding (dso)

–33%

lower interest costs

–$500k(about Rs 250 lakh)

higher resource utilization

+3.5% (1 year after go live)

lower payroll processing costs

–$130 k (about Rs 65 lakh)

higher productivity of Finance,

+15% to

hR, and operations FTEs

+20%

higher accuracy of sales forecast data

95%

Reduced monthly billing cycle time

–75%

improved profit after tax (PaT) margin

+1%

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profitability of numerous projects, because despite trying it’s best, the organization didn’t always meet targets. Though it ran about 20 standalone systems with Oracle at one end and Microsoft Excel at another, what MindTree really needed was “project-centric process automation,” says Reddy. One of the biggest problems before MindTree was that it wasn’t able to get a timely — or accurate — picture of the number of hours its staff spent on a project, the meat and potatoes of its business. In order to cost out a project’s monthly expenses, a project manager has to fill in a sheet with each staffer’s role (such as technology lead or software engineer since each role is billed differently); whether that person is offshore or onsite; how many days of leave he’s taken; how many hours he’s put into a specific project; his travel costs and other IT-related purchases, among others. To prepare a final billing input sheet, a project manager has to cull all this data from several spreadsheets. Obviously, the process was labor-intensive and prone to irregularities and delays. This homegrown approach, which worked for a smaller MindTree, was creating an enormous and complex hurdle for project managers trying to establish how much their customer owed MindTree in a given month. It was getting so hard to consolidate all the data that business managers monitoring the big picture could only get a snapshot of the entire organization — like how much it was making in a specific month — a full 20 days into the next month. And if revenues did not meet a month’s target, the 20-day delay made it impossible to create a plan to catch up. What was needed, says Krishnakumar Natarajan, CEO of MindTree, was a system that could give them “billing, gross margins, financial parameters, and the amount of unused talent every month-end. In the services business, if you have people who are unbilled, it’s a loss forever.” That was just one of the many problems that closing its books late posed for the organization. There were others. “If we did not have this kind of control and have reports on time, it would make going public difficult,” says Reddy. By 2004, MindTree’s leadership realized they needed to go beyond spreadsheets and

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adopt an all-encompassing ERP platform. When Reddy joined MindTree in 2005, he remembers how the landscape for SAP was just being laid out. The SAP rollout, which eventually cost MindTree a little under Rs 11 crore, flagged off like any other ERP project: by automating individual business processes. Several processes were identified and allotted a place in certain phases of the project. MindTree chose to begin with two critical processes: order-to-cash (OTC) and project planning. The second phase would deal with automating the payroll process and phaseIII would bring CRM into the ERP fold. But as phase-I took off, Reddy realized that there was a basic flaw with the initial blueprint. The processes at MindTree were project-dependent, which meant that linearly creating process automation would not demonstrate the benefits of an ERP system. Sure, they might be able to get a snapshot of the organization earlier than the 20th, but it wouldn’t have the accuracy — and therefore the impact — that Reddy needed. And without the high-impact benefits, there was no way he could muster the organizational energy needed to push the project through the 5,000-strong company.

“In the end, quick deliveries and the resulting benefits created true believers of even the staunchest of doubters.”

For More Torque Reddy realized that without putting projects at the center of their thinking, there was little chance the ERP could deliver the depth of reports MindTree was looking for because there were a lot of satellite processes that acted as feeders to the main business processes, like the OTC. “Time is the raw material of the professional services sector. We realized that we absolutely couldn’t do without capturing time spent on projects,” says Reddy. There where other reasons why the initial blueprint wouldn’t have worked. Because the organization was used to working on spreadsheets, asking its staff to work simultaneously on spreadsheets and the ERP, while the rollout was in progress, would have been counterproductive. Instead of helping MindTree pull itself together, mPower would only create more drag. “Moreover, automating two mammoth processes (OTC and project planning) at the

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— Sudhir Kumar Reddy, CIO of MindTree same time would have been akin to boiling the ocean,” recalls Reddy. But what really drove Reddy to scrap the first plan was the fact that it just wouldn’t create the impact Reddy knew was needed to sustain the massive ERP project. “We quickly realized that there would be no quick demonstrable results,” Reddy says. And that, he believed, could heighten the project’s chances of failure. His need for speed and impact, pushed Reddy to revisit the initial ERP blueprint. “What we needed was an end-to-end system, which could automate our processes around projects. What we were looking for was project-centric process automation.” He says that they changed the approach to building each cross-functional business process into the system, showing results and only then moving on to the next business process. Crucially, Reddy chose to drop

the project planning module from phase-I and decided to focus on order-to-cash. His foresight would pay off. “Though the toughest to implement, OTC was a crucial functional process because, once automated, it would yield maximum returns. We needed strong examples to start with,” Reddy says. The OTC is a case in point because it covers all the processes between the moment purchase orders are received to customer billing, including staffing, maintaining contracts, negotiating rate cards, maintaining timesheets, invoicing, etcetera. By April 2006, OTC was completely automated, enabling MindTree to integrate the time staff spent on a project with billing. That’s made a huge difference to invoicing and billing processes. In 2005, before mPower, it took MindTree until the 20th of the following month to arrange for the invoices of 250 projects. With the ERP in REAL CIO WORLD | m a r c h 1 , 2 0 0 9

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Cover Story | ERP place, it can now create invoices for over 650 projects by the 4th of the following month — giving the CFO visibility into the organization’s receivables within three days of each month-end. “That’s an improvement of 16 days despite huge growth in the number of projects. The enterprise saved a whopping $500,000 (about Rs 2.5 crore) a year just in interest on unbilled outstanding,” Reddy says. That got the business whooping. “For a 5,000-people services organization, to be able to accurately get data that early in the month on hours billed — by location, role, person and their utilization — gives us the phenomenal ability to react quickly to the changing demands of the market,” says Parthasarathy N.S., COO, MindTree. The momentum of that first success allowed Reddy and his team to go on a rollout spree from January 2007 to June

2008, as they consolidated and automated several key business processes. As many as twelve functional business processes, including CRM, expense management, travel management, project tracking, and asset management were automated. It also helped to beat some initial setbacks. Rostow Ravanan, CFO, MindTree, remembers how user expectations were high when some glitches occurred, “In the finance area, the migration of legacy data was not as smooth as users expected. And the usability of the system was not as intuitive as we had initially expected.” But those were not the only challenges before Reddy and his team.

GAP In SAP “Generally in SAP, when processes and applications are not in sync, you have to either modify the business process to live

“The benefits of mPower have led to an improvement of one percent to our profit after tax margins.” — Ashok Soota, Chairman & MD, MindTree

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with an app limitation or customize the app to suit a business process. Either way, complex problems surface further down the road,” says Reddy. These gaps can be managed by introducing complex SOA-enabled middleware or by filling SAP with customizations. Reddy took neither approach. He decided to go down the SAP NetWeaver platform route. Reddy ensured that SAP was deployed with its Enterprise Portal and NetWeaver components. They addressed gaps by building mini-applications using xApps in the Netweaver space, he says. This way both business processes and SAP stayed largely intact. “Our SAP has less than three percent customization,” says Reddy. Take for example, how the OTC process needed to have a specific invoice input sheet similar to the billing input sheet that project managers used. This sheet recorded time spent (in total number of hours) against a certain role. At the end of every month, about 400 project managers had to fill in their billing sheets because it was crucial for the OTC module — but this was absent in SAP. Getting such a sheet using .Net or Java frameworks would have created further complexities. So Reddy created a mini-app in NetWeaver that looked similar and let SAP populate almost 90 percent of it by querying data tables directly. Thanks to the mini-app, project managers just have to add 10 percent of the data to finish a report. That allowed project managers — who normally lead a team of about 40 project roles — to submit invoicing reports within a half-hour as opposed to a minimum of a few days. And with over 40 validations built into the sheet, the data is hardly ever questioned. It also went a long way in getting the buy-in of project managers. That’s not to say the team was not tempted to look outside SAP. But Reddy warns that while it appears to be attractive in the shortterm, a loosely-coupled system is a cost and maintenance nightmare in the long run. So at the blueprint stage, Reddy carefully analyzed current business processes and enhancements before they were mapped to the new ERP. He says that, in general, 80 percent of the processes were available as standard functions in SAP and only 20 percent needed enhancements.

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This work, he says, created a ‘why-not-SAP?’ stance for every new process that needed to be moved. “With NetWeaver flexibility, there’s literally no business process that cannot go in SAP. Some may argue that we’re building an application infrastructure similar to being in the primitive mainframe era. But the point is, I need to keep my organization flexible. I don’t want local flexibility and organizational rigidity. Our organization has to be flexible enough to take on any approach in the fastest way it can,” he says.

Shock Absorbers “When you’re planning a project that alters a company in a significant way, you have to watch for huge change management issues with several stakeholders. What you are building upfront is trust. If you can’t deliver on your commitment, you get no trust. With no trust, no matter what you deliver, users won't believe you. Change management is really about social engineering with the assistance of technology,” says Reddy. But before he could carry out his social engineering exercises, Reddy had to get inside his user’s head. Before mPower, MindTree employees worked off two master spreadsheets: the finance master sheet and the people master sheet. For all practical purposes, these sheets were mini-ERP systems and everybody referred to them for everything. To hit where it mattered the most, Reddy prioritized the removal of the sheets. “We wanted to eliminate the master sheets because we knew that if we did not replace them, people would continue to access them and circumvent the ERP,” he says. Reddy explains the problem of running parallel systems. “If there are 20 columns of data captured in a sheet and an ERP module absorbs only three columns, the sheet is not replaced in essence. The sheet continues to be more powerful and the ERP is seen as an overhead. “Our approach was to get rid of the sheets at the earliest,” he says. Senior management at MindTree helped the IT team by promising not to accept reports that were not generated with the ERP system once a process was automated. In addition, Reddy, with the help of MindTree’s leadership, took a three-step approach to drive the adoption of SAP

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“mPower has provided greater visibility to opportunities in the pipeline. And by providing a single source of truth it has improved productivity by 15-20 percent.” — Rostow Ravanan, CFO, MindTree

down the ranks. The first and second steps of the adoption strategy demanded that all reports be generated by users and viewed by managers within the ERP system. The third step involved introducing a tracker that monitored a module's use. If users missed a report submission deadline, the tracker would flag up their names and bring it to the attention of a senior manager. “Reports and trackers were an integral part of the delivery because the goal was not the delivery of a system but its adoption,” says Reddy. He then altered his training plans to fall into line with this approach. Instead of sticking to his initial plan of a single training session on all ERP modules, Reddy proposed three sessions for each module. “We were aware that users would attend a training session only because we made it mandatory by ensuring that user IDs would not be handed out unless they finished their training. The second time users were going to come back was when trackers flagged off their names. And once they used the system, they would come

back for a third session with genuine queries,” he says. Since those days, says Reddy, it’s become easier. “People have matured and we have expedited the training process. After a couple of repetitive trainings, people have become serious during the first training session,” says Reddy. But that wasn’t the last trick up Reddy's sleeve. Moving the OTC process to SAP took about six months but after that Reddy and his team ensured they rolled out subsequent processes in much quicker succession. About 24 processes — large and small — were automated and rolled out in two years. “Speed is paramount. Our deliverable had to be achieved within three months at best. We kept up the momentum because people had to know that this wasn’t going away.” But to keep up that pace, Reddy says negotiating and extracting decisions are must-have skills. It’s critical because suboptimal decision can cause extended delays. “There were many instances during this project when we had to remind stakeholders REAL CIO WORLD | m a r c h 1 , 2 0 0 9

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Cover Story | ERP of 80-20 rule: quick and good is better than delayed and best. In the end, quick deliveries and the resulting benefits created true believers of even the staunchest of doubters,” recalls Reddy.

Open Throttle Once in place, mPower helped the enterprise enjoy numerous tangible and intangible benefits. By increasing MindTree’s visibility to as early as 4th of the month, early signs of weakness can now be sensed and dealt with by business teams who are now able to guide the organization better with 95 percent more accurate data. “mPower has provided greater visibility to opportunities in the pipeline. It has also reduced the effort and expense of billing projects every month by a number of days despite an increase in the of number projects. The elimination of inter-departmental conflicts by providing a single source of truth across operations has led to productivity

improvements of between 15 percent and 20 percent,” says Ravanan. It’s also created benefits elsewhere. Because MindTree had outsourced its payroll function, it was paying an equivalent of $2 (about Rs 100) per employee every month. That’s about 60 lakh a year for 5,000 employees. “By bringing payroll in-house, we’ve saved at least $90,000 (about Rs 45 lakh) given the cost of $40,000 (about 20 lakh) for two more resources on the payroll team. If we grow to 8,000 employees in FY2009, our savings will jump to $180,000 (about Rs 90 lakh) a year,” says Reddy. mPower has also improved MindTree’s ability to measure utilization more accurately — an important metric in the service industry. Before mPower, MindTree used spreadsheets and manual inputs to monitor resource utilization. The lack of in-depth data forced the organization to calculate utilization based on the number of people used as opposed to the hours they spent. By integrating SAP HR with leave and time sheets, the utilization metrics was built into mPower. “It used to be difficult to derive and rely on the data we had to ensure cost optimization for, say, travel. Now we can trim easily because we have a clear view of our expenses,” says Reddy. A year after mPower was implemented, MindTree calculated that it had improved its utilization by 3.5 percent — a task that would have been impossible to even start on without the ERP project. “Project mPower has brought significant business benefits to MindTree, which have led to an improvement of one percent to our profit after tax margins,” says Ashok Soota, chairman and MD, MindTree.

“For a 5,000-strong organization, to be able to get data so early gives us the ability to react quickly to the market's changing needs." — Parthasarathy N.S., COO, MindTree

Parthasarathy echoes that thought. “The use of technology is strategic, that’s what we tell our customers. And we practice what we preach. The right investments in appropriate technologies have given MindTree a solid foundation to grow,” he says.

The Road Ahead “Once you pick up a reasonably good product, technology is never an issue. You can always work around the tech problems. The real problems are always those associated with people, change management within the organization and adoption. Adoption is key. We call it institutionalizing. We measure it very carefully. For us, if it is not being institutionalized, it is a failure,” says Reddy. That’s certainly not a problem Reddy faces. As the organization derives more benefits from its ERP platform, expectations of IT only continue to grow. “We are at a 90-percent level in terms of deriving benefits on the operational front. From a project management standpoint, we still have to build some more real time dashboards for different users including executive management,” says Reddy. Ravanan agrees. “We now want our planning and reporting process to be automated and integrated with the core transaction systems. Obviously we are looking forward to continuous enhancements on the core modules so that we are able to serve our internal customers better. Moreover, there are a lot of new areas that impact people, such as expense statement processing and tracking dues from employees and vendors that we expect will be automated to help us further shorten our monthly closing cycles. The project planning module is a job Reddy is already on. And once again, he knows speed and impact are essential. And, what about the biking that he left behind in the US? Well, Reddy plans to pick up a bike soon, and on his shortlist is the Yamaha MT01, a beast of a machine that weighs in on 265 kilos with 1,700 ccs of mean motorcycling muscle. Dumb question, but is Sudhir Reddy still a speed demon? You betcha. CIO Gunjan Trivedi is assistant editor. Send feedback on this feature to editor@cio.in

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ERP via SaaS:

Although software-as-a-service for ERP has gained momentum in SMBs and specific industry domains, ERP SaaS suites for large enterprises remain immature, notes a recent Gartner report. And that maturity won't come until 2012. By Thomas Wailgum recent report from Gartner throws a big bucket of cold water on softwareas-a-service ERP hype, especially for larger enterprises. Gartner analyst Denise Ganly writes in the SaaS Impact on ERP report that enterprises' dire need for a suite of integrated ERP solutions is not something that SaaS vendors can reliably deliver right now. "Because of the complexity of ERP suites, SaaS offerings for administrative and operational functions typically have provided functionality that is confined to one domain, such as sales force automation, or one business process, such as payroll," Ganly writes. "Thus, ERP SaaS suite offerings are still immature." Some of her other findings include: SaaS ERP suites won't be viable options for large enterprises during the next five years. "Except for use in two-tier ERP deployments," she notes, "large organizations should ignore this space."

What's stopping saas ERp Ganly notes that despite the hype, there are sound reasons why SaaS ERP suites aren't quite ready for prime-time enterprise-wide deployments. First she urges CIOs and business-technology leaders not to be "deceived" by impressive 32

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Reader ROI:

Why SaaS ERP isn't ready for the big time Sifting the hype from the truth What's in store

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Cover story | ERp SaaS ERP growth data. "Much predicted growth in this market will be driven by the adoption of human capital management SaaS and financial SaaS point solutions," she writes. "The growth rate for SaaS ERP suites will be a small proportion of the overall market growth, because mature robust solutions are unlikely to emerge by 2011." Next, Ganly points out that one of the big drivers of SaaS ERP is the extreme IT staff constraints faced by many organizations, and the SaaS model "appeals to organizations because it can free up staff to concentrate on morestrategic, value-adding processes." In addition, many of these organizations believe that SaaS ERP is "instant on," which means that it can be implemented with little or no intervention. "You just turn it on," she writes. "However, the business still must be re-engineered, processes redefined, integration points defined and so on." In other words, Ganly writes, "The instant-on perception that drives adoption also makes it an inhibitor." Other inhibitors to more widespread SaaS ERP adoption, Ganly contends, relate to total cost of ownership (TCO). TCO of "SaaS ERP suites likely will be significant and may not compare favorably with on-premises solutions," she adds. This problem applies to vendors as well. SaaS vendors "often have unrealistic expectations of their operating costs," she writes. "The multitenant architecture needed for SaaS ERP suites results in high internal efforts and costs for the initial setup and the ongoing maintenance and upgrade of the system." Security has also been an issue with SaaS ERP offerings, "especially with regard to financial data and privacy concerns," Ganly writes. "Vendors must prove to organizations that are considering SaaS ERP adoption that their security and privacy concerns are unfounded through super lowcost or no-cost, proof-of-concept trials, encouraging early adoption through value pricing and getting early adopters to share their success stories."

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the saas tipping point A

nalysts predict that in the next five years at least 18 to 20 percent of new software will be delivered via SaaS. Consequently, ISVs are scrambling to find simple, cost-effective ways to provide functionality, maintenance and support over the Web. Companies like Salesforce.com are inundating business users and CIos with pitches for all sorts of SaaS applications. But the fact is, today, SaaS is more popular with ERP or CRM solutions. So far, the phenomenon has also been largely confined to smaller companies. For CIos in the mid-market, SaaS may be the only way to get enterprise-class functionality. But as valuable as it may be to smaller companies, it may not be able to serve the needs of larger enterprises. "The needs of an SMB and large enterprise are different," says Bashar Kilani, software group manager, IBM Middle East, Egypt and Pakistan. SaaS its limitations and complexities which have to be resolved by an organization before implementation," Kilani adds. "Many SMBs opt for SaaS due to the start-up costs associated with set-up and acquisition costs of technology. SaaS currently provides businesses with a choice, offering a pay-as-you-use model, thereby bringing upfront costs down significantly," he says. "We need to look at where SaaS fits best in the companies IT strategy. For some companies, where IT merely provides a support service, SaaS may well play a larger role. For those who see IT as a dynamic part of the business that provides important insights, SaaS will be part of the overall solution along with traditional software, enabling the organization to leverage the best of both worlds," says Desmond Nair, business group manager, Servers and Tools, Microsoft Gulf. There are many questions a CIo must ask when considering the use of a SaaS application. But perhaps the most critical question is whether your company wants to rely on software designed for use by many other companies. "This competitive advantage is not maintained when you are using the same piece of technology, except the fact that it can take away some of the high effort ormaintenance workloads and let you to concentrate on competitive advantage," adds Nair. â&#x20AC;&#x201D;By Nancy Sudheer

saas ERp's FutuRE Even with the successes that SaaS ERP efforts are having in the SMB space, Gartner predicts that SaaS will constitute just 16.7 percent of the total ERP market by 2011. "SaaS ERP will continue to grow, particularly at the administrative level," notes Ganly. "However, the complexities of integrated ERP suites, along with a lack of credible vendor interest in this segment, means that truly integrated offerings (such as SaaS ERP suites) for large enterprises are unlikely to emerge in the near future." Ganly recommends that IT organizations

must be proactive with SaaS. "Engage the business before it decides to 'go it alone' on SaaS ERP initiatives," she writes. In addition, she urges large enterprises to "not consider SaaS ERP suites as viable options in the near term. Although the entry fees for SaaS are much lower than for on-premises solutions, beware of unexpected 'hidden' costs, such as sandboxing, testing and development, storage and integration," Ganly writes. "These may substantially affect the TCO for your SaaS deployment." CIO Send feedback on this feature to editor@cio.in

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Deplaning

Risk

Operating in a fiercely-competitive low-margin segment, SpiceJet could not afford to let fraudsters gnaw into its profits. It automated its online credit card screening system and caught fraud mid-air. By Sneha Jha

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Case File

J. Prajapathy, an ICICI Bank credit card holder,

IllUSt ratIOn by MM Shan Ith

was shell-shocked when he received a bank enquiry for a Rs 32,000 transaction he had never made. His credit card had been deceitfully used for booking airline tickets online and he isn’t alone. Over 60 percent of online credit card fraud occurs while people buy an air ticket online says B. Madhivanan, general manager at ICICI Bank. Prajapathy isn’t an isolated case. Unconfirmed reports suggest that credit card fraud went up by 28 percent in India in 2008. Online credit card scams are spreading their ugly tentacles in the world of e-commerce, and a beleaguered aviation sector is being pushed to the wall to devise ways of curtailing incidents of fraud. Another case in point: a 50-year-old Bangkok-based woman of Indian origin was recently suspected of running an e-ticket scam worth millions from India. Many Indian airlines were affected from the fraud estimated at Rs 5 crore. SpiceJet was one of the victims. Like every other airline, SpiceJet had equipped itself to screen credit card transactions, but it lacked a foolproof process to verify online transactions. It’s solution came in the form of a fourmember Fraud Control Unit responsible for manually screening transactions made on SpiceJet.com. “We handle around 2,500 online credit card transactions everyday. We screen them round the clock but the fraud rates increased every day resulting in a loss of revenue to our company. We could feel the pressure mounting on us,” says Rahul Kumar, head of Fraud Control Unit, SpiceJet. Time was running out, SpiceJet knew it had to do something fast.

Transaction Turbulence Headquartered in New Delhi, the low-cost carrier took to the skies in May 2005. Since it launched, SpiceJet has single-mindedly focused on becoming a key player in the highly-competitive low-margin segment. By

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to book tickets online. Passengers who its fourth year, its market share had soared. purchase tickets directly off the Internet SpiceJet is now India’s second largest lowget a cost advantage, ensuring their cost carrier in terms of market share. continued patronage. The airlines, on However, getting there wasn’t easy given the other hand, realize a saving from that the airline operates in an increasingly bypassing travel agencies who otherwise cluttered segment. The landscape was have to be paid a commission. too small for so many players and this Profitable and innovative as it may had sparked off a price war the likes the appear, this system is not devoid of country had never seen before. loopholes. With slim financial margins, But their low-fare pricing model ensured budget airlines are primarily vulnerable that the low-cost operators survived on to revenue loss from e-ticketing fraud. razor-thin margins, suddenly making losses from fraud significant enough to garner CXO attention. Flight Plan “We were losing Rs 50-60 lakh per An enormous amount of SpiceJet’s month. And when you operate in a business — about 90 percent — is generated fiercely competitive low-margin segment, through online credit card transactions, such a significant revenue loss can make making security a formidable challenge. you bleed. We were looking at ways to “There was a steady rise in the number reduce that loss, ” says Virender Pal, CTO, of online fraud incidents,” says Pal. SpiceJet. SpiceJets’ chargeback rate — or the Worse still, the increasing number of number of incidents of fraud it faced as a e-ticket scams, combined with the bright percentage of its total transaction — was light the media threw on it, was beginning 1.5 percent. “That’s a huge number when to impact the credibility of the airline’s we you look at our volumes,” says Pal. website — its chief source of revenue. Alarmed by the increase, SpiceJet In this fiercely competitive scenario, decided to put risk on its radar. It was SpiceJet strove to create a sustainable necessary that they enhanced customer profit model. Running on experience with reala lean mean and focused time verification of Reader ROI: operating model, Spicejet credit card transactions The benefits of automating maintained a laserto alleviate any security fraud detection sharp focus on margins. fears. The thrust was on What to watch out for with It integr ated processes making SpiceJet.com a an automated fraud and technology to attain secure place for credit detection system operational efficiency. card transactions. Why integrating process And one of the best ways S p i c e Je t then with technology can an airline can do this is approached IT for streamline processes by enabling customers help.It knew that IT REAL CIO WORLD | m a r c h 1 , 2 0 0 9

PhOtO by Sr IVatSa ShandIlya

Case File could provide a platform industry. The company has a huge dynamic and real-time for securing credit card database of credit cards and transactions through their this solution is being used by website. And IT was quick to over 20,000 organizations respond with an automated, SNAPSHOT (like Jet Airways and the advanced and flexible online SpiceJet Future Group) across the risk management solution HEADquARTERS: Gurgaon globe. We got the benefit of that could screen online sharing the same database,” transactions efficiently. REvENuE: rs 472 crore says Pal. Pal formed a team of four to spearhead the operation. WORkfORCE: 2,800 Because the solution they Ticket to Security chose would drive 90 percent With Decision Manager STRENgTH Of fLEET: 19 of their business, they had to on board, SpiceJet can now be very careful in identifying automatically evaluate credit OPERATIONS: 115 flights daily a partner. card transactions in real time. They wanted to deploy the Based on a combination of solution from a company that rules framed by the airline had an established reputation and a credible and a set of over 150 parameters, the system database. After three weeks of deliberation decides whether a transaction should be they finally opted for CyberSource’s processed further or sent for a review. Decision Manager, an automated online risk SpiceJet formulated these rules after management solution. analyzing its experience of fraudulent credit “Decision Manager was selected for its card transactions. It studied the various proven flexibility, reliability and scalability strategies employed by fraudsters and in addition to CyberSource’s established mapped out its own security requirements reputation in the e-commerce payment accordingly. One such rule was that they

would review every transaction made for booking a ticket five hours before the departure of a flight. “If there is a transaction for a DelhiMumbai flight which is to depart in the next five hours and customer’s IP address indicates that he or she is in China, we raise a red flag. So we made a rule that we will check the difference in the booking time and flight time. If it is less than five hours then we do not accept the transaction,” says Kumar. By running Decision Manager, SpiceJet. com is now able to almost singlehandedly estimate whether an online purchase should be accepted, rejected, or reviewed. But, the application was not given veto power. “We did not want to reject any transactions because this would impact customer experience. If a transaction seems suspicious, we review it. All this happens within two seconds ensuring that customer experience is not impacted,” says Ganesh Raje project manager-IT, SpiceJet. The project went live in October 2007 and effectively handled the gravity of the situation. But management had certain apprehensions about the implementation. “In case there is a five or 10-minute outage in the system, then during that period you can’t really do business. This was a critical concern for our management,” says Pal. Another concern was that after implementation, business via SpiceJet. com would decrease because some valid transaction could be rejected. That’s why, says Pal, “Initially, we implemented the system mildly, like an anti- virus. We started from a low level and worked our way up.”

“We were losing Rs 50-60 lakh per month. In a fiercely competitive low-margin segment, such a significant revenue loss can make you bleed.” — Virender Pal, CtO, SpiceJet

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Case File

Putting Risk on the Radar Because 90 percent of SpiceJet’s business comes from e-ticketing, it implemented Decision Manager to target fraud and saved the company about Rs 60 lakh a month.

2 2

Hrs to Secs

AfTER: The automated fraud detection software, Decision manager, authenticates every transaction in two seconds and weeds out the suspicious ones.

Tight timelines were another tricky issue, especially because fraud rates and chargebacks were escalating with every passing day. And with the competition hounding SpiceJet, it was under tremendous pressure to get its online credit card system in place. Once the system was up and running, SpiceJet did have some cases of false positives when even a valid credit card transaction was declined. Customers called up the airline to enquire why their transactions were rejected. “Based on that information, we had to further tweak our rule set. Within the last year, and in over a million transactions, we have not had more than 50 to 60 false positives,” says Pal.

Welcome Aboard The solution brought with itself a whole set of benefits. The automatic screening of credit card transactions reduced the organizational burden of manual intervention. “Post-implementation we screen only those transactions that need to be reviewed. We don’t have to deal with accepted transactions. So now we

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BEfORE: The FcU verified every transaction — that’s about 2500 everyday.

2500 350 to

AfTER: Thanks to Decision manager, FcU members are much less overworked. They only examine suspicious transactions Decision manager filters out — about 350 a day.

handle only about 400 transactions in a day as opposed to about 2,500 prior to the implementation,” says Kumar, the head of the fraud control unit. The solution has definitely impacted customer experience but only in a positive way. “Nothing has changed for the customer except that our website has become a more secure place to transact. Now he knows that his credit card can never be misused at SpiceJet.com. The solution has not only enhanced the sales effectiveness of our website but has also inspired confidence in our customers,” says Raje. Within two months of the deployment, SpiceJet’s chargeback rate, according to Pal, “plummeted from 1.5 to 0.002 percent” — the lowest chargeback rate among lowcost carriers in Asia, claims the company. Plus, it makes it easier for SpiceJet to go international. “Our system is now equipped to handle both international and domestic credit cards. We might have to look into our rules and modify them if we want to use it for international transactions,” says Pal.

BEfORE: SpiceJet’s chargeback rate — indicative of the number of fraudulent incidents it faced — was at 1.5 percent of transaction volume.

1.5% 0.002% to

AfTER: Within two months of deployment, Decision manager brought that figure down to 0.002 percent — one of the lowest in asia, says SpiceJet.

This highly robust system is capable of handling immense traffic. “When we launch low-fare schemes on SpiceJet.com, the number of transactions increases. By about 10-15 percent in a day. But even then we haven’t faced any performance issues with the system. We didn’t pay upfront for this solution. We pay on a transaction basis — about Rs 10 per transaction for each credit card screening,” says Pal. As SpiceJet plans to expand its market reach in the international arena, it plans to leverage CyberSource’s global coverage, assessing their expertise and knowledge of fraud trends in the international market. This solution would lend support to its expansion plans in future. “I think we did it the way we wanted to. A different method could not have been better,” says Pal. A robust and flexible system that ensures secure transactions and a step a few feet above competition — Pal couldn’t have asked for more. CIO Sneha Jha is correspondent.Send feedback on this feature to editor@cio.in

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InfOGra PhICS by PC anOOP

BEfORE: SpiceJet’s four-man control Unit (FcU) verified every transaction in batches created every two hours.

Superusers pe to I.t.’S ReScue Your organization is filled with IT rogues and tech renegades. Instead of fighting them, join them — they could be angels sent to save you. BY Dan TYnan

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IT Management

Here's a soberIng sTaTIsTIc: eighty percent of enterprise IT functions are being duplicated by folks outside of the IT department, says Hank Marquis, director of ITSM (IT systems management) consulting at Enterprise Management Associates. In other words, for every 10 people doing IT work as part of their jobs, you've got another eight ‘shadow IT’ staffers doing it on their own.

IllUStratIon by MM Shan It h

You probably know them. They're the ones who installed their own Wi-Fi network in the break room and distribute homemade number-crunching apps to their co-workers on e-mail. They're hacking their iPhones right now to work with your company's mail servers. In short, they're walking, talking IT governance nightmares. But they could be your biggest assets, if you use them wisely. The reason superusers go rogue is usually frustration, says Marquis. "It's a symptom of the IT organization being unable to meet or even understand the needs of its customers," he says. "Otherwise, it wouldn't be happening." The solution? Put them to work. "Most IT managers have too many requirements and not enough time or budget to get everything done and keep everyone happy," says Jeffrey Hammond, senior analyst at Forrester Research. "If your infrastructure is flexible enough, you can let superusers solve their own problems, take the heat off your developers, and provide some of your business needs." Here are five tips for getting the most out of your superusers.

Tip No. 1 LeveRAge the knoWLeDge — WIthout the noISe If you want to find out where IT operations fall short, ask your superusers. Most will be more than happy to give you an earful.

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"You want to develop an anthropological But figuring out who your superusers are understanding of what your customers do," — and which ones are worth listening to Happe says. You also need to identify those — is trickier than it may first appear. who should be superusers but aren't because That's because there are in fact two the current version of the application is too kinds of superusers. One is the geek difficult to use, she adds. who loves technology for its own sake Happe acknowledges that organizations and deep down really wants to be an may be reluctant to dedicate limited staff IT person. He or she will do whatever it time to watching their own employees, but takes to get the job done without waiting the alternative is millions of dollars spent for IT to sign off. on developing applications nobody uses. But there are also superusers who "If you've got an ERP system, the may not necessarily possess a wealth of accounting department has to use it technical knowledge but eat, breathe, and whether they like it or not," Happe says. sleep a particular application — whether But as organizations start to deploy less it's your in-house accounting tool or structured communications-style tools your hosted CRM solution. They're your such as BI or CRM apps, that changes. primary internal customers. "If they don't like the tool, you can't The problem? The geeks tend to squawk force them to use it," Happe warns. "And the loudest and to focus on minutiae, says the only way to drive business value out of Rachel Happe, research manager for the application deployment is regular usage." digital business economy practice at IDC. But it's the application hounds whose voices matter most. "You'll get an overwhelming amount of feedback from people who are being very Let them buILD theIR thorough but not necessarily thinking about oWn AppS an application's primary- and secondaryWhen it comes to business applications use models," Happe says. "You end up with and superusers, the rule is: if you build it, a pre-ponderance of edge cases." they will come; but if you don't build it, they To counteract "the loud crowd," Happe will probably build their own. And that can advises organizations to cause big headaches. examine log files to find out Reader ROI: Because of this, savvy who uses the applications enterprises that encourage Why fighting superusers most often, and then superusers to build apps is anti-productive shoulder surf — watching do so in a way that lets IT how to choose which superusers work and asking keep a close watch over superusers to listen to them questions about what security, performance, and The wider benefits of they're doing and why. compliance. Mashups and employing superusers

Tip No. 2

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IT Management things really stink when it comes to sharing Web-based workflow tools are two popular data between users, managing security, and solutions that allow ordinary users to mix adding structure to data," Weider adds. data, processes, and services yet remain "Those are all things QuickBase is good at." governed by IT. Rather than fight ad hoc application "Mashups can provide a happy marriage development, Weider believes in between the desire of IT to govern and embracing and encouraging it. "My goal the desire of business users to innovate," is to have 100 percent of our knowledge says Rene Bonvanie, senior vice president workers be shadow IT," says Weider. at Serena Software, a mashup platform "Every employee must be tech-savvy and vendor. "Even if IT wanted to build these leverage the tools provided in order for us apps, they can't because they don't have the to have any hope of achieving a return on capacity. But there's an entire generation of our very expensive IT investments." business users quite happy to do this." Using Serena Mashup Composer, business users can drag and drop applications, processes, and content into workflow diagrams that pull data from Turn them into sys admins designated applications and Web services. A smart way to handle superusers is to John Hastings-Kimball, vice president give them more IT authority, not less. of workflow solutions at Thomson For example, 12 years ago, Maureen Financial, tapped Mashup Composer to Vadini was recruited to help bring Parma create an app that bridged Thomson's Community General Hospital's paper ordering, entitlement, Citrix server, and records into the digital age. A registered contract and billing management systems, nurse by trade, Vadini is still holding trimming the company's order fulfillment hands and taking temperatures — but now process from four days to she's doing it for users less than 24 hours. of the hospital's Vocera During the past four Communications System, years, Thomson business which is modeled after users have built dozens of the badge communicators mashups for generating from Star Trek: The Next sales proposals, Generation. When hospital establishing business personnel need to find continuity plans, and each other, they speak performing incident into their badges, and management for critical Vocera gets the message outages, says Hastingsto the right person. Kimball. Now a patient care "It's classic shadow informatics analyst in Source: Enterprise Management Associates IT," he says. "We grew the the Ohio hospital's IT product across the entire department, Vadini sales and service organization. Now we made the leap from superuser to tech deliver solutions to almost every part of professional about four years ago. But our organization from outside IT." she's hardly the only non-techie fulfilling Meanwhile, Ministry Health Care and an IT role. Affinity Health System in Wisconsin relies At PCGCampbell, a marketing on more than 3,000 Intuit QuickBase and communications company, some applications created by more than 100 superusers have been dubbed ‘information employees, says CIO Will Weider. administrators’ and have been imbued The hospital started by creating a with special powers not available to QuickBase workflow app to manage ordinary mortals — such as managing meetings two and a half years ago, and it access to sensitive data. just grew from there, Weider says. "We tried "As a marketing company, we often using Access and other Office tools, but those handle personally identifiable information

Tip No. 3

80% Of IT functions are

being duplicated by superusers outside the IT department.

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that needs extraordinary protections on it," says Joe Vandervest, vice president of information systems at PCGCampbell. "These guys are sensitized to it. They're right in the trenches, so they know what's going on. We empower them to set up protected folders for the data or to come directly to us." Some employees feel more comfortable talking with superusers than with IT personnel, Vandervest adds. Likewise, the information admins can report back to IT about issues other users may be encountering. Later this year, PCGCampell plans to empower its information admins to act as content managers on the company intranet and to install software on clients' machines. "In our organization, people are superbusy, and they travel all over the country," Vandervest says. "They need flexibility, which is what we're trying to get at by having delegated powers." But there are caveats, Vandervest says. For example, the approach can only work if you have the necessary training and certification procedures already in place. "I would caution against delegating authorities without compensating controls in terms of certifying their abilities and their understanding of security policies," he says. "Trust, but verify. Most people tend to delegate and empower without checks and balances. If you're allowing superusers to install software, for example, you better make sure you're keeping an eye on license compliance. You want to make sure you're compliant."

Tip No. 4 Create a safe place to collaborate Getting your superusers to contribute ideas is one of the best things you do for your organization. Eighteen months ago, Cisco launched I-Zone, a company-wide wiki for developing innovative business ideas. Since then, Cisco's 61,000-plus employees have contributed 600 ideas for potential $1 billion-per-annum ventures, says David Hsieh, senior director of marketing for emerging technologies at Cisco.

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IT Management But letting end-users build their own blogs, wikis, or other collaborative tools is just asking for trouble, says Bill Penn, chief architect at Covisint, a vendor of collaboration solutions and services. "CEOs aren't considered hip unless they're writing their own blogs these days," says Penn. "But you don't see the same CEOs saying it's OK for employees to create their own blogs and wikis. People need to be held accountable. You need to have a compliance and security framework tied to identity management systems before you turn these folks loose." John Baschab, president of management services at Technisource, says his tech staffing and consultancy firm created its own collaborative site to include a ScrewTurn wiki, WordPress blogs, a user forum, and a file management application, all wrapped up within SharePoint 2007. "You've got to give end-users tools and the sandbox to use them in, and to make it easier for them to use than it would be to do it themselves," Baschab says. By including SharePoint into the initiative, Technisource can ensure production-level performance, data backups, security, and single sign-on. "If you don't give users these things, they'll eventually just give up on you and go elsewhere," Baschab says.

Tip No. 5 Recruit your own geek squad Superusers constantly try to introduce new technology. Let them — but make sure they support it themselves. Chris Lynch, vice president of engineering at collaborative software firm Daptiv, begged, pleaded, whined, and cajoled his IT department to let him use a Mac, until they finally gave in — but only after he offered to be his own support department. "At first, our IT department said they didn't have anyone in IT who knew anything about Mac management and support," Lynch says. "I said, why not start with one person — me. I will get a Mac, I will support it. Any problem I encounter, I come up with the best practice to resolve it and tell you everything I do."

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Users From Hell

A long-suffering consultant tells you why letting users free can be your worst nightmare.

o matter how hard we pray, how many chickens we sacrifice, how often we chant naked by moonlight, we’re all exposed at one time or another to the ultimate technology risk: users. Take for example BrilliantCompany.com. The company was growing at dot-com bubble rates and with departments popping up like daisies in spring, IT staff was ceding desktop control to department heads because most everyone was technical. Shortly after a batch of 75 new Dell desktops arrived for a new product division, the network suddenly died in the middle of the day. All lights were green in infrastructure land, but performance had slowed to such a crawl that the LAN was effectively paralyzed. Some diligent sniffing and log file snooping revealed the culprit. Turns out Windows XP’s Automatic Update had defaulted to high noon on a weekday, and all 75 machines were attempting to download several hundred megs of Service Pack 2 simultaneously and individually. Instant network clog. Solution: Centralize IT control so one somebody is responsible for all the details. Moral: Just because your users are technical doesn’t mean they’ll behave with any more attention to detail than the average Joe. — By Oliver Rist

You can guess what happened next. Soon, other people at Daptiv saw Lynch's Mac and wanted one, too. So he became their support department as well. The IT department saw the writing on the wall and assigned a staffer to handle the company's burgeoning Mac population, which Lynch estimates at 15 to 20 machines. (He says Daptiv offered to send him to Mac training as well, but he declined.) EMA's Hank Marquis says deputizing superusers to provide shadow tech support also allows business units to get faster fixes without busting the IT budget. "Say you have a remote office," Marquis says. "They're unhappy with IT because when the network goes down it takes four hours to get someone there to fix it. But if you take a person on site and make them a quasi-member of IT, he can call a special number to access the help desk when the network goes down. Or he can have a key to the telecom room and enough training to reboot the system. Business users get back up in minutes, not hours." Just don't overdo it, Marquis warns. It's easy to give superusers so much extra

work that they don't do the jobs they were hired to do. There are other unexpected consequences as well. Once Daptiv's Lynch got his shadow Mac operation going, he naturally needed an iPhone to go with it — and so did 30 to 40 of his BlackBerry-wielding colleagues. "I must be the bane of IT," Lynch jokes. Bottom line? "You better hop on this train because it's moving," says Alex Chriss, business development lead at QuickBase. "You need to believe in your superusers and empower them. They're the ones that have the business-specific knowledge. If you can empower them and give them the tech knowledge and toolset they need to solve problems, you're the one who's going to look like a hero." CIO

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How airlines are deploying more flexible IT to support new customer-focused business strategies and manage risk in a volatile economy. By Kim S. NaSh

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Alignment

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facing near-crippling economics, where major new systems development is being deferred, layoffs appear likely and budgets are being starved to conserve cash.

Airline Profits And Airline PAssengers For example, Southwest Airlines, which used to be known as a no-frills cattle-caller, now uses technology to provide darn-near luxury services to its customers, such as the ability to change flights with no fee. Sabre Holdings, which provides reservation systems and other software and services to Southwest and American Airlines, among hundreds of others, is using deft, money-saving ways of handling IT labor issues. And Pinnacle, a low-cost regional carrier based in Memphis, Tennessee, is finding success by approaching IT as neither a cost center nor a source of innovation but as a risk to be managed. All you hear about the alignment of people, process and technology with business strategy is playing out — quite painfully — in the airline industry. "A lot of people questioned my sanity, coming to an airline," says Jeff Dato, who joined Pinnacle as vice president of risk management and IT in 2006. "We're all one bad day from having our doors close," he says of the turbulent industry. Then again, he adds, this challenging time "is a wonderful opportunity to make an impact."

designing it for Customers As much as consumers may perceive ‘the airlines’ as a monolithic business — created, it sometimes seems, to make travel as hellish as possible — each carrier deals with different IT problems and business problems. REAL CIO WORLD | m a r c h 1 , 2 0 0 9

IllusTraTIon by pc anoop

several shotgun mergers and a $15 billion ometimes it's hard to tell (about Rs 82,500 crore) federal bailout that a business model in 2001, the industry is no better off, he is broken. Then events says. There are too many planes flying startle you to clarity. For too many places, producing high demand instance: the same week for expensive jet fuel and, some say, an in 2007 that Airbus unwinnable competition. Customers delivered the largest passenger plane routinely complain that they can't get the ever built (four jet engines, 471 seats), flights they want when and where they the trade magazine Airfinance Journal, want them. citing the industry's cry for fuel efficiency, So the airlines are trying new tactics, hailed the "return of the turboprop," an such as cutting flights, hedging fuel costs airplane invented in the 1930s that uses a and offering passengers amenities such gas turbine to turn a propeller. as in-flight Wi-Fi. Plus, the so-called Other times, the revelation comes in ‘unbundled services model’ has some numbers. Ten years ago, a barrel of oil airlines selling everything from pillows was about $16 (about Rs 880) and flying to luggage space to meal deals. planes was lucrative. US airlines together But these tactics require technology made $5.3 billion (about Rs 29,150 crore) support — and in few industries is the in 1999, which would be the industry's business model as baked into the IT as in most successful year ever. Collective the airlines, says Stewart, who formerly net earnings dropped by nearly half to directed project management offices at $2.5 billion (about Rs 13,750 crore) the American Airlines, TWA and Londonfollowing year, leading to five years of based Silverjet. Who hasn't stood in front losses that began as the dotcom economy of an agent at the airport, listened to her burst. Then came the 9/11 terrorist clack on an unseen keyboard for several attacks, which grounded planes for three minutes — no mouse, no touch screen — days and scared customers away from only to hear, "I'm sorry, the system won't the skies for months, even years. Oil, let me do that"? meanwhile, climbed to all-time highs, Most legacy proprietary reservations eviscerating any hope of airline profits. systems can't do everything a Web-based The industry was profitable in 2006 booking system can do, such as pre-sell and 2007, but now we're in an economic an onboard snack to one customer and death spiral that touches virtually all — at Air Canada anyway — subtract the industries in many countries around the cost of that snack for another customer world. When the airlines close the books who wants to bring his own. "Technology on 2008, they are expected to lose up to is lagging where airlines want to be $10 billion (about 55,000 crore) — twice right now," says Darin Lee, as much as they made ten a consultant who specializes years ago. Reader ROI: in the economics of the "You just kind of shake IT lesson from the airline industry at LECG, an your head," says Carter airline industry economics consulting firm. Stewart, managing director Innovative ways How some airline CIOs are at Trans World Consulting, airlines are using to make money grappling with the crisis brings an airline consulting firm in Why speed is crucial lessons to other IT leaders London. After nine years,

Alignment

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Gray Skies It took five years after the 9/11 terrorist attacks for airlines to regain profit, as passenger volumes recovered. But recent record oil prices and worldwide slowdown have dealt another blow. $6B $4B

ProfITS In BIllIonS

$2B 0 $-2B $-4B $-6B $-8B $-10B $-12B 1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

*Estimate Source: Air Transport Association of America

769

800 M

636

Million

666

Million

647

622

612

Million

703

739

Million

745

Million

Million Million

700M PASSEngErS In MIllIonS

At US Airways, the CIO spot has been vacant since Joe Beery left late last year to become SVP and CIO at pharmaceutical company Invitrogen. At Continental Airlines, work recently started to integrate its reservations, ticketing and other systems with those of the Star Alliance, a network of 21 airlines that share customers. Any difficulties that may arise from the technology integration present a "significant" financial risk to Continental, according to documents the airline filed with the Securities and Exchange Commission. Meanwhile, American and United, which have been around for decades, use some technology that is also decades old. Changing these systems can take a lot of time and requires programmers to know the proprietary software well, says Raphael Bejar, CEO of Airsavings SA, an airline IT provider. Even former scrappers like Southwest and JetBlue now have legacy technology that can limit the services they offer and the ways they can spark revenue, Bejar says. While each carrier has its own problems, some issues stretch across companies. Namely, at every airline, everyone from the CEO down must fight to win customers, while at the same time getting as much revenue as possible from each one. Several airlines, such as US Airways and United, now charge for pillows, headsets or other niceties aboard the plane, as well as for services such as checking bags. These items used to be folded into the cost of a ticket. The idea now is to let customers choose which products to buy, thereby generating new revenue. Flight attendants and gate agents conduct the transactions in various ways. US Airways, for example, is testing handheld devices from Guest Logix to process credit card payments onboard its planes. The goal is to eliminate cash in flight this year, says Lisa LeCarre, the president of the union for US Airways Phoenix-based flight attendants. Selling items on the plane rather than at the time of ticketing means that these transactions don't go through US Airways' reservation systems â&#x20AC;&#x201D; minimizing the IT work necessary to process the purchases. Air Canada, however, goes further with unbundling, offering a buffet of options for fliers to buy or reject when booking a ticket.

499

600M

Million

500M 400M 300M 200M 100M 0

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

*January to September 2008 Source: Air Transport Association of America, Bureau of Transportation Statistics

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Alignment Air Canada built the Web-based system in 2006, separate from its traditional reservation service provided by Galileo. A year later, Galileo built a desktop version to roll out to travel agents so they, too, could access the Ă -la-carte products that Air Canada now offers. Customers at the airline's website can choose from four levels of options, with goods and services ranging in price. For example, passengers can add extra services to their fare, such as pre-buying a meal and a snack at a discount. Sometimes, customers can opt for ticket discounts, too. The strategy seems to be working for Air Canada. As of last September, ancillary revenue per passenger totaled $210 million (about Rs 1,155 crore), up $71 million (about Rs 390 crore) since 2005, according to a company presentation to investors. And 49 percent of customers choose a ticket fare other than the lowest available. Trans World's Stewart predicts that unbundling will be short-lived. The revenue gained from selling add-on products can't fully compensate for volatile fuel prices raising flight costs and too many available seats pushing ticket prices down, he says. Plus, modifying legacy reservation systems across the industry, such as Galileo, Sabre and others, to track all the products available from the airlines and the hundreds of sales combinations will take too long and cost too much, he says. An airline bringing the idea to a reservation systems supplier, he says, would probably hear a response that asked for a feasibility study, requirements documentation, a change request and time for testing. Then the reservation vendor would develop a quote for the job. "All of this would take four or five months and nothing's been done yet," he says. "These types of things are very slow." Southwest, meanwhile, is using IT in a different way to target customers. Business and IT strategists with the company maintain that charging extra for such items as snacks bothers customers. "We don't expect our customers to have to pay for every little service we offer," says Jan Marshall, Southwest's CIO. "It's part of flying."

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Instead, Southwest is trying to attract passengers by making flying more pleasant. In 2006, Southwest executives, seeing the strain the airline industry was enduring, discussed ways to maintain market share by improving their customers' experience. One simple question, Marshall says, set off hot debate and ultimately spawned a major IT project: should Southwest assign seats? The airline had historically asked customers to wait at the gate and be seated on a first come, first served basis â&#x20AC;&#x201D; kind of like lining up for concert tickets. Then it switched to group boarding. For a while, agents handed out colored boarding cards to each waiting passenger. Then management wondered whether to refine seat assignments further. Marketers, technologists and operations specialists alike fanned out at various airports to test theories on live customers, then watch their behavior. Such customer anthropology can mean the difference between wasted and well-spent IT dollars, Marshall says. "What we discovered was that our customers didn't want assigned seats. They wanted to pick their seats but didn't want to stand in line," she says. "Our people saw that right away without building a prototype

system back in headquarters that might have made the wrong assumptions." However, from this research grew an eight-month project that, at its height, involved more than 500 employees across the company as well as outside contractors. Southwest defined three objectives: to assign boarding classes to all ticket holders; to let customers choose to pay $10 or $20 (between Rs 550 to Rs 1,100) to board early; and to single out Business Select members (Southwest's elite frequent flyers) to board first. To accomplish these goals Southwest is replacing many of its back-end systems with a service-oriented architecture built on SAP financial and HR applications, among other investments. The company divided IT workers into about 15 teams to work on the various platforms on which Southwest does business. These include its website, the frequent flyer and airport systems, revenue reporting, as well as the reservation engine and booking system. "When we roll something out, we roll it out to all our customer touch points," Marshall says. Marshall declines to say what the project cost. But working many changes to legacy systems is a burden airlines must shoulder, says Bejar of Airsavings.

"We're all one bad day from having our doors close," says Jeff Dato, VP of risk management and IT, Pinnacle." But this challenging time, he adds, "is an opportunity to make an impact."

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Alignment uPdAting the legACy ColleCtion In the early 1960s, American Airlines and IBM built Sabre and wowed the computing world with what was then the largest realtime corporate data processing system. Sabre became an independent, publiclyheld company in 2000; today it's a $3 billion (about Rs 16,500 crore) private firm with thousands of customers. The Sabre application remains one of the biggest corporate software systems, spanning from mainframe to Java technology. Sabre must support a variety of business models, such as unbundled or traditional ticketing, and everything in between, because of the variety of customers it serves, says Barry Vandevier, Sabre CIO. As Sabre has evolved into an airline IT solutions provider, the company has focused on separating business rules from its code. Legacy mainframe environments from Sabre's origins were more rigid than today's technology. Sabre has invested heavily in open systems and next-generation rules engines. In areas where it still utilizes mainframes, Vandevier can encapsulate the mainframe logic as a service while using an open system environment or rules engine to enable the needed flexibility. "This doesn't

happen overnight. We've been leveraging this product for a lot of customers for a long time." He is trying to make modifications to the granddaddy Sabre software happen faster by using agile development techniques. Every two to four weeks, a component is delivered for tire kicking and criticism from Southwest, American or any other appropriate constituency. "Five years ago, that pace and partnership wasn't happening," he says. The challenge is broader than making changes to accommodate unbundled product offerings. Getting the airlines' IT teams and Sabre's people to work in lockstep is key to delivering any enhancements in time to capitalize on them, Vandevier says. That starts at the top. For example, Vandevier has a dedicated team that he considers an extension of Southwest's IT department to handle change requests or new reservation features. Marshall and Vandevier talk through what has to happen technologically and managerially on both sides. Every month, they review in detail the projects underway. But CIOs talking doesn't mean any real work gets done, Vandevier jokes, so he likes to have Sabre IT people on a given project

"We don't expect our customers to have to pay for every little service we offer," says Jan Marshall, CIO, Southwest Airlines referring to how she is using IT differently to target customers.

m a r c h 1 , 2 0 0 9 | REAL CIO WORLD

connect with counterparts at Southwest more than he is in touch with Marshall. "Interaction at all levels is critical," he says, interlocking his fingers to show how tight he wants the teams. Southwest builds its own Web applications. But when the time arrives to build interfaces between Southwest.com's back-end software and Sabre's reservation system, Vandevier's staff steps up. With any IT project, Vandevier carefully considers to which country he assigns the work. In 2003, 85 percent of Sabre's workforce was in the United States. By 2006, it was 45 percent. The migration was planned to take advantage of deep skills available for lower pay offshore. "We're pushing for more efficiency," he says. IT work can occur in any of the countries, but each has a specialty. In Poland, where many on staff have earned master's degrees in computer science, Sabre employees concentrate on serving growing business in the Asia-Pacific region (although they also serve other regions). In India, Sabre's slant is data warehousing and business intelligence. Buenos Aires is where Sabre focuses on marketing applications; a short time difference â&#x20AC;&#x201D; two hours between it and Sabre's Dallas offices â&#x20AC;&#x201D; make meetings convenient. In the United States is where strategic planning of new products and services and caretaking of the Sabre reservation system, among other tasks occur. Ongoing work includes converting major Sabre products to open systems technology. Such projects include the newer SabreSonic Customer Sales and Service customer relationship management system, as well as GetThere, an application big companies use internally to book business travel. Development for a single project is usually confined to one or two locations. Any more than that makes it hard to coordinate, and project managers can lose track of who's doing what when, Vandevier says. To help, Sabre recently built a social networking site named Cubeless, to help far-flung IT staff get to know each other and pose technology or business questions broadly across the company. All 9,000 employees have a profile page to populate with pictures and personal and professional

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Alignment details. The travel agencies using Sabre and internal call centers are on Cubeless, too. Distributing the workforce may complicate logistics but is a good financial hedge, Vandevier says. Treating IT overall as a risk to hedge, in fact, can help CIOs react more nimbly to change.

IT Through Reality Glasses Pinnacle Holding is no American or Southwest or even an ATA. The $790 million (about Rs 4,345 crore) Pinnacle runs two regional carriers that fly customers around 35 states and Canada for Delta, Northwest (its former parent company) and other big names. But this small airline is taking bold steps to manage IT more flexibly and more cost-effectively, so it's easier to change course with the business climate. Namely, Pinnacle approaches IT as a risk to be managed and one that can help mitigate risks in other parts of the company. At Pinnacle, IT is not a cost to be borne or a magical savior that transforms. Senior executives at Pinnacle are "extremely conservative," says Dato, the vice president of risk management and IT. He was hired in 2006 to help the company manage IT risks and those inherent in being a growing airline in a chaotic economy. Dato joined Pinnacle after consulting there for about five months, from KPMG. "I'm not a technologist," he points out. "I'm in risk and operational efficiency." A risk-based approach to technology is the successor to managing IT as a portfolio of investments, says Jim Sutter, principle at The Peer Consulting Group and a former technology executive at Xerox and Rockwell. That is, instead of balancing IT projects, CIOs should think purely as business executives, partnering with a peer to lobby for a given project within the overall priorities of the company. Being focused on risk means emphasizing how a project will prevent mistakes that the company might otherwise make, Sutter advises. One of the first conversations Dato had with C-level executives was about the nature of risk. Some is allowable; but some specific risks shouldn't go unchecked. "There's good risk and bad risk, like cholesterol," he says.

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On the bad side, for three years after its spin-off, former parent Northwest was Pinnacle's only customer. The deal precluded Pinnacle from flying for anyone else. Pinnacle renegotiated in 2006, settling on an agreement that cut its revenue from Northwest by about half but left it free to fly for competing airlines. Diversifying customers is key to managing financial and operational risk, he says. Now an example from the good risk category. Pinnacle's board requires Dato to provide metrics showing why it should fund IT requests. Board members want the usual: estimated costs and returns expressed financially and operationally. But they also want a narrative explanation of how the numbers will be achieved. Telling a story at a human level makes the risk calculation more tangible, he says. To that end, in 2007, Dato built a case for a new Web-based training system. Ground crews, pilots and flight attendants come to headquarters regularly to refresh safety, mechanical and other training. What the board didn't know, Dato says, was that this travel amounted to 60,000 nights per year in hotel stays. A training management system from Plateau Systems that Dato proposed would provide online access to most courses, saving one to three nights of travel per person, per year and "hundreds of thousands of dollars." The board could have elected to spend the project money on other things, Dato says. But the numbers and anecdote together helped convince them to spend it on the IT work and avoid the greater financial risk of bringing employees to headquarters for training. Overall, Dato is evaluating Web replacements for nearly all of Pinnacle's software, which was a mix of various applications from different vendors, none of which was built to work together. By mid-year, most systems will be Webbased, some hosted offsite in softwareas-a-service configurations, he says. The list of systems includes financials, human

resources and aviation maintenance, among others. Lawson's Human Capital Management suite, for example, replaces a group of legacy systems used for managing job applicants' data. Pinnacle HR employees had to enter data manually and generate 29 pieces of paperwork for each job seeker, according to Lawson. Being able to access this information online, along with employee personnel records and training certifications, cuts Pinnacle's compliance risk, Dato says. "Our world is heavily regulated. We needed this information more available and more complete for audits." Fortunately for Pinnacle, with most of this spade work completed in 2007 and 2008, Dato and his 30 IT staff will ride through 2009 and into 2010 tweaking and strengthening controls. They won't have to scratch their eyes out trying to figure out which necessary IT projects to defer as cash dries up, the way many CIOs â&#x20AC;&#x201D; in the airline industry and elsewhere â&#x20AC;&#x201D; will spend the coming year. Each of these airlines hopes it's making the right business, and therefore technology, choices. But no one will know for sure until the recession abates and customers accept or rebuff the new products, consultant Lee says. "Airlines have been through a number of recessions, it's true. But this is not your garden-variety recession," he says. It's deep and it's global, he says, which means few, if any, bright spots for the aviation industry. But anyone, in the airline business or not, who stands still will get plowed under, adds Bejar. "There are two types of technology people," he says. There are those who say that this is the right time to invest to prepare for upcoming growth. And there are those who won't do anything, waiting for the crisis to end. "Those," he says, "are the ones who tend to disappear." CIO

$10 billion. What

the American airline industry is expected to lose when they close 2008's books.

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Green IT

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IT vs. Facilities: It’s always been a little bit of a power struggle. CIO are responsible for greening datacenters, but have only been spectators to energy bills. Is it time for them to take over facilities and datacenter operation expenses? By Tam Harbert

acilities buys the energy; IT buys the technology. That's the way it's always been in corporate America. But that may be changing. As energy costs seesaw wildly and public concern over the environment grows, datacenters have landed in the corporate cross hairs. And IT managers find themselves on the hot seat, asked to account for the huge energy costs their systems incur. Some forward-thinking companies are even beginning to wonder if it isn't time for their IT and facilities departments to merge. Should CIOs get ready to add ‘energy czar’ to their list of job roles? McKinsey, a management think tank, seems to believe as much. In a study presented last year at the Uptime Institute's Green Enterprise Computing Symposium, McKinsey called on companies to move 48

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Green IT

accountability for facilities operations to the CIO and Forrest maintains that the organizational restructuring he and the report's other authors recommended will emerge to appoint an internal energy czar to better focus on the over the coming year. "It may not come about exactly as true cost of datacenter ownership, which includes both we've suggested, but I think ... you'll see [restructuring] equipment and facilities expenses. become a de facto part of the IT organization," he says. That's a tall order. Historically, the two departments have been in a power struggle — figuratively and literally. Each has its own budget and reports to a different part of Any Takers? Not quite the corporate structure. With no takers willing to publicly sign on to McKinsey's Typically, IT reports to the CIO and facilities reports challenge, Computerworld (a sister publication of CIO) to the corporate real estate unit, which in turn reports to sought out companies — including Google and Yahoo — the CFO or CEO, says Ron Hughes, president of California that are leading the charge to take control of datacenter Datacenter Design Group, who has been involved in the energy costs. The conclusion: corporate America is indeed design and construction of datacenters for 25 years. "In the thinking seriously about datacenter energy costs, but end, you have two groups that report to different sides of many companies aren't yet ready to commit to changes the organization," he says. "That's always been a conflict." as sweeping as what McKinsey proposes. Indeed, when McKinsey presented the report, it issued a Why does McKinsey advocate such a radical shift challenge — calling on senior executives at 10 companies to in responsibilities? Forrest points out several reasons commit to implementing the three main recommendations behind the recommendation. First, datacenters are usually of its study, which are these: the biggest users of energy in a corporation. Second, IT would be charged with developing and implementing the To improve and integrate asset-management technology — such as dashboards — required to measure capabilities in the datacenter and monitor energy efficiency anyway. To include the true total cost of ownership in businessAnd third, it's important that companies designate case justifications for adding facilities or applications to someone who can be held accountable for total datacenter the datacenter costs and energy efficiency, he notes. Even in companies To formally move accountability for datacenter facilities that have set up a ‘green champion,’ if that person isn't and operations expenses to the CIO and appoint internal given the power and authority to deliver results, "it makes energy czars with operations and technology mandates to the job very limited," says Forrest. The company may double IT energy efficiency by 2012 trumpet a goal of reducing greenhouse gas emissions by 8 No one stepped forward to take the bait, at least percent a year, for example, "but there's no means of tying not publicly. that to any real executive action." "It's been a lot of talk but little action," says Kenneth Jonathan Koomey, a datacenter energy efficiency expert Brill, founder and executive director of the Uptime at Lawrence Berkeley National Laboratory, agrees with the Institute, a consulting and education firm that helped basic premise of the McKinsey study, but he says he believes develop the report. the responsibility for total cost should be above both IT and Like others who follow corporate energy issues, Brill facilities so that the person with that responsibility "is able is frustrated that many companies express interest in to make a decision about total costs, rather than having his greening their datacenters but are unable or unwilling to or her own budget in mind." commit to specific organizational changes that Reader ROI: And energy-minded corporations could bring those results about. Why IT should take themselves? Computerworld's spot check Will Forrest, the McKinsey analyst care of facilities found that, rather than making one person who wrote the report, is more optimistic. Companies that have accountable, most organizations are "Companies are putting energy efficiency on an ‘energy czar’ scattering energy efficiency responsibility the table and, in certain cases, are starting to Why CIOs should be take organizational steps to change," he says. responsible for energy through several organizations — IT, facilities costs and even marketing. They just aren't doing so publicly — yet.

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Green IT Google’s Energy Czar

The Eco-Warrior A

s the Business Head-Technology, HyperCITY Retail, Veneeth Purshottaman is a part of the corporate management team and hence his role goes beyond just IT. Recently, he was also asked to take on the mantle of green and was named an ‘Eco-Warrior’ for HyperCITY Retail by outgoing CEO Andrew Levermore. In an interview with CIO, he talks about the initiatives he has taken to boost the energy efficiency of his organization. What environment initiatives have you taken within HyperCITY? I am currently working with a group of individuals, selected from different departments, to drive various initiatives which will help us conserve energy. We started by creating a forum of people from almost all departments to discuss various possibilities. But most of the energy saving ideas initially incur a lot of capex, so it is difficult to get approval for such initiatives. We started a proof-of-concept to use an energy tool which Veneeth Purshottaman monitors equipment that consume a lot of power and Head-Technology, HyperCity also helps the store administrator schedule the lights and travelators (moving pavements). We have decided to reduce paper consumption. Most of our vendors now receive their purchase orders by e-mail or have access to it through our vendor portal. Do you think a single person should be accountable for both equipment and facilities expenses? No. I think, the facilities department does a lot more than just buy energy and the CIO would not want to get into managing canteen food or housekeeping while managing energy costs. It’s a better idea to give any of the CXOs the added responsibility of managing the energy costs across the company. So, who should be playing a bigger role in reducing datacenter energy costs — IT or facilities? The bigger role has to be definitely played by IT. We moved the datacenter out of our office premises to a remote location and brought down the energy cost considerably. This way we not only avoided risk from the DR point of view, but also saved the capex that we would otherwise have incurred to make the facility state-of-the-art in terms of energy conservation. What organizational restructuring is required to bring about this change? I do not see the facilities department reporting to a CIO because the admin team has a lot more role to play than just procuring energy. The other common link between the IT team and the admin is telecommunications where they work together, but again IT is involved only during the setup, beyond which the admin takes care of maintenance. — By Sneha Jha

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Google is one of the very few, if not the only, major US corporation that currently employs someone with ‘energy czar’ in his title, although he is not directly responsible for datacenter costs. "My focus is on greening Google's energy supply," explains Bill Weihl, Google's green energy czar for the past two and a half years. Weihl's goals are to figure out how Google can use more sources of renewable energy as well as how to use that energy more efficiently. But when it comes to datacenters, his role is advisory. There is a single person at Google who is responsible for both equipment and operating infrastructure energy costs, says Weihl, and that's his boss, Urs Holzle, senior vice president, operations, and a Google fellow. Holzle reports to a senior vice president of engineering, who in turn reports to the CEO. But everyone at Google is "empowered to think about total cost of ownership," Weihl stresses. "That has led to a lot of innovation around energy efficiency. We've been ahead of the curve in making trade-offs between the equipment budget and the operations budget." For example, Google has been designing and building its own energy-efficient equipment for several years, Weihl says.

Make way for Yahoo's Green Champion Yahoo does not have an energy czar, but it does have Christina Page, who has been director of climate and energy strategy since July 2007 and whose job it is to coordinate energy efficiency efforts across the company, including the datacenters. Page reports to Meg Garlinghouse, a senior director and the head of a committee known as Yahoo for Good, which focuses on community relations, including efforts to promote green practices. Garlinghouse reports to the senior vice president of marketing. When energy reports to marketing, it raises a red flag among skeptics on the lookout for companies that are more interested in ‘greenwashing’ than they are in real organizational change. Page bristles

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Green IT at the suggestion that that's the case at Yahoo. "I have a budget and a mandate that reaches across organizational silos and comes with the blessing of the co-founders," she points out. "I have authority and flexibility to look for the leverage points across the entire company that will create the maximum positive impact in addressing global greenhouse gas emissions." Day to day, Page says that she shares best practices and works to help forge partnerships. "It's really important to have a conversation between IT and the folks who run the datacenters," she says. She talks with engineers and facilities staffers on a tactical level and with executives at a strategic level — and that can involve making recommendations to the CEO and chief technology officer. Total cost of ownership, she says, "is top of mind for our folks here, all the way up to the CTO and co-founders."

A New Kind of Power Struggle

Some companies haven't embraced that type of energyefficiency-driven re-organization but are nevertheless starting to hold CIOs responsible for IT energy use. Last year, for example, reducing power consumption became, for the first time, an important part of Atti Riazi's job at Ogilvy & Mather Worldwide. Riazi, who is worldwide CIO and a senior partner at the advertising agency, has a goal of reducing its carbon dioxide emissions by 20 percent over the next three years. As a result, IT has begun measuring its power use and devising ways to reduce it. Every six months, Riazi must report IT energy consumption to the CEO and CFO. Reducing IT energy use is also a priority at medical insurer Highmark. Mark O'Gara, vice president of infrastructure management, who reports to the CIO, says the company has a goal of reducing power consumption within the raised floor of its datacenter by 10 percent this Bank of Montreal : year. But IT consumes only 40 percent CTO in Charge of the power used in the datacenter — Bank of Montreal has come fairly close facilities and infrastructure consumes to the McKinsey ideal by putting IT and the other 60 percent, with facilities facilities under one executive — the CTO. reporting to the vice president of human As part of a program launched two years relations and administrative services, ago to better manage its IT equipment Source: Gartner who reports to the CEO. and infrastructure, the company created IT and facilities are working a new position — manager of datacenter together on ways to reduce energy consumption, such governance. The position is responsible for forecasting as improving air flow, which reduces the need for air IT equipment needs and translating them into language conditioning. Other measures have reduced the expenses that the facilities department can understand, says Mike in the facilities budget. Wills, director of facilities management. That said, facilities does not have a target comparable Wills, who helped create the new role, has 30 years of to IT's for reducing its energy use, according to O'Gara. experience in IT, having moved over to facilities only about "Maybe that will be the next level of dialogue next year," three years ago. The datacenter governance manager, Rocco he says. Alonzi, is Wills' counterpart in facilities. The two men work in partnership to manage the overall energy portfolio. Alonzi reports to the senior vice president Accountability for All for enterprise infrastructure, who reports to the company's While very few companies are tackling energy management CTO. Wills, who forecasts utility needs, floor build-outs, in just the way McKinsey envisioned, and energy czars cooling and mechanical requirements, reports to the are still few and far between, organizations are indeed senior vice president of corporate real estate and strategic beginning to realize the importance of tinkering with, or sourcing, who also reports to the CTO. wholly reorganizing, their reporting structure to better The structure encourages integration of IT and facilities control energy usage and costs. staff. The company has already moved some IT people At Bank of Montreal, the new energy-centric reporting into facilities, and Wills is now working on moving more structure makes it very clear who is responsible for what facilities people into IT. costs, says Wills. "You cannot control these costs without And he has started requiring his facilities quality control aligning these accountabilities up," he notes. "I think managers to be certified in ITIL standards for managing IT that's the tough part for a lot of large organizations — to infrastructure, development and operations. "So now they get that clarity." CIO have the same language as the IT people when they come to communicate about maintenance, changes, upgrades," Tam Harbert is a Washington-based journalist. Send feedback on this feature says Wills. to editor@cio.in

$1.3 million

The amount archaic datacenters will pay compared to their greener counterparts: $ 0.5 million

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Essential

technology Illustration by pc anoop

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

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

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

Health Solutions, knows about the havoc an acquisition can wreak on a company's storage infrastructure. While overseeing National Medical Health Card Systems' (NHMC) IT department, he watched the pharmacy benefits manager grow nearly 40 percent per year, primarily through acquisitions. The result was a mish-mash of more than 60 servers that were functioning at 90 percent utilization, impacting performance and creating a constant challenge for storage and system administrators, he recalls. Fortunately, that had changed by the time SXC acquired NMHC last February. Gone was the hodgepodge of arrays and, in its place, a high-capacity, easy-to-manage storage infrastructure made possible through storage virtualization. "SXC was very impressed," says Kudaravalli, adding that SXC plans to preserve NMHC's storage environment. But accolades aren't the only reason companies are turning to storage virtualization. Cutting costs, easing management headaches, simplifying data migrations across

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essential technology

multiple tiers — these are just a few of the factors pushing them into the arms of vendors including Hewlett-Packard, EMC, Symantec and DataCore Software. A study by research firm TheInfoPro reveals that 35 percent of Fortune 1,000 storage organizations are using the technology and plan to expand their investment during the next two years. Not unlike server virtualization, which simplifies the management of disparate server hardware and operating system platforms, storage virtualization masks the complexities of heterogeneous storage arrays by aggregating them into a centralized structure. And it's earning plenty of fans. But with all the hype surrounding this technology, many CIOs fail to consider the hurdles — from interoperability glitches to deployment snafus — that can greatly impact storage virtualization success. "In the course of putting [multiple storage devices and arrays] into one consolidated pool, companies risk introducing new problems, like performance issues," warns Greg Schulz, founder of consulting firm StorageIO Group.

Far from Plug-and-Play Kudaravalli agrees. Today's NMHC storage environment consists of two HP StorageWorks XP24000 Disk Arrays, which supply enterprise-class capacity to applications from a pool of virtualized storage. And two HP StorageWorks Enterprise Virtual Arrays support nearmission-critical applications requiring high availability and mid-range capacity. The result is 55 terabytes of virtualized storage. But, Kudaravalli admits that "it took a long while to get there." For a company to make the most of storage virtualization, a solution must be able to accommodate existing storage hardware, as well as satisfy the requirements of future storage systems. In NMHC's case, Kudaravalli needed a solution that would be compatible with factors including the company's existing servers, host bus adapters, fiber cards,

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fiber switches, operating systems and multiple business applications. For this reason, NMHC spent nearly nine months testing evaluation copies of HP's technology, and decided to limit itself to a single vendor. By doing so, Kudaravalli hoped to reduce the interoperability headaches that can arise from deploying disparate solutions from competing vendors. Schulz of StorageIO recommends requesting a compatibility matrix from your vendors that outlines — not only the products each supports but — the versions and configurations, too. While a storage virtualization solution may accommodate a competing vendor's hardware, interoperability issues may prevent it from taking full advantage of a device's functionality.

AMulti-step Process Another obstacle that can stand in the way of a high-functioning, virtualized environment is a botched deployment. Because implementation errors can result in data loss and reduced service, experts warn that deploying virtualization across an entire enterprise in one fell swoop can easily spell disaster. Rather than risk "putting its business in jeopardy," Kudaravalli says NMHC adopted a piecemeal approach to implementation that spanned more than a year and involved the use of test servers for development, quality assurance and production trials. As a result, Kudaravalli was able to standardize the deployment process, avoid having to hire top-dollar consultants, reduce the complexity of the overall project and gain time to properly troubleshoot unanticipated deployment glitches. Time certainly wasn't on the side of Gerry McCartney, CIO of Purdue University. But he knew that wresting control of the institution's complex and overloaded storage environment called for a carefully plotted procedure. Purdue selected EMC's Invista network-based storage virtualization solution. But McCartney first made certain Purdue's existing

63%

Of companies in the US planning to implement storage virtualization say heterogeneity is somewhat or extremely important. Source: State of the Storage Virtualization Market 2008, F5 Networks

storage-area network was robust enough for virtualization, ensured adequate switch port capacity, certified connected hosts, as well as updated firmware and operating system patches. "It was a lot of work but it was the best method to preserve the integrity of our operating environment as we proceeded," says McCartney. McCartney also opted to deploy the virtualized environment "host by host," to allow system administrators to become familiar with it and make certain they did not run into performance issues. This slow-and-steady approach also afforded Purdue University's IT team the time needed to determine which systems could be virtualized in place, and which required scheduled migrations to avoid disruptions. However, not all experts agree that a slow deployment is a smart move. John Sloan, a senior research analyst with InfoTech Research Group, cautions that "a graduated approach" delays "reaping the benefits of a streamlined infrastructure." All the more reason for companies to test the waters before pooling their storage resources via virtualization. CIO Send feedback on this feature to editor@cio.in

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Pundit

essential technology

Exit Business Analysts Enter system designers. New business problems require new thinking. Analyzing problems is only the first step in the solution. By Michael Hugos strategy| Is there a place for business analysts in todayâ&#x20AC;&#x2122;s IT? Not if their primary function is just to analyze business needs. As the pace of change accelerates, business people want more than analysis; they want workable solutions to their problems. Analysis is only part of the job that needs to be done. It can clarify situations and trends, identify problems and make recommendations. But most analysis serves only to educate the business analyst. Business people who live with the situations being analyzed already know 98 percent of what the analysis will tell them. There are two other important parts of the job: creativity and synthesis. Analysis is where we determine business needs,

companies are encountering situations never seen before. Under current conditions, the value of analysis decreases rapidly unless it is combined with creativity and synthesis. If we over-emphasize analysis, we end up relying too heavily on so-called best practices as we try to fit all the situations we encounter into categories that have welldefined answers. This can work for known problems, but not for problems that are new and different. No amount of analysis will ever produce a new idea all by itself. Systems designers, who combine analysis with creativity and synthesis, need to understand that just four techniques that have been evolving in the IT profession for several decades are key to the design of

designers use process mapping to create diagrams that capture task sequences for existing and new workflows. And they use data modeling to diagram the structure of the data those workflows operate on. Then designers use protoÂtypes of user interface screens to illustrate how people can interact with the system to do their jobs. Since both business and technical people are able to quickly scan and understand these diagrams and screen layouts, those approaches are effective ways to communicate with the diverse groups of people involved in the development of any new system. The four techniques work equally well to capture and manipulate the information generated during all three parts of the

In today's economy, the most successful companies don't just follow best practices; they set them. For that, you need designers, not analysts. specify performance requirements and find out what resources we have to work with. Creativity is where we come up with ideas for combining available resources to create systems that could meet performance requirements. Synthesis is where the best ideas are evaluated and modified until good solutions are found. A single person who does all three of those things isn't really a business analyst. He or she is a systems designer. And designers are what businesses need today. Increasingly, 56

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information systems. These techniques are group facilitation, process mapping, data modeling and user interface prototyping. They transcend any particular technology or any particular industry, so they are a stable foundation for giving structure to the work involved in all three parts of the system design process. Group facilitation is essential for getting input from everyone who might have relevant information and insights on a business process. As they gather this input,

design process (analysis, creativity and synthesis). So teaching people to use them in appropriate combinations brings order and manageability to the work involved in designing new systems. The systems that are designed using this method are the ones business people really want. In today's economy, the most successful companies don't just follow best practices; they set them. For that, you need designers, not analysts. CIO Send feedback on this column to editor@cio.in

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