by Jean-Pierre Garbani

How Businesses Use Technology: Pushing the Envelope

The IT infrastructure and the corresponding organizational structure exist solely, in any enterprise, for the purpose of supporting the business processes. Over the years, the advance in technology has allowed IT to "push the envelope" of how businesses use technology:

• The number of business processes that could benefit from IT, from the simple, objective of administrative support has grown to include to more subjective areas such as marketing and sales.
• The areas of a business process that could benefit from IT support have expanded beyond data processing to provide decision support information, e-business, and so on.

Studies have shown [Schneiderman 84, Thadhari 81, Guynes 88] that the key to productivity in interactive applications is a rapid response time. As long as the user and the system keep a compatible pace -- that is they don't have to wait on each other -- productivity increases, cost of work drops, and quality improves.

In this environment, the IT management role is to provide not only the functions required by businesses, but to provide them with a satisfactory level of performances. The cost of providing these functions and keeping the user satisfied has to be minimal, or at least competitive with outsourcing providers.

The problem of reaching these objectives has multiple aspects:

• The non-linear growth of user demand
  As long as user functions are confined within a limited number of processes, growth is a linear function with roots that are in the business growth and the corresponding increase in, for example, personnel. When the paradigm shifts from data to information, the growth becomes non-linear since it shifts from a process-based demand to an individual-based demand. The example of "Web Surfing" shows how unpredictable this could be.
• The lack of suitable management tools
  For a number of years, infrastructure management vendors have provided a number of tools to capture and report component behavior, on the basis that "healthy" components must produce good performances when grouped together. The problem has proved to be more complex, however, and requires a more sophisticated approach.

The simplest, most common form has been, in most IT organizations, the creation of a "Fire Brigade." In firefighing mode, through help desk, trouble tickets, and the like, the IT organization basically waits for the user to complain before identifying problems and correcting them. Network and system management tools provide real time information about infrastructure components to the control center function. This leads to several potential problems:

• Users are experiencing a roller coaster ride in terms of performances, the net result being a lack of confidence in the infrastructure and the IT organization.
• The costs of constantly "fixing" problems under time pressure is higher than  it should be in a planned mode.
• The IT management does not have any visibility of the long-term deficiencies of the installed infrastructure and lacks the basic information needed to plan for its evolution.

The correct way to go about all this is to bring the IT infrastructure into a really controlled and managed environment. To achieve this, the IT management will have to control two key elements:

• user expectations in terms of performance, and, of course, costs. This means that, instead of blaming each other for the current results, both parties (users and providers) agree on a certain level of performance and costs.
• performance of the IT infrastructure has to conform to the agreed upon level. This forces IT to be managed in a "predictive" rather than a "reactive" mode.

Improving Infrastructure Management: Shifting Gears

The first step in improving the situation will be to shift from an essentially subjective world to an objective one. By involving the user in the cost/performance trade offs necessary for a certain level of performance, the IT organization can bring user expectations to an objective and realistic level that is accepted by both sides.

The Service Level Agreement (SLA) is the instrument resulting from this negotiation. It provides a yardstick by which actual measures of performances can be judged, costs compared, and improvements negotiated.

The key to appropriate and sustained performances, and the basis of Service Level Management, clearly resides in IT management's ability to:

• create, by capturing key metrics, a performance scorecard at component level
• aggregate it into a user performance scorecard in line with the SLA
• manage the infrastructure capacity in such a way that the balance is  maintained between cost and performances

The success of this enterprise relies on two capabilities:

• The ability to create component models, which, from metrics captured at the IT infrastructure level yield an exact performance parameter such as service or response time.
• The ability to aggregate thousands of these parameters into user scorecards.

The following figure illustrates how service level management can be  implemented:

© Giga Information Group, Inc.

The first three layers of the model shown above are the data capture layers. All components of the infrastructure are represented, from hardware or service components such as server and network, to storage components (databases) applications. Different web services, which could be a platform for browser-based applications (a J2EE or .NET platform), or external services used in the performance of an application are also included in the data capture layers.

The second layer shows the parameters to be captured. Availability and performance, traffic and response times are pretty straightforward. Increasingly, parameters such as "application accuracy" and "security" become relevant. The content of a Web page, for example, becomes as important as the capacity to deliver it on time. Reacting to security breaches in an infrastructure that is open to the Internet is also a key point.

The data captured is reported in real-time in a Network Operation Center (NOC), where it is used in real-time to detect potential problems (alerts, alarms) and to identify their root cause to determine a real-time corrective action. Load balancing, alternative sites, and now utility computing are the types of corrective action available in modern computing infrastructures.

The Pivotal Layer

The pivotal layer in this infrastructure management model is the service level management layer. The data capture layers are traditionally component or device-oriented. Also, the functions provided are the traditional functions offered by the network and system management products, either through a framework, a suite of products, or a series of point solutions.

At the SLM level, however, the report on infrastructure performance becomes user-oriented instead of device oriented. This is where the different parameters collected are aggregated into end user "scorecards."

This demands an aggregation model. Since the link between the business process and the infrastructure is the application, reporting service levels as perceived by the end users requires that models of how the infrastructure supports the application be built, as illustrated in the following figure:

© Giga Information Group, Inc.

Most products available at this level propose a manual aggregation of the components. However, there are currently a number of companies working in infrastructure administration and configuration management that are on the verge of providing an automated way of "discovering" the components of an application and the dependencies between them. This will be a giant step forward in the implementation of SLM.

The upper layers of the infrastructure management "stack" are all capitalizing on the ability to build these models. Performance management is the capability to use the model to determine performance bottlenecks in real-time. Capacity planning is the ability to forecast the evolution of infrastructure usage or the impact of new applications and to adjust the infrastructure capacity accordingly.

Finally, the business process performance management is an aggregate of all data received from the application models in order to create a view of how IT is serving a business process in terms of efficiency, effectiveness, and costs.

Implementing service level management consists essentially in creating management processes within the IT organization that are capable of using the data provided by a number of tools and to convert that data into information. When an infrastructure has been instrumented in such a fashion that it can be controlled in real time from a NOC, a cross-divisional process has to be created within IT Operations to aggregate data in a way that is meaningful to the end user. Once this is done, the process can be capitalized upon to open the door to a complete control of IT performances and costs.

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Jean-Pierre Garbani is a vice president of the Computing  Infrastructures and Security group, Forrester Research. His focus is on the  performance and capacity management of IT and Web infrastructure.

by Elizabeth M. Ferrarini

For 16 months before  his death, Elizabeth Haas Edersheim was given unprecedented access to Peter Drucker, widely regarded as the father of modern management. At Drucker's request, Edersheim, a former partner at McKinsey & Company, spoke with him about the development of modern business throughout his life, andI how it continues to grow and change at an ever-increasing rate. Edersheim's book, The Definite Drucker -- Challenges for Tomorrow's  Executives - Final Advice from the Father of Modern Management, captures his visionary management concepts, applies them to the key business risks and opportunities of the coming decades, and imparts his views on current business practices, economic changes, and trends.

Enterpriseleadership.org recently sat down with Edersheim to discuss how Peter Drucker might have responded to questions about technology, innovation, and C-level executives. She speaks from the point of view of having read and re-read Drucker's books and spending many hours interviewing him. She says, "He would often surprise everyone with his thinking."

EL: Peter Drucker believed that leaders must focus on people, especially what influence the CEO has on his/her people. Some great CEOs, such as Steve Jobs of Apple and Larry Ellison of Oracle, are known to be hard on their employees. What would do you think Peter Drucker would have said about tough CEOs?

EE: First of all, the CEO is an American invention modeled after the president of the U.S. There's no comparable thing elsewhere in the world, except the export of the American CEO. In Europe, several senior executives come together as a collaborative team. Each executive reports to a board.

The CEO's role is to provide strategic moral and human leadership with the right balance. In the US, you have this challenge to both lead and to create collaboration. Some people are more visionary, but don't create collaboration. Often times, their companies will fail when they leave because they haven't a team underneath them. Jack Welch was hard, but he absolutely had a bench. You need to be attracting the right talent for the team. In other words, are you building successors?

It's not bad to be tough on people, but you don't want to be abusive. Because you want to build their strengths and to make their weaknesses irrelevant, you don't want to undermine your confidence in them, and their ability to do what they do well.

EL: Peter Drucker was definitely an advocate of innovative technology. How do you think he would've viewed the role of chief information officer in a multi-national company? What advice might he have given to someone in this position?

EE: He didn't talk about the CIO. He did spend some time on the CFO. He said the CFO was the least knowledgeable person in the company because s/he always looks backwards. In some ways, the CIO has an opportunity to be the forward engine of an organization, but, on the other hand, the CIO can get caught up in chasing down problems too. The CIO has a huge opportunity for making an organization successful. I think Peter might say, "You need to be looking forward always, and executing against yesterday's requirements."

EL: How did Peter Drucker feel about formal best practices such as  Six Sigma or Lean?

EE: He often talked about what we can learn from others. As far as Lean and Six Sigma go, Peter worked with the two men who came up with the concepts of Lean and Six Sigma --  W. Edwards Deming and Joseph M. Juran. The Japanese loved all three men.

Peter felt that if you get too close inside, you only get cost. You really need to be looking outside and linking with customers. Again, you need this balance. Best practices can help you learn. Pushing things so they are better internally is good, but it's not sufficient. You can't loose sight of other critical areas, such are as your customers' needs. How are you providing them with value?

EL: Peter Drucker talked about giving employees some autonomy and allowing them to contribute by asking the question, "What can I contribute?" How do you provide information technology workers with autonomy when they work on very well-defined projects?

EE: If you step back for a second, the question is really, how can they find ways to contribute? For example, if the end product is very well defined, there has to be a feedback loop. Ideally, they are part of the definition of the end product. Given how much information is embedded in product, services, and what is done, the IT group might not be part of the definition of that requirement. That doesn't work today.

Toyota has its engineers find solutions to problems. In 2003, when Toyota was redesigning the Sienna, the engineers in North American drove across highways in the U.S., high crowns in Canada, and dirt roads in Mexico. Engineers observed there is greater distances between cities in the U.S. Americans need to be able to eat in the car, and load the van at Home Depot. Engineers took this information back and provided feedback about what the design needed to be. The Sienna became the number one minivan in 2004.

EL: In The Practice of Management, Peter Drucker talks about the importance of regular face-to-face meetings between managers and their employees. How did he view how technology has, in many cases, replaced face-to-face communication?

EE: He talked a lot about the impact of technology on face-to-face communications. He was all about community, but he never walked away from discontinuities and new realities. In one of our conversations, Peter remembered how the kids in the 50s, 60s, and 70s used to come out and play every evening. He said that today, if kids come out at all, they usually have their cellphones or Game Boys with them. They play with electronics, not with each other. He was concerned about their ability to have face time.

Email is an important change. It can be a great mechanism. If Steven Hawking was born 20 years earlier, he never could've communicated with us. The new communication mechanism lets one be more inclusive to more people in different kinds of ways. On the other hand, face to face is a human way of exhibiting to someone that they have value. It's a huge way of understanding at a different level. You don't want to abuse it. I have sat in plenty of two-hour meetings when nothing got done. Technology facilitates a different kind of connection, but it doesn't replace face to face.

EL: What would Peter Drucker have said about whether or not the U.S.  is falling short with its own global leadership?

EE: I asked him the same question. He would've said that we aren't the global leader anymore. We're one of many leaders. Our first challenge is to accept our new role. It creates a different kind of mindset. We need to be investing in the needs of tomorrow so we can create opportunities as a country. We need to be the place where entrepreneurs want to be, and where technology wants to come.

EL: What role does information technology play in helping a company  carry out its business strategy to stay competitive?

EE: Information isn't in the backroom of a company. It's an integral part of what a company is today: it's part of product, the service, and the way we put things together. It lets people and companies link. It's the connector. I can't imagine a strategy that doesn't embrace an information component. Information lets us do so much more.

EL: What are some of the ways an organization can promote  innovation?

EE: Innovation is a discipline about how we do everything. That needs to be a formal process. There needs to be a manner or mechanism for letting ideas happen, evaluating them, for picking where we are investing, and allocating resources, and not allocating resources to yesterday's problems all the time. It needs to be an exclusive part of what a company is doing.

Elizabeth M. Ferrarini is a writer from Boston,  Massachusetts. Reach her at elizabethferrarini@yahoo.com.

If you really want to want to see how IT can make a difference in peoples' lives, you may want to think about becoming a public sector CIO. That's what Nicole Fontayne did when she left her post at a major insurance company and became CIO for the City of Detroit. She quickly earned a reputation for not only improving operations, but creating award-winning initiatives.

In 1999, Fontayne took a big leap by becoming CIO of Broward County, the second largest county in Florida and the 15th most populous county in the U.S. Her key charter consists of overseeing a technology agency to support the Broward Board of Commissioners' agenda to improve services and to bring new services to 1.6 million citizens. She transformed Broward's once outdated IT services organization into a leading provider of e-government services. Organizations such as Gartner Group, the National Association of Counties, and CIO magazine have recognized Fontayne's ability to translate IT into  business value and into solid return on investment.

Recently, Enterpriseleadership.org spoke with Fontayne about her responsibilities as CIO of Broward County. Here's what she had to say:

EL: Can you describe how your group is organized and what types of  responsibilities it has?

NF: I'm responsible for setting the overall strategic direction for IT in Broward County, Florida. I work with two policy councils to make sure IT aligns with the Board of County Commissioners' goals and objectives.

We have a federated IT structure. The central IT organization has 200 people who handle applications development and maintenance, and enterprise systems maintenance. Our core competency focuses on developing small- to medium-size Web applications. We also have about 120 people who work in seven of our 83 agencies.

We provide contract support when necessary; our network infrastructure includes all county-wide communications. However, we have a dotted line to overseeing communications for traffic engineering, aviation, and Port Everglades, and we're responsible for ensuring that public meetings are broadcast or Webcast.

Our project management office monitors and participates in the legislative arena. We have full responsibility to approve our $24 million operating budget, and we have a $75 million capital budget.

EL: What is your governance structure like?

NF: The IT policy committee sits at the top. It consists of the CEO, the purpose heads, and the administrator, which is me. I bring policy issues and major initiatives to the group. We meet quarterly to talk about county-wide policies, and we have other meetings about how IT is supporting the business. For example, recent topics have included reviewing IT initiatives for licensing and permitting, and looking at how the Board of County Commissioners can continue to expand its vision for one stop, e-commerce services.

Below the IT policy committee, we have several advisory groups. For example, our budget advisory group receives all of the capital IT requests and makes recommendations to the policy council for funding of those requests. We've been using a portfolio that has public outreach, transformation, and then foundation type of projects. That has been very effective. We meet when we first receive the budget requests and then later when we have Board direction for how to spend capital outlay. Next, the IT policy council reviews the recommendations, makes any adjustments, and then funds them without any change once the budget runs through the legislative process.

EL: You've spent most of your IT career in the private sector. What are some of the reasons a corporate CIO might want to seek a career in the public sector?

NF: You can really see how your work contributes to the community at large, as well as to the local economy. For example, we play a very large role in supporting first responders during an emergency. We have to make sure our disaster recovery and business continuity programs really work. As a result, we can really make a difference.

EL: What are some of the challenges of being a public sector  CIO?

NF: I'm fortunate to have a very supportive Board that looks for major e-commerce initiatives. We've had consistent budget goals over the years, and if we have any budget reduction, it will be one across the board to reduce the general tax levy.

On the other hand, things here can move more slowly than what we've come to enjoy in the private sector. The Board's due diligence at times can go further than necessary, because it has to balance taxes and other public funds. But, this is a large jurisdiction, and I always have a plate full of interesting projects to engage in. So, I don't mind if some projects move a little slower through the political process.

EL: When you took the job, what changes did you have to make  immediately to the infrastructure?

NF: We began a basic upgrade and replacement of key communications equipment, such as servers. We made sure we had standard systems, and current release levels for all of systems software. Many employees' IT skills had fallen short, causing an uptime problem, so we had to invest in a lot of formal training for them. We also took measures to stabilize the environment. For example, we replaced power supplies that cannot be interrupted in many of our buildings.

We needed to establish better disaster recovery plans, and we contracted with SunGard to help us with them. We now have extensive DR plans in IT, as well as in the business. We also put business continuity plans in place. We exercise all of these plans twice a year -- good thing we do. In 2005, Hurricane Wilma hit Broward County very hard. Because we remained operational, we could support many of the cities, as well as support FEMA, the Department of Emergency Management, and others needing to respond to citizens.

EL: In 2006, you received a CIO magazine 100 award for your leadership skills. Can you talk about how some of the initiatives you've spearheaded have benefited Broward County?

NF: The CIO magazine award involved our ability to improve and to increase licensing for hazardous types of materials. In Broward County, we have a lot of regulations concerning the Everglades. The system we put in place has enabled the county to increase licensing revenues, to expedite permits for local businesses, and to aggregate permit violations. Looking at it another way, the system has played a key role in preserving the environment and supporting economic development.

We've been responsible for all the online financial systems to collect monies and to follow up. We're now processing in excess of $200 million a year. We've been able to increase our ability to manage and to process real estate property transactions by going to digital processing. While we've had a 40 percent increase in these transactions, we didn’t need to increase staff.

Most jurisdictions require some type of a system for small and disadvantaged businesses, but we didn't have a system for this. The system we developed is completely integrated into our financials and purchasing. It has increased the registration and the certification by 400 percent. This system has enabled the Board to meet its goal of building and certifying small to medium-size businesses in this community.

EL: Any other initiatives you've been involved with?

NF: When problems come up, we have to support the various supervisors. For example, several years ago, we had to help the supervisor of elections with the process of opening, managing, and closing the polls. After several smaller storms, we realized that we didn't have an effective damage assessment program. That's another system we developed. All of these programs have received awards from various entities.

EL: What new technologies are you considering?

NF: We've been introducing wireless technology for county government, as well as for citizens. We have a couple of hotspots in Fort Lauderdale, at the Hollywood airport, and downtown, and our installation of a fiber WAN in the country will enable us to widen the cloud. We might be able to expand the free wireless services across the county.

We've put in VoIP for new buildings or where we needed to replace obsolete equipment, and we've seen a $500,000 improvement in our telecom costs. The fiber WAN will drive down our telecom costs even further. By working with the Broward School Board and some other entities, we can provide our schools with advanced technology services, such as video cameras in school buses and on mass transit buses. We've equipped county inspectors and social workers with hand-held devices, so they don't have to go the office every day.

EL: What formal best practices do you have in place or are  considering?

NF: We're using a Rational unified process for applications development, and Microsoft has recognized our Active Directory migration as a national benchmark for infrastructure management.

We're following the IT Infrastructure Library's service support framework for our help desk, change management, and configuration management. ITIL seemed to be easier to adapt than going with CobIT. Several people in our agencies have either been exposed to ITIL or are foundation certified in ITIL. That's another reason why we liked it.

EL: Are you involved in any professional IT  organizations?

NF: I'm on the advisory council of a local organization called IT Women. We focus on developing women within IT by placing emphasis on career building, team building, leadership skills, and building and maintaining a budget. We have monthly meetings with speakers who are experts in the areas I've mentioned. We also mentor female students who are considering careers in IT.

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Elizabeth M. Ferrarini is a writer from Boston,  Massachusetts. Reach her at elizabethferrarini@yahoo.com.

In the 1990s, RFID burst on the scene and was hailed as a new technology that would help reshape the global supply chain. It promised tighter inventory controls, shorter time to market for products, and cost savings for retailers. When Wal-Mart and the U.S. Department of Defense mandated that suppliers use RFID technology, rapid adoption seemed assured. Yet, adoption has not been rapid, and the buzz about RFID has quieted. Has the early fervor for RFID cooled, or has more been going on behind the scenes? Enterpriseleadership.org recently spoke with Reik Read, of Robert W. Baird & Company, about the state of RFID: What's going on now, and what's to come. Here's what he had to say ...

EL: Can you tell us about yourself and about R. W. Baird &  Co.?

RR: Robert W. Baird & Co. is an international financial services firm. We were founded in 1919, and for many years were owned by Northwestern Mutual, a large life insurer also located in Milwaukee. In 2004, Baird actually bought itself out. We're now fully employee-owned, and we've got a nice track record in a number of areas. FORTUNE, for the last four years, has ranked Baird as one of the "100 Best Companies to Work For." The quality of our research also consistently earns Baird top rankings in a number of prestigious surveys including The Wall Street Journal and Forbes. So, we're small, but we've got lots to be proud of. I've been covering the auto-ID space for Baird for about ten years. That includes companies -- historically, Zebra, Intermec, Symbol, when they were public. We've also spent a lot of time studying the RFID space.

EL: Enterpriseleadership.org interviewed some early proponents of RFID who were very enthusiastic about that technology. But it seems that adoption of RFID has not been as fast as was predicted. Why is that?

RR: When you're referring to the Wal-Mart mandates and the associated UHF technology, I think what's happened is that standards needed to be developed. And beyond the standards, equipment needs to be developed, and people need to write software solutions. End users need to learn about the technology, and they need to share implementation plans. Certainly, you need to develop a business case so you can justify the investment in that technology, and along with that, the pricing needs to drop. All of those things together have probably created more of a headwind than people had expected with RFID. There was a belief out there, if you go back to 2003, when Wal-Mart mandated use of the technology, that if Wal-Mart was mandating it, RFID adoption would happen fast.

I  also think that Wal-Mart itself has recognized that they've not been able to put in the infrastructure as rapidly as they had hoped and probably not in quite as many stores as they had hoped. All of those things have accumulated to slow down adoption versus what we were thinking four or five years ago.

EL: Another big entity that was trying to spur adoption of RFID was the Department of Defense. How is the rate of RFID adoption in the government sector?

RR: The DOD has had to deal with many of the same issues I cited about Wal-Mart. But, a lot of those issues, by the way, are being resolved. We've had the Generation 2 standard out there since late 2004, equipment since early 2006. Equipment has been developed for the last couple of years, so now we are really on second or third iterations of Generation 2 equipment. That equipment is starting to work fairly well; the issue's no longer with tags and readers being able to communicate with each other because they communicate with each other effectively. Now, it's a matter of writing the software for certain sets of applications, the ability to tag more and more SKUs, the ability to perform all of the necessary tasks, to understand and generate a better ROI. As a result of all of those factors, I think the DOD has come to believe that RFID will provide some very good things, but, it's very hard for them right now because budget dollars are scarce. We're at war, and those dollars are being diverted elsewhere.

At some point in the future, we will scale back operations in Iraq and in Afghanistan, and at that point, there probably will be better opportunities for RFID deployment within the DOD.

EL: You mentioned that one of the big sticking points for adoption has been a lack of compatible standards for RFID. There are a number of software companies offering competing RFID solutions, but are some standards emerging, and do you see more cooperation developing on standards?

RR: Yes, absolutely. Historically, prior to Wal-Mart's and the DOD's mandates, there really wasn't much in the way of standards development. ISO had a few loose standards with respect to some of the various RFID technologies, but there wasn't a real concerted effort to create them, and the only industry body was the Auto-ID Center at MIT, an academic institution that isn't in a position to really move standards. So, when Wal-Mart and the DOD mandated use of RFID, this, in effect, created enough impetus within the industry to form a body that was specifically designed to create and develop standards: EPCglobal. EPCglobal has done a very good job of getting people within the industry together to foster the standards development process. So, when I talk about the Generation 2 standard at UHF that was developed by EPCglobal, that's now been ISO approved. And they're now trying to create an HF standard with the same protocol as the UHF Gen-2 version so that regardless of what frequency that's used, the protocol will be very similar. By the same token, EPCglobal has done a lot in the way of standardization of how readers work with a network, or different types of software standards. The RFID industry, in general, recognizes that the only way to encourage mass adoption is to have a very clear set of standards that are well developed.

EL: Do you see adoption happening more quickly in Europe or Asia than  in the States?

RR: I do think it matters a little bit by geography, because adoption's being driven by some different things. For example, in Europe, you now have Metro, a large German retailer, which has done a very good job of testing and understanding this technology, and understanding the benefits that it brings to them. They feel comfortable enough now, not only mandating it as Wal-Mart did, but also, their mandate has teeth in it. As of October 1st of this year, when you're a supplier shipping to one of Metro's 229 Cash and Carry or Real stores in Germany, if you fail to put an RFID tag on your pallet, you'll be basically charged by Metro. That's going to induce a lot of suppliers to ensure that they comply with that mandate. There's been some change in some European regulations that have helped also. The other area that's progressing well with RFID adoption outside the States is South Korea. They've embraced RFID technology.

EL: The Europeans seem to be more sensitive to privacy issues in some respects than Americans, and some people are starting to talk about privacy with regards to RFID technology in Europe. Could the Europeans begin to move towards legislation around RFID as they have in some other areas of data gathering?

RR: Yes, and I would actually argue that the United States have also been doing so as well. There's been a lot of discussion about privacy within the U.S., and there are a number of privacy groups that have raised concerns out there. And legislation around this has been passed at the state level.

For example, in Wisconsin, they've legislated that you cannot put an RFID tag in someone without their knowledge. California has some new legislation moving through its political process. Privacy is an issue that's being looked at by legislators, and I think that the industry really needs to do a better  job of is explaining what RFID is, what it can do, what it can't do, where privacy is not an issue, where it might be an issue, and the steps that they're taking to ensure that privacy exists. In many cases, the technology just doesn't transmit well enough that it could even be read at a far distance. And in a lot of cases, there are safeguards around the technology such as who is, and is not, authorized to read a certain tag. But again, the industry has to do a good job of letting people know that privacy with this type of technology is not an issue.

EL: It sounds like things are being addressed more quickly in the  state legislatures than on the federal level right now.

RR:  That's correct. There's a caucus within the U.S. senate that looks at RFID, but it seems to me that the federal government is a little bit more deliberate in making sure that they understand the issues. They don't want to dampen the technology before the technology has a chance to move forward. By the same token, everybody wants to make sure that end users can be comfortable, because at the end of the day, if end-users aren't comfortable that their privacy's being protected, they're not going to have the incentive to use the technology.

EL: Another factor that might be impeding rapid adoption of RFID is the issue of infrastructure. I mean, buying the readers, getting the systems and the processes in place, and so on. Is that an area of concern?

RR: Yes, you're looking at this from a Generation 2, passive-technology standpoint where a lot of suppliers have systems in place that are working today. They do bar coding, they do it well, and their infrastructure is designed around bar coding.

There are certainly issues around RFID that need to be resolved, but at the end of the day, what a lot of end-users are going to need is a business-case justification to put RFID in place.

Right now, they're saying, if I have all of this technology that's working pretty well, why do I need to change it out with RFID -- which, by the way, is exactly what they did 30 years ago when they started using bar coding.

A lot of little things need to go right in terms of better equipment, lower pricing, more software solutions, more people adopting the technology, more SKUs being tagged -- all of those add up to a better ROI for everyone within the supply chain. The benefits of RFID have to outweigh the costs, so there's a business-case justification. But, RFID does have certain attributes that make it very attractive in some cases: you don't need line-of-sight, so reading it can be much more automated than a bar coding process, for example, and that leads to faster read rates and, in a lot of cases, better read rates.

Also, there's additional information that you can put on these tags, such as routing instructions or identification -- however you decide you want to use that information can be very, very helpful in tracking inventory more accurately, to reduce stock-outs, and so on. These are the types of things that CIOs would be looking at as business case justification.

EL: Even with the challenges to adoption of RFID that we've talked can you give sort of a best guess/forecast about where you see things heading for RFID?

RR: Yes, I think it's appropriate to talk a lot about the supply chain and all of the uses of RFID there because it's potentially a very large market. But I think it's also useful to acknowledge that there are a lot of areas that hold potential for RFID that are not in the supply chain. Another use for RFID that's really catching on is contactless payment, for example, where MasterCard and Visa and American Express are increasingly using RFID chips within their credit cards to make payments, much as Mobil has done with their Speedpass. I think there's some good adoption outside of the supply chain.

When you look at Generation 2 RFID, I think what you're going to see is increased emphasis on a number of closed-loop asset management solutions. So, for utilities, for example, that have large transformers or other equipment that might be sitting in a yard somewhere, it's much easier and faster  for them to identify that with RFID. In closed-loop manufacturing operations where you have, say, totes running on a conveyor belt that are carrying various types of inventory, a lot of times those totes simply get lost in the process. If you can use RFID, and you're constantly rescanning that tag, you're driving the per-scan cost of that tag way down so it becomes a much better ROI proposition. When you talk to vendors out there, they're spending their time and attention in these asset-management, closed-loop areas where there is some good momentum moving forward right now -- still small, but again, good momentum. You are also seeing a good amount of active tag or Real Time Locating System deployments in the asset management area.

From a supply chain standpoint, the things that you continue to need to look forward to are what we talked about in the Metro example. They're moving forward with all pallets as of October 1st into these stores. They're talking about extending that into cases in 2008.

Wal-Mart has been pretty silent in the last six months or so. In part, that's because they've turned their RFID functions off from IT to their operational group. So, there's some digestion going on there. There's still some infrastructure that they have to get in. But I think what happens is that kind of ebb towards the end of the year. You're going to see Wal-Mart get more aggressive and probably start sending out more letters identifying those suppliers that are not in compliance. And so, those are all things will help to continue the momentum going, and you will see more in the way of solution development, and in the way of the channel getting involved. But, in terms of when we really start to see that big inflection point, that probably won't be in the near term; that is well more than a year out. What you will see are indications that things are moving forward, such as, are you seeing more RFID in contactless payment? Are you seeing more closed-loop solutions? Is the channel getting more involved in RFID? These will all indicate that the technology's moving forward.

Today's enterprise has a ravenous appetite for information, and mandates such as Sarbanes-Oxley require longer retention for even more kinds of data. Standard storage devices are reaching their limits. Enter something entirely new in the storage arena: holographic storage. This new technology promises to store previously unheard-of amounts of data efficiently, and to enable speedy access.

Sound too good to be true?

Enterpriseleadership.org recently spoke with Kevin Curtis, chief technology officer of InPhase Technologies, a developer of holographic storage, about how it works, how (and why) it was developed, and what it can bring to the enterprise. For both businesses and consumers who need to keep their digital-data houses in good order, holographic storage might just be "the next cool thing."

EL: Can you tell us about yourself, and about your company, InPhase  Technologies?

KC: I've got a bachelor's, master's, and a Ph.D. from the California Institute of Technology in electrical engineering. I've worked about 17 years in holography and optics at Caltech Northrop and Bell Labs. At Bell Labs I was the project manager for the holographic storage project at Murray Hill; from this group, InPhase was formed in 2000.

EL: So, InPhase Technologies was actually a spin-off of Bell Labs,  with the aim of developing holographic storage technology?

KC: Yes. We were very focused, and put together a great team at Bell Labs and at InPhase to work on all the technical, and the business and marketing issues.

EL: What is holographic storage, and what are  the benefits it will bring to the enterprise?

KC: Holographic storage is similar to an optical disk, like a DVD or a CD, but it's actually designed to go into automation systems. Instead of holding 4.7 gigabytes like a DVD, the first-generation holographic storage disk will hold 300 gigabytes and will transfer it at the rate of 20 megabytes per second. And, that's the first generation: we've actually designed three generations of product going out to 1.6 terabytes on the same disk and it can be read at 120 megabytes per second. The disks are all plastic, there is no metal there, and they've been tested for 50 years archival lifetime. They're very stable, and they can be manufactured inexpensively. So, the primary market for this technology is corporate long-term archival storage, for those who have digital assets that they want to keep for a long time.

EL: Could this technology replace the tapes that are being used for  data storage now?

KC: Yes; tape systems are really designed for, and the market for them was, backup. Data backed up in this manner is not meant to be kept for very long. Archival storage means storage for seven, or 10, or 50 years. But in the case of the professional video marketplace, for example, or compliance, or medical marketplaces, you're required to keep digital data for very long periods of time. Holographic storage offers a very unique combination of the robustness and random access of an optical disk with capacity that's more akin to tape.

EL: What was the genesis of this technology?

KC: The concepts behind this technology go back at least to the mid 1960s, and there was a lot of work in this area, including at Bell Labs, in the late 1960s and early 1970s. But there were some fundamental issues that couldn't be addressed then in terms of components and media. In 1994, Bell Labs decided that you could actually buy enough of the drive components to be able to put together a system, and then try to figure out what was needed for media. We've now made tremendous advances in media by developing a unique, two chemistry photopolymer material. We came up with a way of manufacturing the media at a low cost, to multiplex and record holograms at high density, and to enable recovery in a very robust manner. That's the genesis of the basic technology.

EL: Using holographic storage technology, how easy is it to not only gather, but retrieve large quantities of information, quickly?

KC: That is one of the advantages of a disk versus a tape: a disk has random access. For completely random access, this disk functions at a speed that's similar to your CD or DVD, around 250 milliseconds. But the technology offers a unique characteristic: inside a rather large body of data -- say about 150 megabytes -- you can have two-millisecond access to data inside a particular field. It's a unique combination. And, you certainly do have random access, and once you get that, you can stream it out continuously at 20 megabytes per second initially, and this speed will be increasing to up to 120 megabytes per second with future generations. The one thing that's unusual, at least for disk, is that those are sustained rates. Often, with CDs and DVDs, and other disks, they spec just the outer track, which spins faster than the inner tracks. And so the actual rate that you see on a CD or DVD is much slower than the actual spec. Our rates of speed are actually continuous, sustained across the entire disk.

EL: Can you talk about data security and holographic storage?  Are security issues similar to those for other storage technologies? 

KC: Yes, especially for removal of media. This has garnered a lot of attention lately: As the capacity of these media goes up -- whether it's a tape or a disk -- somebody could, potentially, walk out the door with a lot of data. Every company that's in the data storage field is considering encryption. And the format that we've implemented for our device certainly supports and anticipates encryption use.

In addition, the first generation technology, particularly for archive, is worm technology, meaning, write once, read many times. It actually cannot be erased. That's often very important, legally, for record authentication.

Compliance and Holographic Storage

EL: Gathering and storing certain data is also required for regulatory compliance. You touched on that when you talked about medical compliance.

KC: Yes. Five years ago, archival storage was the ugly stepchild of storage. Now, it's coming front and center as a critical and very rapidly growing issue. That's a real problem, because tapes and other technologies weren't designed for long-term retention. That's where we see a good opportunity for holographic storage to make a difference. Both e-mail and e-mail attachments now have to be kept for a very, very long period of time. Both the medical, and the financial industries, for example, have significant data archival requirements. And, Sarbanes-Oxley is a very significant factor.

Our technology's also getting a lot of attention in the professional video space. More and more content is being filmed in high-definition digital format, which increases the difficulty of storing it.

EL: InPhase is currently focusing this technology as it is relevant for the corporate customer. But do you foresee moving more into the consumer market?

KC: Absolutely. We actually have two projects to develop holographic consumer products that are being funded by major companies. One product is a holographic, read-only memory, like a CD-ROM or a DVD-ROM. Essentially, it's a very small card that could hold maybe 50 gigabytes that can be replicated very quickly. In optical media, the real advantage of optical storage has been in the ability to quickly replicate the content so that the cost of distribution is very, very low. We've developed a mastering and replication process for holographic that allows us to do the same thing: we can replicate content and distribute it. This could be for games or any sort of video or video content. You can have a very small drive with huge capacity that can be distributed very, very inexpensively.

The other project that's being funded by a major company is translating professional recording technology into technology available to consumers -- like the next generation after Blu-ray or HD-DVD -- something we can make very small and inexpensive.

EL: What about the cost of your technology?

KC: For professional products, we have to do a tremendous amount of testing, and the reliability is really critical. So certainly, that adds cost -- and, this is the first generation. Initially, we're looking at drive prices of $18,000 and media prices for 300 gigabytes of about $180. These compare quite favorably with tape prices, particularly high-end tape prices. Video professionals are used to that. Now, for a small business, that's quite an expensive piece of equipment, but we feel that this is an initial launch price. With volume, our pricing can come down into the small business price range.

EL: Enterpiseleadership.org did an interview some months ago with the chief technology officer from another corporation. We called the interview "The Next Cool Thing," because this CTO talked about certain emergent technologies that he felt would lead to big paradigm shifts. In that spirit, could holographic storage technology be called "the next cool thing"?

KC: There are two points to be made here, at least. One is that archiving for both the consumer and professional is now becoming a really significant need. Our technology has some unique attributes that can satisfy this critical need -- that's quite important for business. Also, this is a new approach: storage does not require a spinning disk. There are new consumer formats, particularly for distribution, that can be enabled because of this technology. Very small devices -- 50 gigabytes on something the size of a postage stamp -- can be replicated very, very cheaply. I think that really could enable some very cool consumer applications.

Doris Hall has chalked up a stellar track record devising strategies and building systems for supply chain-logistics. For the past seven years, she has been vice president and chief information officer for BAX Global Systems, a $3 billion worldwide business-to-business freight-forwarding company. She has led the charge in building global operating systems networks for clients such as  Microsoft. Prior to BAX Global, she was a senior IT manager for systems development at Emery Worldwide, supporting 600 business units worldwide.

Now, Hall is taking in stride a corporate logistical change that will alter the IT organization and her reporting structure. In 2006, Deutstche Bahn AG, a $50 billion global railroad company based in Germany, acquired BAX Global, formerly owned by Brinks International. BAX Global is being merged with Schenker, Europe's largest multi-modal freight carrier, under the DB Logistics umbrella. Together, BAX Global and Schenker will have about 50,000 employees in more than 1,000 offices in 100 countries.

Recently, Enterpriseleadership.org spoke with Hall about how she is preparing the IT organization for the merger of the two companies. Here's what she had to say:

EL: Can describe your IT organizational structure and how it fits  into the Deutsche Bahn organization?

DH: IT at BAX Global is entirely centralized, and that's also true for Deutsche Bahn. We don't have any outsourcing. Because we were purchased by Deutsche Bahn, we're going through a transition; we're a global organization, but we're one of several global entities owned by Deutsche Bahn. All of these entities are gradually being integrated under the Deutsche Bahn umbrella.

In the U.S, we're still two separate organizations, BAX Global and Schenker, but we're working together as one. The organization is in a state of flux. We're changing from being the global corporate office to being the regional office for the Americas (U.S., Canada, and Latin America). I report directly to the CEO of the Americas. Deutsche Bahn has a global CIO who I have a strong dotted-line responsibility for adhering to standards. I also have to make sure we're in lockstep around the world when it comes to the selection and delivery of our IT solutions.

Within my organization, we have IT leaders in Canada, and in most of the Latin American countries. Below these people, we have a vice president of infrastructure who oversees the support of the backbone, and another vice president who has responsibility for applications. This's the traditional way the IT organization is split.

EL: Given the structure of IT, how does it work with the business  units to make sure their technology needs are being met?

DH: The IT staff sits within IT, not the business units. We have a director for strategic operations and finance and another for customer facing. Both of these individuals align with the business by helping to decide what needs to be done, and then passes the tasks over to the IT group that will execute them. That's the way we're moving.

Many of the functional groups have a "super user" whose primary focus is on technology in their group. For example, the super user in finance sits at a fairly high level in that group. This person doesn't do any coding or specification writing. However, this person understands how the finance systems work, answers any questions about them, and helps the group to use technology to do its job. By understanding what our customers do and what they need, the sales and marketing super user drives most of our Web initiatives. Super users work very closely with IT, and we depend on them a lot.

EL: What does your governance model look like and what changes are  you going to make to it on a regional level?

DH: About four times a year, all of the regional CIOs around the world, along with leaders from the corporate group, meet to discuss how well we've been adhering to the strategic direction for IT, and what might we be doing in any specific region that could influence the direction of the strategy.

In the Americas, we've been developing our governance model. The executive team, which is headed by the CEO, currently meets at least four times a year, but we are looking to increase that number. I have governance in the business through this group. I also have governance in IT through yearly face-to-face meetings. Meanwhile, governance in IT also gets carried out through bi-weekly conference calls and one-on-one meetings with staff. I travel a lot to meet with staff leaders.

EL: You've specialized in delivering global logistical supply chain solutions. What advice would you give to CIOs who are making major changes in this area?

DH: The global nature adds another layer of complexity. I'd tell new CIOs, especially, not to make it any more complex than it needs to be. It's complex enough. This is an area where you'll find users who want to be very creative, and they tend to request every feature that comes to mind. I can't tell you the number of times we've built and deliver something that was so complex and abstract, no one could use it.

People don't trust a system that's not flexible; we aren't in a precise business. I'd emphasize being careful. Don't insist on building a system that will make all the decisions for you. Everything doesn't have to be completely automated -- use technology to do the things that you know the system can handle very well. In our business, that usually translates to tracking where your goods are and gathering the info so you can report on it in a meaningful way.

EL:  You've done some pilot projects from RFID tabs. What's your  opinion about this technology?

DH: At BAX Global and Schenker, we've done a couple of RFID projects to get some synergies in managing our warehouses. We thought we might move these pilot projects into the transportation area country by country, but we haven't seen the need for that yet. We know how to do it. The pilot projects in our warehouse worked fine, but they didn't give us any more benefit than what we had with our existing technology. Deutsche Bahn has started to see a lot of benefit from using RFID in large transportation rail and passenger rail services.

EL: What formal quality best practices do you use in IT?

DH: I've used the balanced scorecard, but it hasn't worked well within IT. We tend to come together as a corporate team and decide what our direction will be. Right now, we have the strategy and direction to execute our merger plans.

The closest formal best practice we have is the IT Infrastructure Library. It provides a good framework for controls and practices for managing our IT infrastructure. We're using most of the ITIL service support functions, and we have several infrastructure managers who've gotten certified in ITIL.

We do use a bit of CobIT for security, but we don't pull these best practices out of a book and follow them to the letter. We tend to tailor things, as well as follow collections of best practices.

EL:  What are some of the key process improvements you've made as  CIO?

DH: Bringing in ITIL has been one of our major process improvements. We've made a number of improvements in our global infrastructure. Putting together an IT steering committee to help decide the right things to do is another key process improvement. We've made process improvements in communications so we could have effective all-hands meetings, as well as one-on-one meetings, with the IT management team.

EL: You've been a speaker at several IT venues. What have you gotten  out of that?

DH: I always manage to get something out of each venue. I like listening to my peers in other industries talk about how they handled situations in their organizations. These people also make great sources for networking. I get a lot out of presentations given by CEOs or consultants with expertise in leadership.

EL: Do you belong to any CIO organizations?

DH: About four years ago, I was active on the CIO Executive Board, a selected members-only organization. Participation involved spending a lot of time writing and speaking, but during the past few years, I've found it difficult to get away for some IT conferences. So, it's not fair to be involved with an organization if you can't do what's expected.

EL: Any particular IT leadership books you'd recommend to other IT  professionals?

DH: I liked the The New CIO Leader written by Ellen Kitzis, a senior vice president of the Gartner Group, and Marianne Broadbent, a senior fellow at the Gartner Group. My favorite book, however, is Larry Bossidy's Execution. I'm not really a big Peter Drucker fan. I tend to  give Pat M. Lancioni's Death By Meeting to my managers; because the book is very small and a very concise fable, the managers can get a lot out of the each reading within a few minutes.

EL: What attracted you to the supply chain logistics?

DH: It just kind of happened. I started out in manufacturing and then moved into warehouse distribution. By that time, I had the beginning of a good track record in logistics. I also found it to be a very interesting area because it's complex. IT people who like to solve puzzles will find logistics very addictive.

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Elizabeth M. Ferrarini is a writer from Boston,  Massachusetts. Reach her at elizabethferrarini@yahoo.com.

Most global companies outsource some aspect of IT, ranging from managing the network infrastructure to developing parts of key applications. However, since 1996, after EDS was split off from General Motors  (GM), outsourcing the entire tactical IT organization has become the  business model for the Information Systems and Services group.

Recently, Enterpriseleadership.org spoke with Dr. Daniel McNicholl, the chief strategy officer for GM's Information Systems and Services organization, to get a glimpse of what makes outsourcing work at GM. Dr. McNicholl, the former chief information officer for GM North America, oversees all new outsourcing agreements, as well as develops IT strategies. McNicholl reports to Ralph Szygenda, group vice president and global CIO. Here's what McNicholl had to say:

EL: Can you describe the senior management structure of your IT  organization?

DM: Each regional automotive business unit has a CIO, who reports both to Szygenda and to the president of that business unit. They are responsible for the IT needs of their regions, such as North America, Europe, Asia Pacific, and Latin America.

In addition, Process Information Officers (PIOs) -- who are responsible for global IT strategy and implementation across GM’s major business processes, such as product development and design, or manufacturing and quality -- are part of the senior management team, and also report to Szygenda and GM’s global business process leader.

There are three other key IT senior leaders on Szygenda’s team -- which include myself as the chief strategy and business management officer along with the chief systems and technology officer and chief services officer.

EL: In a nutshell, describe your outsourcing partners?

DM: We're one of the most extensively outsourced organizations in the world. We spend about $3 billion a year on IT.  We have global contracts with five large, tier-one IT service companies: IBM, EDS, HP, Capgemini, and AT&T for telecommunications. Together, these companies develop and maintain all of our systems, and operate and maintain all of our servers, desktops, and network infrastructure. We have about 2,000 internal GM IT employees who are responsible for all the strategic aspects of IT including managing about 12,000 contractors. We also have some contractors that handle specific functions. For example, Wipro handles middleware. Our major contractors also have subcontracts with other IT providers.

EL: How did you work with this current group of outsourcers to have  one united IT organization?

DM: That's an important part of the success of relying on outsourcing. Starting with senior management, we've set some high expectations of what we want collectively from our outsource partners. Our expectations are universal throughout the entire organization.

Because we have different contractors handling different parts of our IT organization, we developed standard work processes. That happened in 2005. All of the outsourcers participated in developing these processes. Right up front, we told them how we were going to do business together. Off-the-shelf best practices such as CMMI and the IT Infrastructure Library (ITIL) provide the underpinnings of these processes. However, we've customized some of these best practices for the outsourced IT model.

EL: What lessons have you learned about dealing with  outsourcing?

DM: A lot of large-company executives say that outsourcing can't work. We're proof it can work; we've been at it for more than two decades. We're also one of the top 10 Fortune 500 companies in revenue, and we do business in more than 200 countries. Outsourcing might not be right for every company. It does take a lot of hard work to get it right.

You can outsource the services, but you can't outsource the leadership work. First, you must develop an outsource model. Internal people need to work daily with the suppliers to keep them on track and to resolve any problems they might have. You also need to have complete and accurate statements of work and appropriate service levels. You'll need to fine tune these things to make them better.

Contracts aren't enough. You need to have good relationships with each outsourcer's senior management team. Ralph Szygenda has these very close relationships in place. Several times a year, we'll sit down with each outsourcer's senior leadership team. If something goes wrong, we can pick up the phone and resolve the problem with a senior-level executive.

EL: Describe your governance model?

DM: It's incorporated into our GM organization. Relative to suppliers, PIOs are in charge of their contracts so oversight of suppliers is part of our model.  For example, once a year, we produce a scorecard for all suppliers, and they take them very seriously. We do a lot of communications with our suppliers. The heads of all of the suppliers attend bi-weekly supplier meetings where we talk about what's going on. We have a very strong contract management organization that helps all of these people write contracts and carry them out. These are some of the elements we use to help direct IT.

Ralph Szygenda is an integral part of the decision-making body at GM. He sits on the senior-level executive committee, which we call the Automotive Strategy Board. It is led by Rick Wagoner, the Chairman and CEO, and is comprised of all of the business unit presidents and most senior functional heads.  Together, these executives make funding decisions. All of the PIOs and CIOs meet with Ralph to hear his recommendations, and together, they decide what they are going to do.

EL: Can you go into more detail about how the best practices fit into  the GM standardized work model?

DM: ITIL helps to guide the network and computing operations area, while CMI does the same for software development. We are also incorporating CobIT. Over the years, we've tried to rely on industry standard processes, but we quickly found out that some of these processes, such as CMMI, weren't set up for an outsource organization. In 2005, we worked with the Software Engineering Institute (SEI) to develop a version of CMMI that is appropriate for the outsourcing of software development. SEI just published a draft of CMMI for outsourcers. SEI plans to bring out our customized outsourced CMMI version as an industry standard. We also use elements of Six Sigma in IT.

EL: What strategic initiatives do you have planned for  IT?

DM: We're making great strides to globalize many aspects of IT so we can bring new vehicles faster to market. Our goal is to leverage the strengths we have around the world. By doing this, we can reduce costs. We've deployed a lot of these new global applications. For example, regardless of where you are working and what vehicle you're working on, you're using the same engineering analysis.

Looking forward, to help increase our revenues, we're working with our global retail dealers to streamline the GM system between them and us. We're reducing the time it takes to configure and to order new vehicles. The sales people will now have more time to spend selling vehicles.

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Elizabeth M. Ferrarini is a writer from Boston,  Massachusetts. Reach her at elizabethferrarini@yahoo.com.

In 2003, Exelon, the $15 billion owner of two of the nation's largest electric utilities, transformed the way it did business to keep its competitive edge, and to prepare it to handle mergers and acquisitions efficiently. Dan Hill, senior vice president and CIO, spearheaded the move to change IT from decentralized organizations into one centralized group with approximately 800 employees. He says, "We saw the centralized model as a way to increase and to improve our overall effectiveness through standard processes."

Working with senior management, Hill put a management model, or playbook, in place for the new IT organization and adopted the CobIT best practice. His on-going emphasis on relationships, ranging from a mentoring program for employees to the values IT managers require, have earned him several awards including, most recently, the Computerworld Premier 100 IT Leaders award in 2007.

Recently enterpriseleadership.org spoke with Hill to talk about the unique  aspects of his IT organization.

EL: Why did you decide to go with CobIT for the new IT organization?

DH: In devising our playbook, which we call the "management model," we looked at the best way to structure all of our processes and procedures across the organization. It made sense for us to align with an industry standard that we were familiar with, which is why we chose to base our management model on CobIT. We've put a lot of organization and rigor around our management model. Our decision to incorporate CobIT has really paid off for us. In fact, we're looking at taking it to the next level by incorporating ITIL [IT Infrastructure Library] to provide a framework for our service delivery and service support areas. With ISO 20000, we are well positioned because it nicely aligns ITIL with CobIT.

EL: What has been your payback from CobIT?

DH:  Our best metrics for assessing the value CobIT has brought to our internal processes and procedures is reflected in our performance with both Sarbanes-Oxley compliance and our general audit results.

EL: Can you describe your IT management structure and your IT  governance process?

DH: There are two IT vice presidents who report to me and who are each aligned to one of the major business units -- energy delivery and generation. There are also IT vice presidents for enterprise applications and infrastructure and operations.

The governance groups for architecture and engineering, the project management office, the business office, and security and compliance also report to me.

The IT executives aligned to the major business units sit at the "table" with the business when they talk strategy. This partnership allows us to integrate the future direction of each business unit into our overall business planning processes for IT.

In addition to ongoing partnership and work with each business unit, we also have an IT council comprised of senior executives from each of the businesses. This council has multiple functions such as reviewing our annual benchmarking and overall business plan.

EL: How do you handle a business unit's unexpected  projects?

DH: When we centralized several years ago, we centralized the employees, functions, and the budget. At that time, I recognized the need for a "relief valve" for emergent work that occurs during the year and is outside of the normal planning process. As a result, each year we set aside a "project reserve pool" that is managed by the IT council. Any business unit can apply for funding from this pool to address an emergent need.

EL: Besides your governance process, what other things did you do to align the new IT organization with the needs of the business units?

DH: We built a formal client engagement process and focused heavily on interacting with clients on a daily basis and in a consistent manner. The Client Engagement Model also helped to provide clarity about the delivery and value of "back office"-type functions such as infrastructure services. In the end, we eliminated a lot of the inefficiency and redundancy found in a decentralized structure, reducing cost while improving quality and delivery.

In addition, we also worked to make sure that IT strategy remained aligned with each business unit's direction while also looking for opportunities to drive standardization. If we saw similarities in initiatives from different businesses, we viewed this as a chance to leverage standardized and common platforms and solutions.

Lastly, I looked closely at how we selected our IT leadership team. We established guiding principles that we intended to operate by and ensured all of the leaders we selected to join the team regularly demonstrated behaviors consistent with these guiding principles.

EL: How does your IT mentoring program work?

DH: We put a mentoring program in place to help IT employees own their careers and to support them in that process. The mentor helps the employee identify what skills he or she needs to work on, and also provides a broader perspective of the organization. We encourage employees to choose mentors from different parts of the organization.

Acting as an essential business contact, mentors play a critical role as an employee transitions throughout their career.

The mentoring program places a lot of importance not only on the relationship an employee has with his or her mentor, but also the relationship an employee has with his or her manager. The manager plays a role in helping the employee identify their career development needs, and provides essential feedback and coaching necessary for successful job performance. Combined with the mentor's role, the result is a comprehensive program for the employee.

EL: How do you balance the mentoring program with other forms of  employee development?

DH: The mentoring program doesn't take the place of other, broader development programs the employee might desire, such as pursuing an MBA. The mentoring program very nicely complements the wide range of development opportunities by providing a trusted advisor who will help employees identify the development opportunities that support their career and growth objectives. We've gotten a lot of positive feedback about our mentoring program both from employees in IT taking advantage of it as well as areas outside IT. In fact, the company plans to use our program as a model for a company-wide mentoring program.

On our Balanced Scorecard, we track a metric related to employee development. This metric looks at the number of training days each employee has taken, the budget we've allocated for that training, and how many employees are utilizing the mentor program. We look at how well we have delivered against those metrics. This keeps overall employee development on the leadership team's radar.

EL: What is your philosophy about outsourcing IT tasks?

DH: Outsourcing IT functions isn't unique to any one company or industry. More IT jobs within a company are being done by outside resources. When it comes to sourcing, you first need to establish a strategy by which to make your sourcing decisions.

I've put a lot of emphasis on the strategy for how we source and outsource. The outsourcing strategy we developed can be viewed as aligning with the SDLC [Software Development Lifecycle]. The model has internal employees who have detailed knowledge of our business processes and systems, who engage with our clients, gather requirements, and design solutions. Doing so ensures employees are adding value in the right areas. We then leverage outsourcers to execute the "factory" or "build" portion of the SDLC.

EL: What have you been doing to drive innovation in IT?

DH: Innovation ranks high on the list of business initiatives I've been driving over the past year. We've leveraged technology to make our power trading business very competitive. For example, we've created a central data repository and other tools that support effective decision-making on the trading floor. We have rolled out a new portal with Web 2.0 features that are tightly integrated with the power trading organization's back-end system. This initiative has been a great win-win for the business and IT.

For our electric delivery companies, we recently implemented a new outage management system. We're currently working on a large project to roll out a mobile dispatch system for field crews. Overall, IT strives to bring solutions that enable the business to succeed and reach their goals.

EL: Any other innovations?

DH: Tagging and clearance is a critical operational process in our nuclear plants. Nuclear employees working on field equipment need to tag equipment out-of-service so no one will operate it. We've implemented a self-service kiosk where a worker can wave his or her badge in front of a reader to sign onto the tagging system. The worker is authenticated into the system and immediately brought to a screen listing any equipment tagged out by them. This system has brought significant benefit to our nuclear organization.

EL: How has Exelon coped with deregulation?

DH: Some areas of the country have very little experience with industry restructuring, while others have a lot of experience. We're in the latter group. Because we have been living through the process of restructuring for several years, we have built the ability to deal with changes in our business model that deregulation, and other major disruptive forces, can require. We have created our "management model," and we know to focus on our core business, to strive for operational excellence, to benchmark aggressively, to strive for continuous improvement, and to aggressively manage costs. All of these elements are important when the industry dynamics are changing and provide us with the ability to succeed in a deregulated industry.

Because restructuring has driven more M&A activity in our industry, we've developed a flexible business process architecture and infrastructure that enables us to respond to the demands of mergers or acquisitions.

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Elizabeth M. Ferrarini is a free-lance technology and  business writer from Boston, Massachusetts. You can reach her at elizabethferrarini@yahoo.com.