by Elizabeth M. Ferrarini

No one can deny that Jerry McElhatton has mastered many successful IT moments. During his 10 years as CIO with MasterCard International, McElhatton spearheaded a five-year, $160 million upgrade of the company's global processing system into one unified, single messaging standard. Even more impressively, he delivered this enormous undertaking on time and within the budget. The systems support more than 15,000 customers worldwide, handle more than 40 million transactions daily worth more than $1 trillion annually, and are linked to 800,000 ATMs globally. Also during his tenure, McElhatton oversaw the building of a $135 million, 52-acre campus for MasterCard's primary IT team.

In March 2005, McElhatton retired from MasterCard, where he had anywhere from 1,600 to 3,200 IT professionals under his leadership. Enterpriseleadership.org recently spoke with McElhatton about what his experiences managing an IT organization that could make or break MasterCard's success.

EL: What are you doing now?

JM: After 10 years with MasterCard, I retired to start Virtual Resources, a company that does consulting for organizations in the payments area, and for some architectural engineering firms. I also sit on the boards of directors for several technology companies, where I set up advisory committees to provide feedback on the company's products and examine what competitors are doing. I spend my free time tinkering with a massive model training collection, which my four grandchildren love. I almost forgot: I write articles for business publications, such as CIO Decisions.

EL: Now that you've retired from MasterCard, would you advise other  near-retirement CIO's to go off and keep their hands in IT?

JM: Why not? I'm enjoying helping companies understand the cost benefits of technology. I've successfully gotten people to look at their cost structures, to put some best practices in place, to help them evaluate some future cost-effective architectures, and to get them to be more responsive to business needs.

EL: Looking back at the technology overhaul you implemented at  MasterCard, what things really made it happen?

JM: The credit goes to my great team. The company had some very mature systems that did a nice job, but it took too long to bring new products to market. New and better technology could simplify things and reduce our infrastructure costs. My assignment included restructuring, rewriting, and redeveloping the core systems. It took five years of changes to give those systems the scalability and flexibility they needed to meet best business practices. We completed that project within the assigned budget and ahead of schedule.

EL: What were some of the best practices that were put into  place?

JM: We put reusable systems code and architectures in place. When it came to databases and data warehousing, we made sure we captured the data correctly and could easily segment it. Our key members had to analyze this data to help them build their marketshare.

At MasterCard, I had the unique position of being responsible for all technology, all IT operations, and both IT security and physical security. Fraud is a big problem in the credit card business. For example, I oversaw all of the risk systems that enabled our members to report fraud to us so we could stop it. We gave them information to make them aware of certain types of fraud that were taking place or had the potential to take place. We spent a lot of time reworking those systems. We put together things that would give us an advantage in identifying some characteristics and traits of fraud.

JM: Yes, the entire security team reported to me. I was also responsible for the access control side of physical security. The entire team that guarded our campus buildings reported to me. These folks did a lot of investigations internally to make sure employees did not access unauthorized areas.

EL: What was the business model for MasterCard when you were  there?

JM: Simply, we worked very closely with the business units to help them define priorities, to help them move marketshare and generate income, and to help them reduce operational expenses. As a member of the operations and policy committee, I looked at how we could leverage technology to get the biggest payback.

EL: What was your IT model at MasterCard?

JM: MasterCard's technology generates a significant amount of revenue on what's called a "quick charge." We have charges for authorization, clearing, settlement, and also charges on our risk systems. On some of the systems, we had profit and loss residing with the operations and technology group. And on the others, we had direct chargeback to the marketing group for the cost and expense of generating that revenue.

EL: Did you folks use anything like Six Sigma?

JM: It's an interesting concept that has to do with the definition of root cause analysis and definition of quality standards. Eighty-five percent of the program we used consisted of Six Sigma and the benefits associated with it.

We measured everything, and we drove staffing and quality off those numbers. In our system, we posted implementation reviews, and whenever we had a problem, we did a root cause analysis to determine where to patch the problem. So, our systems got stronger over time. The performance of MasterCard as a company became outstanding because of the work we'd done to engineer the system.

EL: How successful were you in combating fraud?

JM: It was very good. We did a lot of proactive things to put people on notice. In the credit card business, fraud often happens at the merchant location and at some of the processors. If someone doesn't follow the rules, you might do routine audits, but an IT security audit is only good for the day you do it. Someone can make a change the next day, and thus, put a hole in the system. You might not catch it until you do another audit, or you might not catch it until you have a problem. We did a lot of proactive work to identify potential fraud. We not only used our systems, but we had cooperative efforts with others, and we used their systems, so we had a significant reduction in fraud.

EL: Do you have any comments on Oracle's recent buying  spree?

JM: On the one hand, Oracle will have a strong product offering. On the other hand, as with all technology mergers/acquisitions, IT departments no longer have a lot of product choice; they'll lose their ability to negotiate on price, and service levels.

EL: Are you writing a book?

JM: I've thought about it. My working title is, 101 Easy  Lessons Learned the Hard Way. IT folks today have similar sets of issues and problems as their counterparts five or 10 years ago. Yes, there might be more flexible ways to solve these problems, but every generation seems to have to touch the top of the stove to see if it's hot. I have a lot of advice to give about how to avoid some of the mistakes other IT people have made in the past.

EL: What's the biggest mistake people make in climbing the career  ladder?

JM: IT people are smart people, but they don't often have a sense of how to budget for projects and how to meet the deliverables. IT people often make things harder than they really are.

At MasterCard, we learned how to eat a big marshmallow without getting sick. The answer is a bite at a time. We broke down projects into very significant deliverables that we measured and monitored.

IT people have to first learn to commit to a project, and then stick to the  schedule, the budget, and the deliverables.

EL: Do you think the CIO role should be rotational?

JM: Some companies might be better off if they went in that direction. If someone has been a CIO for 10 or more years, then that person might be stuck in that role. Let me tell you what helped me at MasterCard. For example, at one time I was assigned to run the process change team. We took more than $100 million out of the systems by leveraging technology, and leveraging people's skillsets. This experience helped me to grow closer to the business units. I had some other great business opportunities.

If you want to cultivate stronger IT professionals, then assign them both business problems and technology problems. This process enables IT professionals to gain a more realistic view of how the business uses technology, and how they should use it to solve problems.

EL: Have you read Nicholas Carr's book, Does IT Matter, or  his Harvard Business Review article, "IT Doesn't Matter?"

JM: I've read the book. I've been in businesses where technology has made a big difference. At MasterCard, we leveraged a lot of technology to get good business results. Carr perceives technology as a commodity -- spending a lot of money on IT doesn't necessarily translate to creating competitive differential. For example, if an IT department is late with deliverables, then the company can loose its competitive edge. At MasterCard, we won a lot of new business by being the first to deliver new, working systems, and to continue to enhance those systems. The other guys had a hard time catching up with us.

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Elizabeth M. Ferrarini is an IT consultant from Boston,  Massachusetts. Reach her at elizabethferrarini@yahoo.com.