In 2005 when California Governor Arnold Schwarzenegger introduced his Strategic Growth Plan to rebuild the state’s crumbling infrastructure, he said that this infrastructure went beyond roads and bridges, but also included the State’s massive information technology infrastructure.  On January 1, 2008 the Governor appointed Teri Takai, the former CIO for the State of Michigan, to first transform the California’s IT organization, by managing costs, despite the tough economic environment, and then to put more e-government initiatives in place.

Takai is no stranger to overhauling a state’s IT organization. While CIO for the State of Michigan, she restructured and consolidated that State’s resources by merging the IT organization into one centralized department to service 19 agencies and more than 1,700 employees. Under her leadership, Michigan ranked number one four years in a row in digital government by the Center for Digital Government. Prior to going into public service, Takai worked at Ford Motor Company for more than 30 years. At Ford, she led the development of the company’s IT strategic plan.

Enterpriseleadership.org recently sat down with Takai to talk about the challenges she faces transforming the largest IT organization in the State of California. Here is what she had to say:

EL. What is it like working for Governor Schwarzenegger?

TT. I am enjoying every minute of my work. It's never a dull moment.

EL. Can you describe the structure of your organization?

TT. We are currently in transition. To date, our organization has been highly decentralized. Each of the 130 CIOs have pretty much been able to set their own processes, establish their own way of doing things, from both a business and a technology standpoint.

This position was really the creation of a central CIO organization with reporting responsibilities directly to the governor. That is the first time the CIO has been a cabinet member. It is the first time the position has directly reported to the governor. Before today, my organization was a policy setting and financial review vehicle with about 32 people. I have close to 1,100 people. Within my organization, we plan to consolidate our large mainframe data center, our security organization, and our public safety communication organization. The central shared services to support our infrastructure will become part this larger organization.

EL. How many IT workers does the State of California have?

TT. We have been using the 10,000 number. When we consider things like desktop support and other functions, we think that the actual number is a little larger. We believe that our on-going run rate budget is about $3 billion. We run about $1 billion of project spend on top of that. As a result, our spend comes closer to $4 billion. Even that could potentially be a low estimate.

About 10 percent of the current state IT workforce will become part of my organization directly. The rest will move to a federated model. We plan to establish a dotted line working relationship where the IT policy, as well as all of the technical direction, will come from this office. The business direction will reside within each respective organization. The business organizations will also make the decisions about how much money they want to spend on IT.

EL. Since you are going to this structure, what will your governance process look like?

TT. It is changing dramatically. We plan to establish a brand new governance structure around reporting of projects. We put out a policy letter in April to get the transparency ball rolling. First, we do not want to monitor all of the little projects. Projects that met certain parameters will require reporting into this office. We plan to post the projects on the Web site so they will be available to the public, as well as to the legislature. The reporting frequency depends upon the size of the project.

EL. How do you plan to measure these projects that meet certain parameters?

TT. Initially, we will look at project performance. Our challenge is sheer performance. The first thing we plan to do will be to meet our milestones.  Within those milestones, we may have measures around earned value. The first step is to just get the reporting to happen.

Keep in mind that we are not where we need to be. We are just in the beginning stages. We have the challenge of trying to do business transformation while we are trying to do IT transformation.

EL. How are you going about getting this reporting to happen?

TT. We told the departments and the agencies that we have the ability to put out our policy letter, which is the equivalent of the traditional administrative manual. Our policy letter requires certain project and portfolio management training, certain practices, and then reporting requirements. This is all brand new. The portfolio management tool we plan to secure will help us to do the reporting.

EL. What key technologies investments have you needed to make?

TT. Because the budget crisis hit when I arrived here, we have not made what I call key technology investments. We struggle to make due with our dollars. We have continued to support some of the investments that we have had underway. For our infrastructure, we are working on aligning data centers to improve disaster recovery. We have a major project going on to shut down one of our locations and create a more robust disaster recovery plan for our mainframe data centers. The investment there is not a huge amount of dollars. It has been making use of the dollars we have to make dramatic changes in our disaster recovery capabilities.

We still have a large number of application projects underway and continuing to move forward. Some of them even accelerated. We have several ERP projects underway. As you can imagine with the size and scope of California, we have had several of them happening right now in corrections and another one in transportation. We have a statewide payroll and personnel replacement system underway, that is an ERP implementation for personnel. We are in the process of preparing an RFP for an enterprise-wide ERP system for financial management.

EL. Are you folks doing much consolidation of redundant systems?

TT. We have just begun that process, but I would not say we are far along with it. In 2008, we did our first ever five-year IT capital plan. It was the first ever it was ever done for the State of California. We required everyone to come with his or her five-year plan. This process will give us visibility into the areas where we need to move towards consolidation and shared services. We will update that plan this year.

The 130 CIOs will be in 11 different groups. Before I move forward with a statewide consolidation strategy, I have asked all of these CIOs to submit a consolidation plan for their agency based on what they would do. These plans will give us a way of actually looking at what we should do from a state perspective.

EL. Is your shared service organization going to be mandated or not?

TT. Yes and no! It's an interesting situation to look at a shared services environment based on both mandating and cajoling. Because I have done this type of consolidation before, a mandate could damage could damage your ability to pull if off, especially if you do not have the ability to do it properly. Our first step requires that I have the technical team organized, and I have the ability to do consolidation properly. Call it the first step. I am focusing right now on directory and email.  It is a great kind of outward invisible place to start. The second place we are starting to work in is our data centers. We have more than 400,000 square feet of data center and only about one third is what we would call tier three. Those are a couple of areas where we are going to move toward consolidation, but I have not yet going to the mandate state. I have mandated that the agencies are to prepare their consolidation plan, but I have not mandated which direction they are going to go in.

EL. Because your IT transformation or reorganization implies a change in communication style, what type of training program are you putting in place to facilitate this?

TT. Our communications director has been working very hard to develop a cohesive communications plan. This plan is not only important for our IT employees and our business partners, but we need it for dealing with our legislature and our various special interest groups in Sacramento. For example, we have a council comprised of the 130 CIOs. They all have the opportunity to participate. Our executive leadership council includes the undersecretary of each major agency. To this end, we are always talking to the business folks, as well as to IT. I then have the venue of the cabinet secretary if there is an issue I have to raise to that level. Communication is key and essential to what we doing.

EL. Are you looking at social media for the communications piece?

TT. Yes! We recognize social media tools as an effective way to reach our audience, especially those who want to follow us. We have done a Facebook page. We are experimenting with Twitter and how to push out information using those short updates for people who want to follow us. Governor Schwarzenegger is twittering. People are very interested in what he say to say. He has started to lead leading state agencies toward that style of communicating. We are looking at different things.

We are focused on using the tools to push information out. We have not yet spent enough time looking at how we use these tools as a way to gauge and to get input. We are re all struggling with this issue.

EL. Have you had much contact with Vivek Kundra, the new U.S. Federal Government CIO?

TT. Yes! We are certainly interested in what he is doing. While putting data out there is great, we are all still struggling with what people do with the data that actually will result in an outcome. We have to continue to work on this piece. On the other hand, we have much internal resistance to putting data out to the public

EL. How do you communicate to the rank and file about the importance of understanding the business impact of IT?

TT. This area is important to us. We are trying to use a business approach to the way we approve projects and the way we implement them.

EL. What are you looking for in a CIO?

TT. We want pro-active people who will stand up and be counted. They want to be leaders.

EL. What challenges would private sector CIOs if they wanted to join your organization?

TT. They have to be able to calibrate and understand the way the work gets done here. They have to be able to calibrate to the pace of government, and the bureaucracy of government. People who can do these things will derive much reward working in government.

Elizabeth M. Ferrarini - She is a free-lance writer and IT consultant from Boston, Massachusetts. Reach her at elizabethferrarini@yahoo.com.

If you read the computer trade press, you’d get the impression that cloud computing is the next killer app. “Not so,” said Dr. Jeanne W. Ross, principal researcher at MIT Sloan’s Center for Information Systems Research. Speaking at the recent MIT Sloan 2009 CIO Symposium, Ross said that “major companies have to clean up their infrastructure before they can take advantage of cloud computing.” She added that cloud computing makes sense for emerging companies that will need to scale in a hurry.

Ross should look at what’s happening at Brady Corporation, a $500 million manufacturer and marketer of a comprehensive line of identity and protection products, including labels, signs, safety devices, and printing systems. In a recent www.enterpriseleadership.org interview, Frank M. Jaehnert, Brady’s president and CEO, described some of his company’s key cloud computing investments.

We also came across an interesting cloud computing application at the Brain & Spine Institute at Sacred Heart Hospital in Wisconsin. Dr. Kamal Thapar, a neurosurgeon and the Institute’s director, is using the country’s first SmartOR, which based on cloud computing technology.

To get some authoritative perspective about software as a service (SaaS) and cloud computing, enterpriseleadership.org turned to Jeff Kaplan, founder and managing director of THINKstrategies. His strategic consulting firm focuses entirely on the business implications of transitioning technology from a product focus to services-driven solutions. Here is what Kaplan said:

EL. Why is so cloud computing on every IT executive's mind?

JK. You can no longer justify doing business the old-fashion way of building your own systems and solutions in-house, and then trying to maintain and manage those inefficient systems on an on-going basis. The rules have changed. You need to look at how you can operate your resources more economically and with more agility. You need to reduce your cost of ownership, but you also need to improve your return on investment. Because of today's more disbursed business environment, you need to provide a services orientation, not only to your customers but also to your end users. You must provide access to resources anywhere, any time. You must get outside the four walls of the traditional data center.

EL. What advice would you give those people who have locked themselves into SAP and Oracle?

JK. Many alternatives to SAP and Oracle have proven to be enterprise class. That's the good news. For example, Salesforce.com, SuccessFactors, or a variety of other companies that have not only reached a certain level of financial stability, but have gained public market access. These companies serve large-scale enterprises. Many of the companies that don't have the background and the identity equity also have been able to penetrate the largest of enterprises. These companies are getting some recognition from the willingness of their customers to give references.

EL. Okay, so how do you divorce yourself from, say, SAP?

JK. You need to wean yourself off SAP or Oracle. It's a gradual process. You can't folk lift your way off these applications. Many folks recognize that they can get a complementary capability from vendors such as NetSuite. It recently announced winning a number of new accounts among SAP customers. NetSuite made a concerted effort to make its software compatible with SAP, the same way Salesforce.com did many years ago.

EL. What did you think of SAP's attempt to cover a cloud-based service?

JK. SAP has business by design. It's a SaaS alternative aimed at small and medium-size businesses. It offers a pay-as-you-go pricing model. The initial rollout was a limited success. SAP has been retooling it for a long time now. SAP recognizes now that people aren't just looking for a skinny down version of a traditional legacy app. They look for some features and capabilities that never existed within those former traditional applications.

EL. Will SAP lose marketplace of its traditional large enterprise customers?

JK. SAP could if it doesn't respond accordingly. This company has denied that this market has attracted both small and large enterprises. The success of Salesforce.com and Success Factors have proven that large enterprises have an interest in both SaaS and cloud computing.

EL. What changes do you need to make to your enterprise architecture if you want to move your apps to the cloud?

JK. You need to make sure that cloud computing can fit within or be compatible with those architectures, which is not necessarily a high hurdle. If you have based your architecture on service-oriented architecture (SOA), then you will be okay. Many SaaS and cloud computing capabilities also recognize SOA as the key architecture for success. The prevalance of APIs and Web services permits a certain level of integration, as well. You will find a growing assortment of third-party tool vendors, starting with two established players -- Infomatica and Pervasive -- to upstarts such as Cast Iron. These companies offer integration tools to tie SaaS solutions to both legacy applications and other SaaS solutions.

EL. Are we starting to see standards for cloud computing?

JK. There are a number of standards and initiatives. The most recent one is within the Federal Government's National Institute of Standards and Technology. There is a recognition that we have to bring some order to this marketplace. Like any new technology trends, a tug of war occurs between the various vendors who have stakes in the game, as well as customers who try to watch out for their own interests. No one has yet to set an overarching standard. Instead, organizations have tried to surround the problem and coral it into some orderliness.

EL. What integration issues might you run into when you move to Saas?

JK. Integration can often pose a challenge, especially if you look at legacy applications. For example, although you have a world of infinite customization, you must properly integrate those legacy apps with any new apps, either SaaS or any off-the-shelf app. In this case, you will run into some difficulties. You cannot get around it. Here is the good news about attempting to integrate with SaaS. Each time you update or upgrade a SaaS app, it doesn't throw off integration. Why? The SaaS application side permits a limited amount of customization. The legacy world has been fearful that implementing updates would disrupt what customizations unilaterally put in place in a single instance of the application.

EL. What is your assessment of amazon.com's cloud computing services?

JK. It's a major disruptive force in the marketplace. amazon.com has finally realized the full potential we have talked about for years but never really brought it to market. Although SaaS applications have been called on-demand, they can never be provisioned instantly. If you wanted to terminate a service, you usually had to wait to the end of a term. That could be a minimum of one year unless there was some cause otherwise. amazon.com has set a new standard of truly providing an on-demand service that allows you to turn on and turn off the resources instantly.

EL. How reliable are these cloud services?

JK. Reliability always poses a question, but it is always relative. For example, we saw outages in google.com a couple of weeks in May. These outages did not compare to the failures at amazon.com. Stuff happens. Both amazon.com and google.com need to make sure that these disruptions only happen occasionally and only for a short period. Both of these companies, as well as other companies, have to learn how to establish acceptable escalation policies and support programs. They have to do a better job of notifying customers when these instances do occur, keeping them informed about what is taking place to rectify the problem, and ensuring them that the problem does not repeat itself. Both large and small customers have become upset with both amazon.com's and google.com's lack of human-facing customer support. Both of these companies have been faceless entities with no 1-800 number to call. They are working aggressively to correct this problem. It, however, will take some time because they built their businesses to offer commodity services. They might not be able to continue to support services as a commodity. Enterprise customers won't tolerate this type of support.

EL. How will amazon.com blend its cloud computing service with its retail side?

JK. amazon.com's computing grew out of the company's e-commerce business. If you read the amazon's initial promises, the company realized that its data center operations had considerable scale, and thus, could be made available to third parties. Originally, amazon.com thought those third- parties would use resources to build upon the e-commerce proficiency of amazon.com, as opposed to generic computing they had at their disposal. E-commerce at amazon.com won't go away. It will become a vertical market. For a long time amazon.com has been trying to get people to recognize that it's not a bookseller or a merchandiser, but instead it's a distribution company. Amazon.com has modified this to say it is not only a retail distribution company but, in a sense, a computing distribution company as well. I am curious to see if there the buy pull down menu will feature computing power.

EL. Will cloud computing change a company's IT governance model?

JK. Yes, it will. For the past decade, we have been talking about IT being an in-house service provider for the entire IT Infrastructure Library (ITIL) framework. Because of cloud computing, the IT department becomes a procurement agent for third party resources sold to them on a services basis. Cloud computing minimizes some of the ITIL processes, such as release management. On the other hand, some of the SaaS and cloud computing companies will work with companies on the timing of releases. It doesn't eliminate parts of ITIL entirely. The IT department has less of a responsibility to do the release, and more of a responsibility to become a vendor management resource.

EL. Will the allocation and charge back pricing model for cloud computing turn IT into shared services?

JK. Cloud computing is really a shared services, which we talked about back in the 1970s. It's now new and improved with the evolution of technology. It reminds me of the old time-sharing model developed by key players in the aerospace industry. Because companies, such as Boeing and McDonnell Douglas, had purchased more computing power then they could really use on their own, they decided to resell that computing party to third parties. They created the business and made some money doing. EDS, however, was the real innovator in this marketplace.

EL. Many large companies have all types of IT organization structures, including centralized, decentralized, shared services, federated, and combination of all of these. Will moving your major apps to the cloud change your IT organization structure?

JK. Good question! You ultimately want to create the most efficient and economic model. Up until now, individual business units have been unilaterally acquiring SaaS and cloud computing capabilities, independent of their IT organizations. They have done this in order to meet their own needs within a corporate plan or to orchestrate a process. Because these individual point solutions have proven to be successful, the C-level suite has become more engaged by saying, 'Okay, we've discovered that this stuff works because many people within our organization use it. We need to bring some order to chaos for these reasons: to make sure there are no vulnerabilities, to reduce the likelihood of effort and contracts, to improve our purchasing power, and to improve the integration and to optimize the overall use of these applications across the various silos.

EL. Does writing a service level agreement for a cloud-based service differ from writing a SLA for an in-house system?

JK. With a SLA for an in-house system, you don't impose penalties on your IT staff. With cloud computing, you write an SLA similar to what we learned from the telecom space. Telecom SLAs were set to ensure the dial tone, and eventually the data tone. They were not put to use as best practices. The same practice applies for both SaaS and cloud computing.

The big difference between telecom, and SaaS and cloud computing is the number of multiple vendors that exist in various stages of the latter's supply chain. For example, a cloud computing service, such as amazon.com, might have a third-party independent software vendor providing connectivity. As a result, you need to understand that supply chain, and to make sure you have the appropriate SLA for each link in the supply chain.

EL. If you are going to move some of your apps to cloud computing, how should you handle server virtualization?

JK. This isn't an either or proposition. It isn't practical for companies to move everything on premise to the cloud. Companies might decide that they need to keep certain applications in house. As a result, most companies will live in a hybrid world. A virtualized architecture makes senses in plenty of places. A few years ago, SaaS or cloud computing companies offered multi-tenant solutions. Some SaaS or cloud computing companies use a virtualized approach to deliver their services. You could use a hosting company for your own virtualized resources. And you could build virtualized systems within your own data center. There is a considerable debate whether a private cloud makes sense. If you want to outsource a task to a third-party, then you can take the best practices of today's cloud computing leaders, such as amazon.com and google.com, and apply those principles to your own internal operation to establish your own private cloud. I wouldn't do this just because you don’t feel comfortable using the cloud.

Elizabeth M. Ferrarini - She is a free-lance writer and IT consultant from Boston, Massachusetts. Reach her at elizabethferrarini@yahoo.com.

Americans concerned about the state of the banking industry might just get some relief by joining a credit union. In fact, the Credit Union National Association has increased it awareness of credit unions as a viable financial alternative to banks. In the U.S., more than 92 million members belong to the 8,200 credits unions. Because credit unions are cooperatives owned by their members, they offer better rates, reduced fees, and a form of insurance similar to the FDIC.

One credit union, however, stands heads above the rest as a pioneer and leader in the field. Baxter Credit Union (BCU) began in 1981 initially to serve the financial needs of Baxter Healthcare's employees. During the 1990s, BCU expanded rapidly by merging with other credit unions, and by offering credit cards, home equity loans, prime mortgages, audio response teller, and online banking. Today, with assets of $1.5 billion and 140,000 members, BCU ranks as one of the top 100 credit unions in the U.S. BCU's key to providing first-class service to member companies, such as Cardinal Health and CDW, resides its integrated business and technology management strategy.

Enterpriseleadership.org recently sat down with Jeff Johnson, BCU's chief information officer, to talk about this credit union's business process for making and monitoring investments in technology. Here is what he had to say:

EL. How would you describe BCU's business strategy?

JJ. As a cooperative, our members own us. I am a member of this credit union. We do not have stockholders. We essentially do not report to anyone, such as a board of directors. We are not about maximizing profits to the highest degree. We aim to provide the best services and the rest rates for our membership. That sets our cultural tone.

As a Select Employee Group-based (SEG) credit union, our charter enables us to serve specific groups of employees or associations.

We seek out large, nationwide companies and try to wow their management teams into providing our services to their employees at no costs. We differ from most credit unions and certainly all of the banks. We have a very tight strategy based on servicing companies and the employees of those companies.

EL. How does your organization support the business strategy?

JJ. My department drives the message that we are not about technology, but we use it to support all aspects of the organization. We support the business strategy by having three distinct groups that focus on what key parts of the organization need to accomplish. Each group addresses a different imperative of the organization. One group supports our day-to-day operations so all of the transaction processing goes smoothly. We make sure all the members can log on to home banking and carry out their transactions. We make sure our front-line employees have access to whatever tools they need to service the membership. Another team focuses on strategy. For example, our project management office executes on the business priorities as projects and requests emerge. They do not worry about the infrastructure or worry about support. Our architecture group, which is our last group, makes sure that we make the best technology investments and that we optimize what we have bought. The technology space can spin out of control very quickly if you do not pay attention to the long-term implications of the investments you make.

EL. Do you have a physical preference or are you strictly e-commerce?

JJ. We have more than 35 service centers located across our company member sites. We determine the need for a service center based on the facility's number of employees. The majority of our transactions still come remotely whether it is through the Web, through the ATMs, through the phones, or what we call shared branching.

EL. What do you mean by shared branching?

JJ. We try to leverage what else is out there in the industry. We have something called shared branching. If you belong to a shared branching network, your members can go into other credit unions that are also a member of the shared branching network. We are very active in that. We hone things like shared branching with other technologies with the goal of pushing our own strategic direction forward.

EL. Can you describe a technology investment that helped you to differentiate yourself from your competitors?

JJ. Much cooperation exists across the credit industry. Because our strategy focuses on SEGs, we have made a couple of major technology investments. When we started expanding into new, large organizations in 2004, we created this entire branding infrastructure where we could custom brand a company as having its own credit union. Some companies do not want the Baxter Credit Union name; they want their own name. We create the Web sites, the documentation, the marketing materials, and the credit cards and debit cards. It is a great benefit for a company to provide a credit union under its name and auspices.

EL. What influence has your branded infrastructure had on the willingness of companies to join your credit union?

JJ. The first companies we signed up in 2004 would not have gone with us if we did not offer that branding capability. That was the ticket for us to get in the game. When we approach a new company, we emphasize what people want -- great service, great rates, and convenience. Technology enables all of those things. It is all about price, service, and convenience. On the other hand, our customers would have thrown us out if we did not have the right technology, but we have managed not to be in that situation.

EL. How do you measure the value of these technology investments?

JJ. We measure many of our investments on their ability to enable our strategy. If we did not have shared branching and did not build the branded infrastructure, we would have not been able to sell to most of the companies we have signed up in the past four years. We could not have done it without some of the technologies we have. Our organizational structure plays a key role here. For example, we have a team that focuses on making sure everything runs with 100 percent accuracy. No one really notices that it works. On the other hand, they certainly notice when it does not work. Just the confidence in the entire ability to deliver is important.

When it comes to measuring the effectiveness of investments, we break all of our projects into different quadrants and then we make decisions based on their quadrant. The senior management team focuses on projects in a specific quadrant. Mid-level managers will handle projects in less critical quadrants.

Before we invest too much time and money, we go through two internal review processes. We have an IT review process where we look at the architecture, and we do a total cost of ownership over the life of the asset. We do a lot of internal analysis. If we were to do this project, what would it mean from an infrastructure, cost perspective? On the business side, we go through a gated process. Once we approve the project, we go off and do a scope of the entire thing. We make sure we have a full understanding of everything the business users are asking for and then we gate it. We go back to the stakeholder and say, 'You know this project can do X. We are projecting it is going to cost Y.' They might agree or not. We then ratchet it up and cut out pieces of the scope or pairing it down. If yes, it goes on to the next level. If the answer is no, we take it back and start pairing down.

We have gone from the majority of our projects being significantly over budget to most coming in pretty close to deadline. The gating process in conjunction with the quadrant has really helped us control the overruns and the over budget part of it.                                                                                             

EL. Can you describe how you arrived at this quadrant approach to managing your investments?

JJ. Before 2006, we would look at all of our technology project requests and then try to make decisions about them holistically. We wound up having huge initiatives jumbled up with all of the mid-size initiatives. We decided to go with a four-quadrant approach, similar to what Gartner Group has.  Everything above the horizontal line is ROI positive; everything below that line is ROI negative. We put the projects either an ROI positive or an ROI negative above or below the line. On the perpendicular axis to the right, we look at things that cost more than a certain amount. The ones to the left cost less than that amount. Thus, our management team focuses on the ROI positive things in the upper right quadrant. These things will give us the biggest bang for the buck. As we move over to the left, we delegate less important ROI positive things to middle managers. These things are not large enough to make the radar screen of our senior management team.

As we go through our capital budget process, we try to break everything up into those quadrants and then we decide on our capital spend based upon that. Before investments percolate, I will bring them to the senior management team on an ad hoc basis. Having these conversations has proved to be an effective way to work through these projects before they are put on the quadrant.

EL. How would you gauge your organization's agility to respond to changes in the marketplace?

JJ. The model we have set up allows us to expand and to contract quickly. If we see many things north of the quadrant line, we can usually go out and get contractors to fulfill the projects. We also improved our agility by focusing more on project management and business analysis. We outsourced most of our applications development. The knowledge of our business and the knowledge of project management are the value elements. Applications development is a commodity.

EL. What does business impact of technology mean to you and how do you communicate it to your constituents?

JJ. Once every quarter, I look at our uptime and our transaction volumes. I also look at what our members have said about our services. That is my tactical approach to business impact. The strategic business impact is how well we are providing the services our members require. Each week, we have a meeting to discuss how well we have delivered on the business value of technology. We have not run into any problems in this area, which might sound surprising, but it is true.

EL. Do you tie technology investments to new customers or to improved processes?

JJ. As a financial institution, we have technology integrated with our day-to-day processes. If our systems go down, people cannot do their work. Technology functions as our nervous systems. It is what differentiates us. We do not break technology out that way.

EL. How has the economic downturn affected your business?

JJ. We have members who have lost their jobs or who have seen the value of their houses decline. Because we foresaw the recession, we identified many people who might have gotten into trouble. We told them that if they restructured the loan, we would reduce the fees on their loans. We have been very active to do that. I cannot tell you the number of loan workouts we have done.

EL. Are you using analytics to identify people who need to restructure their loans?

JJ. Yes. Three years ago, we had a major push to get business analytics on the fast track. Today we are doing some good analytics around credit quality. We lend people money for mortgages, not sub prime or any Alt A. We have all prime mortgages. We have not seen too many foreclosures.

EL. Have you made technology investments that turned out to be a mistake?

JJ. In 2005, we made a couple of investments that did not turn out to our satisfaction. We made the mistake of going with vendors who were first to market with their products. It was a dismal failure. Our governance process came about from these dilemmas.

Elizabeth M. Ferrarini - She is a free-lance writer and IT consultant from Boston, Massachusetts. Reach her at elizabethferrarini@yahoo.com.

Originally founded as a local bricks and mortar mortgage company, Quicken Loans has leveraged technology in order to do business in all 50 states from several locations. Quicken Loans, within less than a decade, has become one of the nation's largest online lenders, the 10th largest retail mortgage broker in the U.S., and Michigan's largest mortgage company. The company closed $18 billion in home loan volume in 2007 and more than $80 billion in the last five years. In 2007 at the height of the mortgage industry crisis, Quicken Loans stopped doing second mortgages, home equity lines of credit, deferred interest loans, and Alt-A products. Today, Quicken Loans does FHA loans, VHA loans, and reverse mortgages.

Investing in a good work environment and in developing employees has contributed much to Quicken Loan's success. Fortune's list of the 100 Best Companies to Work For in the U.S. has included Quicken Loans in the top 20 for five consecutive years. Metro Detroit has also named Quicken Loans the Best and Brightest Company to work at. For 2008, Quicken Loans ranked second on Computerworld's list of the 100 Best Places to Work in Information Technology, and held the number one spot in 2005, 2006, and 2007.

Enterpriseleadership.org recently sat down with Frank Laura, Quicken Loan's chief information officer, to talk about how IT creates business impact, how he communicates it to the leadership team, and how he motivates the IT organization.  Here is what he has to say:

EL. What important IT investments have you made recently?

FL. We've invested much money in virtualizing our environment and building out our Web-based services applications. We build most of our technology. We've been doing that for a number of years even before it was the in thing to do. We've invested heavily in the development infrastructure and the server infrastructure to do virtualization. These improvements will enhance our agility and will give us the ability to save some money, not only in energy and in data center space.

We've also bought some larger servers. We've engineered into this hardware the ability to have redundancy internal to the server, as well as the ability to slice up and to use every last CPU cycle the server can muster.

EL. How do you measure the effectiveness of your virtualization efforts?

FL. We've virtualized more than 400 servers. If you talk to a number of companies, you're going to get numbers all over the place, such as compression ratios. Virtualization can definitely skew your results. We got good results from many of the single server-type things all the way up to business process-oriented things. As the business demand grows or shrinks, we can spin off new servers or decommission servers within minutes. You may look at some applications and say that you only have a five to one ratio here. It doesn't sound that great. With other applications, you might have a 20 to 1 ratio or a 50 to 1 ratio. It depends on the application and how you use it.

EL. How do you define business impact and how do you keep the executive team abreast of it?

FL. We measure some things from a technology perspective. It helps us that we've satisfied internal customers. On the other hand, we're concerned about how well we satisfy our external customers. We strive for a 92 percent satisfaction rate or higher from our external customers. I pay attention to what our external clients tell us. Our team looks daily at the numbers.

We rely heavily on business intelligence. In fact, we track everything from financial information all the way through production numbers at the beginning of a loan, to the end of the loan process, and through to post-closing. Our business intelligence (BI) infrastructure consists of highly skilled people whom analyze the numbers and report on them for our executive leadership team. The BI team understands what the business finds important and helps the executive team find numbers they need for supporting critical decisions. This process happens on an automated basis. We continue to build out that platform.

EL. Do you communicate business impact down to the troops?

FL. People on the team like to know that sort of information. They really like to know they're making a difference. We communicate business impact in a variety of ways. I have many one-on-one meetings with IT team leaders and people who are on the front lines. I'm very happy to share this information with them.

We have a very open culture, especially around information disclosure. To this end, communication readily flows throughout the organization. We do relay company information either verbally or through company-wide email. For example, our CEO often sends out information to the entire company about what we doing. He might send a message about how a particular change made an impact to our business, how quickly we got into a new line of business, or how we achieved efficiency through some technology improvement or process improvement.

EL. Can you easily link technology investments to new markets, to new customers, and to improved business processes?

FL. Yes! We've designed into our systems some ways to track how a new marketing initiative, for example, or an arrangement we have with an online partner, directly impacts revenue and profitability. We have those things built into our systems as part of our processes. We can trace things back very accurately.

EL. What did it take to achieve the open communications that you have in your organization?

FL. Our culture supports open communication. You can't have an organization that doesn't believe that sharing information is a something that can be taken lightly. Everyone in the organization has to feel like they make a difference. That's was our first step. Next, we understand that information is timely. As a result, we explain it clearly and then share it quickly.

We have a variety of mechanisms for sharing information. Like many companies, we can send broadcast emails. Some of the leadership team might use entertaining voice mails to convey information about our business. We'll even put together videos and send them out as a way to broadcast how the company is doing or what changes have occurred in our business.

EL. If you look at your IT organization on an IT maturity model, where would you rank as an organization?

FL. Depending on how you'd look at things, we'd be all over the board on an IT maturity model. We recently went through an exercise with a partner where we compared ourselves with other companies on a maturity model. We also compared how we thought we were doing with what people in our industry thought of us. We don't take have much time to dig deep into IT industry standard ways of following a process, carrying it out, and then ensuring we can repeat it. Why? Quite frankly, our processes change very quickly, and we grow in new lines of business or new products very rapidly. The IT things we do today may not make sense tomorrow. We haven't spent much time studying and making sure that we let the industry-established IT governance standards dictate how we do business. On the other hand, we spend more time working with the business to understand how IT can better support the business.

If you look at the IT maturity models, you'll see that agility doesn't mean all that much in those models. You need to have processes that you can easily repeat and constantly maintained. These models assume that the overall business processes stay relatively the same and must be within certain tolerance levels at all times. The numerous disruptions in our business create the need for us to change rapidly and to be agile. I find it to hard to have those things operate in harmony.

EL. Because your business reacts to ups and downs in the economy, can you explain how you leveraged technology to stay competitive within your business model?

FL. We have the advantage of being able to leverage our technology platform here in one location and to do business in all 50 states. If we didn't have the technology platform to afford that, we wouldn't be in business right now. We've figured out a way to have the processes and the technology, and to maintain both of those things in such a way that we can adapt and can change it. Can you imagine having branch locations in all 50 states all trying to do the same thing! It would be nearly impossible to have a single platform that relates to our business, that operates smoothly, and that has visibility. We're fortunate to have very agile, knowledgeable IT professionals, business analysts, metrics people, and others. You need a powerful team like this if you want to build your business successfully on a single platform and to operate nationally.

We've been able to adapt our platform to work rapidly in our space. For example, we can get into a new line of business, like reverse mortgages, rather quickly. We can grow into the FHA loan business within a very short amount of time. If we had to do that with a branch model, we'd spend months and months and probably miss the opportunity. The technology in a single platform model has been a huge benefit to us.

EL. What's the process for setting strategy and how are you involved in it?

FL. We communicate in all directions throughout the organization.  The corporation has a formal process for how it meets certain guidelines. In addition, we have the informal process for how the team works together to get things done. It can include everything from streams of email and voice mails to a group of key people meeting throughout the week. The group might include the CEO, the process team, or the mortgage people. Our flat management structure enables people to figure out what is important, then to meet, and to decide what needs to get done. For example, the business development folks might say to the CEO, 'These are the top three things that we need to do.'

We don't have a quarterly board meeting. The CEO meets regularly with both decision makers and people in the trenches. The latter group has first-hand knowledge about what happens on the floor and recommends better ways to accomplish something. The information we gather from this diversity of opinions helps has to uncover business concerns that can help  dictate the strategy of where we need to go moving forward.

EL. Have you ever made a technology investment that turned out to be a mistake?

FL. Everyone has. We all learn from those lessons. I can't talk about specific ones for obvious reasons. Several led us down the path where we finally decided we needed to do this ourselves. While we try to focus on things that our core to our business, we need to look at things that support the core. For example, our off-the-shelf faxing system didn't work all that well with the industry standard solution, and we had many problems with it. The service level that the industry supports wasn't acceptable to our business. We wound up writing the fax system ourselves. That's one lesson we learned. To this end, we need to look at very closely, to evaluate, and then to decide whether or not an outside purchase provides better value than developing it ourselves.

El. Have you converged your IT strategy and your business strategy?

FL. We hope it is. IT needs to follow what the business needs to do. It can't be the other way around.  If you look at who we are, you'd see that we're a technology company that does mortgages.

EL. Do you give your IT professionals any special awards for outstanding performance?

FL. Within the IT team, we have a variety of different awards. We have something called the IT family gathering, which occurs quarterly. We try to make it special. During each gathering, we give out some type of recognition award. In many cases, team members will come to me and will nominate someone who has excelled in his or her job. We recognize people for the different areas they excel in.  We have innovation awards that are name changers. People must see their idea through execution and then to justify how it made a difference to our business. An award can range from recognition in front of a group, a call from our CEO, or the full star treatment at a Cleveland Cavaliers' game. Our chairman of the board owns this team.

EL. What development programs do you have available for IT professionals.

FL. We have two programs in the company. One of them is our formal company-based leadership development program. As I became familiar with the people in IT, I decided to create an IT leadership development program. A group within IT, which we call the farm team, develops the leadership programs.

Elizabeth M. Ferrarini - She is a free-lance writer and IT consultant from Boston, Massachusetts. Reach her at elizabethferrarini@yahoo.com.

Kermit the Frog isn't the only one that knows it's good to be green. Just about every major U.S. corporation has made a commitment to become greener, especially greening their data centers. Symantec, the $6 billion security software company, has gone one step further and demonstrated that green initiatives, especially in IT, can yield cost savings to the tune of about $46 million a year. In fact, Symantec's corporate responsibility program for 2007 outlines the company's multi-phased approach to becoming green.  The program leverages some of the company's products.

Enterpriseleadership.org recently sat down with David Thompson, Symantec's CIO, who has responsibility for the company's green IT program. Thompson oversees a staff of more than 1,300 IT professionals. Here is what he had to say:

We've taken steps to learn from its peer companies and its customers about their green efforts.

EL. Can you describe how you consolidated data centers and what benefits you achieved?

DT. We consolidated a data center in the United Kingdom into one in Tucson, Arizona. We reduced about 15,000 square feet and saved about 150,000 kilowatt hours monthly. We had about a $20,000 savings monthly just in power. Through server consolidation, we went from 1,300 servers to 700 to make better use of those assets. We saw savings of $1.5 million annually just from that server reduction. We had a $3 million annual cost savings in facilities from an IT perspective. All of these cost savings are for one data center.

EL. How many data centers did you consolidate?

DT. We did two data center consolidations. We had five data centers and consolidated down to three main data centers. Our primary data center is in Tucson. We consolidated another data center in Sunnyvale, California.

EL. What has been the cost savings from the two data center consolidations?

DT. The cost savings, including the real estate costs, were $10.1 million annually. It's a significant figure. We were a little surprised after we counted all of the dollars our cost savings added up to.  I was proud of the hard work my IT team did.

EL. How long can you go before you build or need more data center space?

DT. We see a horizon of four years and two months before we'll need more data center space. If didn't take some of these steps, we'd have a shorter time horizon. Because we took steps early, we're seeing the savings pile up.

EL. How did you consolidate the servers?

DT. We did two things. As we started the planning stage, we looked at where we would put the entire new infrastructure. We changed some service level    agreements (SLA). As we moved a server, we gave the business owner the choice of having a physical server in the new location, and having an SLA that would be six to 10 days to put in a new server. The owner would have to buy the server.  If they went the virtual route, they'd get the server in three hours and the cost would be part of the central IT cost. By changing that, we made a good case for everyone to go the virtual route. It allowed us to create a virtual farm in our Tucson data center, where all of our new applications occur. We use VMware for the hypervisor and Symantec for the infrastructure.        

EL. Do you have any life cycle management for how long these servers stay on the floor.

DT. We use our Altiris change management, configuration management database, and lifecycle management tools. We have a rotation cycle for our equipment both from an end-user perspective and from our core infrastructure. We give some of the older equipment to our labs. We contract with a company to do the appropriate disposal and recycling of hardware.

EL. Have you gone to service-oriented architecture?

DT. No. We're not in that space in this time. As we develop new applications for customer facing, we'll definitely consider it. Service-oriented architecture isn't one of our key priorities.

EL. Have you done any data consolidation throughout the company?

DT. We reduced the overall utilization of storage across all of our 46 field offices. We now backup all of the data in our field offices using our peer disk technology to duplicate the data. We're seeing data reductions close to 35 percent to 40 percent. We're also seeing savings in storage costs, power costs to keep the storage running, and commodity costs in having to buy tapes.

EL. Have you improved the reliability of the data because of doing this?

DT. Because we have better availability of our data, and have more successful backups, we can more easily recover things for our business units or a field office.

EL. Have you reduced email storage?

DT. Over the past year, we've put in our enterprise vault technology. It allows us to vault individual's email. We put the stored mail on peer storage, which reduces our costs and it also allows us to archive quite a bit of mail on off-line storage.  The off-line storage really reduced our costs and power. We can still retrieve the data because it's on tape. This reduction in overall email has helped us reduced our legal discovery time and costs.

EL. Have you done anything to reduce energy consumption with desktops?

DT. We noticed that about 60 percent of users are online 24 hours a day. Using our workstation management tools from Altiris, we pushed green settings to all of the workstations. The power cycle in the machine powers the desktop down to sleep mode in keeping with the desktop user's time zone. This initiative has allowed us to reduce cost savings dramatically by having the machines powered down at night.

EL. Any other energy cost reductions besides the data center?

DT. As part of our productivity initiatives and our green initiatives, we deployed more telepresence around the globe. We wanted to get people off planes. Our 18 conference rooms equipped with a high-end telepresence dataport enable users to have an almost in-person experience in the teleconference. DreamWorks created the rooms, which a third-party concierge service manages. Telepresence has provided us with dramatic gains in productivity. Today, our engineers spend more time designing and working on a technology versus then waiting for and taking flights around the globe. We have some good metrics around this technology with 72 percent utilization. Through 2007 to September 2008, we've seen a $22.6 million savings in travel costs.

EL. How did you arrive at that figure?

DT. We did a year-over-year analysis all of the highest traveled city pairs. We tracked that once we went live with the new telepresence system. We saw the reduction in the city pair travel and calculated the difference year over year based on what those city pair travel costs were. That's how we arrived at the savings.

EL. Did you go to a more efficient UPS in your data center?

DT. As we've added additional space to our data centers, we've put in the newest power conservation technologies from Liebert and others. We've been using directed cooling rack units, which allow us to direct cooling to a specific area. These units have helped us to reduce our power. We have the advantage of buying nuclear power in some regions. We view nuclear power as green. In fact, about 40 percent of the power in our main data center comes from a nuclear source. We realize that some people may not approve of this?

EL. Have you been looking at solar?

DT. We don't have any solar. We've been exploring it. We'd consider it as a source of power and heat for the office space within our data center. We've included solar in one of our designs for our future data centers. Solar wouldn't be realistic for our entire data center.                                                                           

EL. Are any of your data centers near wind turbines?

DT. A portion of the power in our UK data center comes from the wind turbine in the business park.

EL. What are doing to help your customers to be more green?

DT. We give customers the option of how they want to receive their software -- either as physical media or by downloading. We've seen a higher uptake of the digital content delivery, which is a good thing. We're obviously motivating customers, especially our enterprise customers.

As part of our corporate responsibility program, we took a fresh look at our entire consumer packaging and decided to go with the new, smaller eco-friendly packaging. We reduced the package size by 48 percent and replaced the plastic case with a cardboard wrapper. Our cost savings for this effort is about $4.5 million annually cost for the packaging.

EL. What are your customers telling you about their green efforts?

DT. Many of our customers are going green because of the business advantages for cost reductions. We've been sharing knowledge with many of them. As a company, we're putting more and more green settings in our products, such as power management for desktops. For example, the Altiris end point management tools have agreed settings that we can push to workstations. We've done that internally.  We have had dialog with our customers about new requirements they want to see in our software, but they're also telling us how they're reducing costs.

EL. What is Symantec doing in the software as a service area?

DT. We're one of the largest providers of security software as a service. We have our own Symantec protection network. This software as a service allows you to backup your business to Symantec's business infrastructure. We also have a company called MessageLabs, which is the number one mail security vendor. It, too, is a software as a service offering. We also have an auto managed service in our managed security service business where we run customers' security operations centers. Software as a service is a big push for us. We see the industry shifting. With all of our experience, we're trying to be a leader in this area.

EL. What has been the overall business impact of all of these green initiatives?

DT. If you look at costs savings (including those from real estate) over this last fiscal year for all of our initiatives, we appropriated between $46 million to $47 million in savings. We're talking about significant cost savings. These are on-going savings.

EL. Do you have any new green projects you're looking at?

DT. We're continuing to drive consolidation around our infrastructure, decommissioning applications, and focusing on every aspect of our business, including a review of our research and development and our use of assets within research and development. We trying to find ways to be more efficient in that area of our business. It's just not about the backoffice. It's also about the areas where we develop products. You'll see continued savings coming from Symantec. We report on these publicly through our corporate responsibility report. I put that data in the report. I'm proud of what we've been able to do today.

EL. Is IT spearheading most of the green efforts?

DT. It's a joint effort between our government relations group, our legal department, and IT. We joined forces to package it within our corporate responsibility program. IT drives it from a green IT perspective by working with our R&D organization to make sure we have products that enable us in our business, and that can also work for our customers.

EL. Where do the green initiatives rank with the governance process?

DT. Just two weeks ago, the agenda for our CEO's staff meeting asked us to report on our status on the green IT initiatives. All of the managers and I came together and reported to the CEO and his staff on the status. The board of directors reviews the corporate responsibility report. We have much insight from our management team and our board about this topic. They support us because of the cost benefits, but also because of what it can do for the market. Our customers have started to see the value of green IT initiatives. It feels good to be in a position to add IT value to the company.

EL. What advice would you give to other CIOs about carrying out green IT initiatives to gain a business impact?

DT. You need to set a goal, to understand your baseline, and to measure your success. You might not hit your mark, but you should try. We continued to  set the bar higher and higher for ourselves.  If an IT organization can capture that data, it should feel proud and share it with their management team.

Elizabeth M. Ferrarini - She is a free-lance writer and IT consultant from Boston, Massachusetts. Reach her at elizabethferrarini@yahoo.com.

Sybase is no stranger to tough economic periods. Before 2001, Sybase was a database company loosing more than a $100 million a year on revenues that peaked at $700 million. Other problems included high employee turnover and doom and gloom comments from Wall Street analysts and computer industry analysts. Today, Sybase has revenues of more than $1.1 billion, backed by solid profitability and double-digit growth in key market segments. Sybase also has emerged as leader in embedded software for analytical applications and for mobile devices. Sybase might be on the road toward meeting its $2 billion revenue mark, but a key part of the corporate strategy calls for controlling costs and finding ways for the company to improve business processes. Jim Swartz, Sybase's CIO and vice president, says, "Our mantra is to simplify, to standardize, and to consolidate."

Enterpriseleadership.org recently sat down with Swartz to talk about the initiatives his organization has put in place to deal with this economic downturn. Here he is what he had to say:

EL. Has the economy effected Sybase in any way?

JS. The issues aren't so much cost-cutting or tightening our belt. We are working to make the company more effective and efficient with the resources we have. Let me provide some example these initiatives.  Certainly, we travel less than we used to do. As a means to help us to be more effective, we have added videoconferencing into our mix of toolsets. It allows us to work from almost any place at any time. As a result, we can create the 7 by 24, 365 global manager to support the company. This technology has proved to be very effective. Even if we weren't in a down economy, this initiative would help us to be more effective and efficient to support the company with a global workforce. The net effect of cutting travel and introducing videoconferencing has made our people more productive, especially with respect to communicating across our many locations. It has also impacted the way managers work. For example, we allow our managers to work at home so they can have communications at more convenient times with people in other locations.

EL. Whose technology are you for videoconferencing?

JS. We use a mix in the sense that Cisco provides the backbone technology and the desktop conferencing technology, but in our conference rooms we use Polycom's technologies.

EL. Are you using 3D telepresence for videoconferencing?

JS. No. We use a high-definition system. As we all know, videoconferencing technology has been around for more than 30 years. Every few years it goes through a new generation, which supposedly creates promise. Now the technology is at the point where it is very effective. We don't get the old Max Headroom-type displays of people at the other end, as well as broken voices. From a cultural point of view, we need to figure out the most effective way to use this technology. How do you really have a videoconference between two engineers? How do you have a videoconference where one person is broadcasting to multiple sites? How do you have an effective videoconference between two videoconferencing rooms, as well as to show the content materials to people at the other end. These materials might include training sessions.

EL. Who is doing the training to improve the use of videoconferencing?

JS. Right now, IT does the training to help people make better use of videoconferencing. We are coming up on the curve. We have discovered some interesting aspects of videoconferencing that we didn't expect. For example, just the location of the camera in the room with respect to lighting can make a big difference in the image quality. If the camera has a long view on the people sitting at the conference table, they appear as if they are sitting at the end of a tunnel. You want that camera to zoom in so you get the value of seeing each person up close and personal. The goal is to try to emulate a telepresence capability.

EL. What have been your cost savings since you want to videoconferencing?

JS. We are looking to save between $2 million to $3 million a year.

EL. What other things have you done to take cost out of the business?

JS. Certainly, on the data center side of things, we have done much with virtualization. Say you had one server per application before virtualization. Now you might be able to create a virtual machine on a single server or up to as many as 10 to 15 virtual machines on that server. You can save a significant amount of CPU purchases.

EL. How many servers have you virtualized and whose hypervisor do you use?

JS. Because we provide software for almost all devices, we have hypervisors from each of the major vendors. We manage both enterprise applications and engineering applications. On the enterprise side, we have virtualized more than 50 percent of our enterprise applications. On the engineering side, we have virtualized many of the development environments for the engineers. The unanticipated consequence of that virtualization is that they created more virtual machines that we expected they would. We don't have to wait six months for the whole procurement cycle to circle around so we can bring in machines. We can provision a new virtual machine in just a few hours, especially if we give the engineers the ability to establish those virtual machines.

EL. Have you moved to Web 2.0 or any kind of cloud computing?

JS. Certainly, we have Web 2.0 applications, and we are looking at cloud computing as a future. We are working towards first creating our own internal cloud. As more and more vendors provide cloud computing, we will move our cloud outside of the company to create a virtual data center.

We have operated on the idea on simplifying, standardizing, and consolidating our data centers. In prior years, we had up to 30 data centers. We now have three data centers, including a disaster recovery facility. With virtualization and cloud computing, we are seeing that there potentially will be an impact on the way we do disaster recovery. It will also give us the ability to create, what we call virtual data centers, where people will look at ones we have left and see it as one data center.

EL. How much money have you saved through virtualization?

JS. Through virtualization, we have driven down about $3 million a year. What is important in 2006, we looked at our data center in Dublin, California, and recognized that we would run out of power and cooling in this data center by 2009 unless we did something. Our action was to virtualize, to retire old servers, and to use the technology that writes the images of some servers to a backup storage device, which allows us to bring the images back near term. Because of those efforts, we have extended the life of that data center out to 2017. We have cut the cooling costs as well. We have virtualized not only processors, but storage as well.

EL. Have you replaced any of the uninterruptible power supplies?

JS. We have replaced some of them with more energy-conserving devices.

EL. Are you using any hydroelectric or nuclear power?

JS. Being in California, we probably draw on some nuclear power, but we aren't tied directly into nuclear power. Our efforts have mostly been on the conversation side internally, rather than on the supply side.

EL. Have you had any staff reductions in IT?

JS. We have reduced staff a bit, but it has been a result of requiring new skillsets from our folks. We have been realigning what we do as we move from older technologies to mobilizing much of our workforce. As a result, we have changed the way we operate, transforming, not only IT, but helping to transform the business as well.

EL. How are you keeping up the morale in IT giving the economic downturn?

JS. Keeping up morale up has always been an important aspect of what we do. Because we have embarked on a number of very exciting forward-thinking projects, we have engaged our staff in what these projects will mean to the company. These projects include the virtualization of the data center, the virtualization of the desktop, and the business intelligence types of projects on the application side, and the development of new applications that help the business to grow.

Our role within IT is to improve the performance of the business as a whole. We have a stated objective within the company to grow to $2 billion over the next several years. Even in this economy downturn, we are still pursuing this objective. The projects we have in play focus on doing that. For example, to make our sales force more effective, we are giving them better information to use for forecasting, and providing a greater ability for them to work with our partners. We are also improving our partners' abilities to work within the company. Our partners also include our business partners, such as our finance people.

We went to make our managers more effective and more efficient with the use of new technologies, especially when they are out of the office. Better mobile technologies, which we develop inside of IT, will enable them to respond in real time. Many of the things I am talking about deploy the application of our own Sybase technologies, especially for mobile email, and mobile applications. Our analytics tools will help our sales and marketing teams understand what our customers' needs are.

El. Of all of these initiatives, which ones will have the greatest business impact?

JS. In terms of business impact of helping the company grow, we have two key ones. The analytical marts help us to understand our forecasting. They work together with products Salesforce.com and some of our marketing tools. As a result, we can better project sales estimates, such as much business is going to come in for a particular quarter. Activities that use our analytics tools are very important. Building on our own tools, we have created portals which give our partners better access to information they need to be more effective sales folks. Much of our growth will come from our partner establishments as well.

El. What are you trying to improve upon within IT?

JS.  We are trying to improve upon partnering with the business folks. All of these projects to a large extent are transformational. IT is changing the way it does business, but IT is also helping the business change the way it operates to be more responsive to our customers and our partners to help grow the company.

EL. How do you work with the CFO?

JS. I report to the marketing organization. We used to be part of the financial organization. Because we are an outreach organization dealing with our customer community, we have seen that relationship change over time. The finance organization is a partner of ours. We work very closely with them, especially on developing systems that help report our financials more effectively, that manage our order entry systems more effectively, and that help develop strong relationships in understanding our financial numbers. In addition to finance, other important partners include human resources, legal, and marketing and sales. Our people are becoming more and more business oriented as much as they are technically oriented. We are seeing a major shift where many of our information engines are becoming software as a service engines. They bring the data back inside, and analyze it with our analytics tools. This process brings our people to a different position in the organization. They become very much oriented towards exploiting the business opportunities of IT, rather than just the technology opportunities.

Elizabeth M. Ferrarini - She is a free-lance writer and IT consultant from Boston, Massachusetts. Reach her at elizabethferrarini@yahoo.com.

The shared services model has been a fixture in corporations for about two decades. Today, shared services are becoming a similar fixture across many different types of government agencies. In fact, Accenture's 2005 study, Driving High Performance in Government: Maximizing the Value of Public Sector Shared Services, found that 85 percent of executives interviewed believed that shared services played a key role in supporting their organizations' goals. The study of more than 140 executives also found that the move to shared services enabled organizations to shift budgets from administrative activities to more constituent-facing areas, and thereby improving government services. The most common areas for shared services, according to the study, included IT, finance, and human resources.

John Gillispie, the chief operating officer for IT Enterprise for the State of Iowa's Department of Administrative Services, definitely believes in the merits of the shared services concept. Unlike many public-sector based shared services, the State of Iowa's shared services for IT doesn't have a mandate. Agencies can go outside the public sector and solicit the services of private sector third parties. According to the Accenture study, most government agencies use the services of their in-source shared services, going outside for expertise during planning cycles.

Enterpriseleadership.org recently said down with Gillispie who talked about the challenges he faced when he became CIO for the State of Iowa. He is the past president of the National Association of State CIOs.

EL: Can you describe the IT organization?

JG: Our responsibilities are laid out in code. We essentially have a shared services function to provide IT services, but our potential customers have the choice of using our services or going outside use services by third parties.  This is a unique arrangement in a government environment. We're a shared services model without the mandate. It can be challenging during tough budget times. I have a staff of 140 people, and I report to a department director who is a governor appointee.

EL: Why don't you have a mandate and what percent of agencies are using your services?

JG: That's a difficult question is answer. The total approximate spend on IT from participating agencies is about $180 million.  Since we're a shared services, we provide about $32 million of those services.

EL: Why did the state decide to go this route?  Is it efficient?

JG: I'm not going to tell you it's efficient. I wasn't here when any of this was decided. The theory at the time was that agencies need the ability to make choices about how to deliver on their mission. Technology is one of the many supporting parts of the infrastructure necessary for an agency to do its business. Therefore, agencies should have the freedom to pick and to choose how they procure that technology. The consultants said putting the service provider in a position where they had to compete with the marketplace would force them to make decisions about the businesses they should be in, the businesses they should ignore, the areas where they could compete more effectively, and the areas they should avoid. They wanted to bring the tenets of entrepreneurship and business operations into a government environment. On the surface, it sounds like a really good idea.

EL: What is the reality of this arrangement?

JG: It's an interesting model. I don't know how well it will work over the long run. There are good things about this model. too.

EL: What have been some of the major projects you've worked on that have been important to the agencies you serve?

JG: The model offers some advantages. It allows the business to make decisions about investments that it believes will payoff. We made an investment in a billing service that the customers would've never supported and the legislature would've said just do it on a spreadsheet. Without this system, we wouldn't have been able to gain the efficiencies we needed in the billing cycle. We made substantial investments in upgrading our data center. We now have newer equipment and can do a better job of controlling energy and connectivity. Again, these things would've never been done had the legislature had something to say about it. The legislature wouldn't have seen this as a useful investment. On the other hand, these investments were business critical for our operations. Those were examples of some of the investments we made independent decisions on.

Because we don't have to go and convince the governor's office and the legislature that something is a good investment, our decision-making process is streamlined somewhat in this environment. It is our operating money, and we can make decisions like a business would.

EL: Can you look at business impact without political wrangling?

JG: There is also going to be some political wrangling in this environment. The opposite site of the coin is when you've had political wrangling in order to get some IT investment approved?

Historically, a few individuals had a heavy hand on the governance process here. It made the environment I walked into very difficult to get cooperation from others.  We've worked very hard to build a very cooperative model among the agencies that are making all of their own IT decisions. We've been able to convince the technology people in some agencies that it's better to work together than to work alone. If we do this, we have a better chance of getting the funding we need, instead of getting the winners and losers' syndrome you often end up with in a government setting for technology.

EL: What agencies work with you directly?

JG: We have 43 participating agencies in our shared services model. These agencies include human services, health, natural resources, and public safety.  The legislature has chosen to do its own thing. The judicial branch has a foot inside the door and buys a number of services from us, but it tends to make all of its decisions independently and doesn't put anything it would classify as business critical here.

El: What is your governance process?

JG: We've tried to build a unique model here. When I arrived here, I spent most of my time looking at what things we really needed to centralize and to govern versus what things we could eliminate. To drive common solutions and reduce expenses, we needed to focus our energy on applications development so that we could get rid of the duplication. Many of the agencies have similar functions. We established a technology governance board comprised of all business people. We have small, medium, and large representatives so that we get a breath of opinions on that board. Using a set of rules, they review all requests for proposals and authorize their issuance. This board also sets standards. Between the two of these functions, we have enough levers to drive common solutions. It meets once a month.

EL: How did the National Association of State CIOs help you to make the switch to the public sector?

JG: I'd say without someone there saying 'this is what's going to happen.' this job would've been more difficult to step back and to make decisions about how I wanted to approach the challenges I faced. I didn't get involved with the National Association of State CIOs until about six months after I had been on the job. When I was president of this organization, I urged new CIOs to read the transition guide because it contains much good information. You really need to be a key part of a professional organization if you want to help people take the most advantage of technology. It was a very worthwhile investment of my time and energy.

EL: Are you able to innovate within your shared services?

JG: We try very hard to be innovative, but the rules around federal funding make it very difficult to be innovative.

EL: What's happening in the State of Iowa because of the nationwide economy?

JG: The government announced a plan to save $76 million in the next year. That's just the beginning. The question is whether or not it will affect IT.

There are some things that aren't clear at this point.

EL: What methodology do you use to evaluate the effectiveness of the business impact for the investments in technology you make?

JG: ROI in a government environment is a very tough thing to do. Everyone has to count beans the same way. That makes it challenging actually to arrive at ROI. With that said, we try to do a ROI calculation. We have the challenge of taking into consideration things that are very difficult to quantify from a cost perspective. Many government IT investments, especially at the state level, have social aspects to them. For example, what is the value of information you make available online relative to fire protection during normal times? How much is the value of having that data available during a time of wild fires? You always have to consider these things in any financial calculations. The public benefit calculation is a little more work to get too. You do things in government, not because they return financial dollars, but they are a social investment.

Some of the things we invest in are so esoteric and thus hard to put your arms around. For example, we have a little program here called School Alerts. School districts can use it to post information on the Web about late starts, early dismissals, and major events at a school building. Citizens can sign up to receive a short message service or email. The press can sign up for an RSS feed. From a government perspective, this service offers no specific public value. It's difficult to do financial calculation on this investment. The social value of this investment is huge.

El: Can you describe an investment that offered real bottom line impact?

JG: Different people see the world through different lenses. We invested in an ERP system that would allow agencies to stop doing things on the side because the old financial system wouldn't do it. It had substantial pure ROI associated with it. Unfortunately, we were unable to get agencies to use the new system to replace their old investments. It's the old you can lead a horse to water, but you can't make it drink. I can put a PC on your desk, but if you like the typewriter, you may never use the PC.

Government has a strong and very self-reinforcing culture. Institutional memory lingers on and changes happens very slowly. Some people might tell you about the things you did 20 years ago. I wasn't here 20 year ago. Some people need to move on. This type of thinking has made it very hard for us to get departments to change their business practices and their financial practices to current ways of doing things.

EL: Have you been able to put things, such as the IT Infrastructure Library, or other quality practices?

JG: We've carried out problem management using ITIL methods. We're currently working on change management. We have a long way to go. When you get budget cuts, it becomes even more difficult to make those investments. We have a process where we establish objectives for each of our services and we spend much time measuring how we're doing. I'm not a big believer in formal quality programs such as Six Sigma.

El: How do you motivate your staff?

JG: Most people are in the public sector because they want to be here. They don't come here for the money.

El: Why did you leave private industry to work for the government?

JG: The company I worked for went through bankruptcy three times. I had the opportunity to leave under a good set of circumstances. I spent a lot of time thinking about what I wanted to do next. I've been in operations. I've turned companies around. I've been in corporate development and business development. I've been in IT and ran an IT shop. I had never worked in the public sector. I wanted a new challenge. I got recruited to do something different than what I ended up doing. This job has been far more fulfilling than I ever expected it to be.

Elizabeth M. Ferrarini - She is a free-lance writer and IT consultant from Boston, Massachusetts. Reach her at elizabethferrarini@yahoo.com.

The posters of Norwegian waterfalls that line the lobby of the $100 million, 100,000-square ft. data center in Oslo have the word hydroelectric printed across them. It's the reason why this data center and others like it are just about 100 percent green. Today, DigiPlex is one of the leading builders, owners, and operators of green data centers.

After a successful career starting and growing the $2 billion McArthurGlen, Europe's largest owner and operator of designer factory outlet malls, Byrne Murphy, an American real estate developer, couldn't take his eyes off the potential the Internet offered. At the end of the dot.com boom, Murphy partnered with The Carlyle Group, an equity investment firm, to buy DigiPlex, a bankrupt Scandinavian engineering company. Together both parties turned DigiPlex into a company that focuses on building data centers, especially ones that are very green. Murphy says, "We have 100 percent equity and no debt."

Enterpriseleadership.org recently sat down with Murphy, who is the president of DigiPlex, to discuss what it takes to build a green data center, what countries are leading the pack, and how the U.S. ranks in the green data center movement. Here is what he had to say:

EL: Where are you currently building data centers?

BM: We're working on sites in the United Kingdom, Germany, and France. The most important element of our data center in Oslo is that our power comes from hydroelectricity, which is 100 percent green. We don't have a fossil fuel driven energy source. Nearly all of the Scandinavian countries, including Iceland and Greenland, use hydroelectricity.

EL: Besides hydroelectricity, what other advantages do these colder climates provide for building green data centers?

BM: Green data centers are of such paramount importance now for reasons we've have all been reading about. Some companies, such as IBM that are trying to take the lead on this, are looking at the Northern European climate just for its hydroelectric power. The fjords of Norway produce plenty of this power. Also, this climate has colder ambient air. About 40 percent of the power consumed in data centers goes for cooling down the hot air generated by the enormous heat created by the server farms. For example, if you can suck in 20 degree F air and use that air to cool down your servers, you can save a lot of power. Furthermore, if you can also drive the power in data centers by electricity generated by dams, waterfalls, and hydroelectricity, you can also have an enormous amount of power. This clean power leaves no carbon footprint.

EL: Is Europe further ahead of the United States when it comes to building green data centers?

BM: For decades, Europe has been further along the green curve than the United States. In U.S., we rely heavily on fossil fuel. Up until the past few years, we've ignored alternative sources of clean fuel. As a result, data centers in the U.S. have continued to soak up large amounts of energy. They leave massive carbon footprints.

In contrast, you wouldn't build a new data center any old way in the UK or in Germany. Heavens forbid, if you try to get a permit for that type of a data center. These countries don't want large carbon footprints. Instead, they want something that is clean.  The UK has a very active secondary carbon trading market where you get credit for being clean. You can even make a deal with someone that has a dirty data center.  It will be interesting to see if UK data centers with large carbon footprints will want to team up with clean data centers in Scandinavia. There is nothing formal on the books today about doing this, but there is much chatter that this could certainly happen.

EL: What green measures are you using for your data centers that aren't located near sources for hydroelectricity?

BM: If I can get a data center inside the London beltway to open within eight months based on certain specs, I'm not going to wait for hydroelectric to find the data center. For these data centers that aren't located near hydroelectric sources, I'm trying to incorporate as much green efficiency into the design, mostly through ambient airway uptake. The climates I'm looking at are far enough north in latitude where a good number of weeks per year are 35 degree F or less outside. As a result, we can suck in the cold air rather than having to run generators for heating, ventilation, and air conditioning systems. Specifically, we push air through from inside rather than re-cooling hot air which is 84 degree F. We put the air through a cool water system and it comes out at 43 degrees F. We don't have to spend all that energy if we suck in outside air that is already 43 degrees F. We use the basic guts of a HVAC system, but the ductwork we've added points directly outside to suck in the cold air. Once you have a HVAC system in place, the ductwork isn't a major addition.

EL: Are you planning to build data centers in the United States?

BM: Yes, but the question is when. We have a skewed supply and demand metric. The Internet continues to grow and grow. In fact, we grossly underestimated the Internet growth projection we made several years ago for the consumption of data. For example, mobile devices, such as the Smartphone and the iPhone, soak up more than two percent of Internet bandwidth just by themselves. These devices didn't exist 15 months ago. Youtube.com now soaks about 13 Percent of Internet bandwidth and that figures keeps growing. And Youtube.com didn't exist two years ago. We can cite plenty of other examples.

All this demand on the Internet has to go somewhere. If you're going to fly an airplane, you're going to need an airport. If you're going to have a virtual world, you're going to need a data center. The problem is that data centers are enormously capital intensive to build. Before you even put in the equipment, it's $1,200 per square ft. to construct a data center. That's very expensive compared to building a normal office building, which could range from $300 a square ft. to $400 a square ft. depending upon where you are.

You have an enormous need for these data centers just when you have a capital crunch. So where is the money going to come from? There is a real need for data centers and thus the problem associated with building them.  It's one that isn't easily solved. The very smart money is going to press on with data center development anyway. For example, Digital Realty, the largest data center developer in the world, is trying to press on anyway, but the company has it own set of issues. It's a very difficult time. To this end, you don't see huge numbers of new data centers just being built any old way all across the U.S. Why? There is almost no debt, even the equity is very hard to find, but yet the demand is there for it.

EL: Can we really build green data centers in the United States?

BM:  The question is 'what do you consider green?' Yes, you can build one, but whose definition of green are you talking about? The answer is this: The data centers being built in the U.S. are greener than those built three years or four years ago. On the other hand, very few of these data centers are as green as some of the ones in Europe. We just don't have the hydroelectric power here. Green data centers are being built in the Pacific Northwest by google.com and amazon.com. Neither company wants to talk about them for security reasons. Amazon.com is building data centers next to rivers to have a source of green power. I can't give out specifications about these data centers because amazon.com won't release any information.

EL: If you wanted to build a green data center in the U.S., what challenges would do you face?

BM: The first obstacle is to find a site that is located next to a water source to make hydroelectricity and that has enough fiber somewhere nearby.  Most important, can you get all of the appropriate zoning in place in time to build? The demand is very high for that. Getting the combination of a hydroelectric location and plenty of fiber exists in many places, but not in all places. If you're in a really rural location, you'll need backbone fiber. How expensive is it to get there? Combined with assembly with the zoning and the very important construction financing  -- debt and equity in a short time horizon -- can make it all feasible. Financing, the last part of the process, might be daunting at the moment. That should change, but the question is when?

EL: Can you power a data center by wind?

BM: Yes, but not a very big one. If you have a large data center, you'd need a huge wind farm. Everybody likes to be green. Any population, however, doesn't like the look or sound of wind farms.  It sounds like you have an airplane behind you the entire time. That's why Ted Kennedy and Walter Cronkite have been opposing wind farm sites on Cape Cod and Martha's Vineyard.  Some folks advocate being green until it hits their backyard.

EL: Would you recommend that a European company or a U.S. company with a European operation build a data center outside say in Norway?

BM: It might be a good idea if you have a European-based business already. On the one hand, it would be a challenge to convince a London-based company to move its primary data center to Norway. On the other hand, you need to answer how the company is going to use the data center. If you're a trading operation, you need milliseconds between when someone pushes a button and the trade happens. If the fiber is too long and too far away from the data center, you run the risk that the fiber can be cut. The further away your data center is from the information being pushed out, you run into latency issues about the quality of fiber. If you're backing up data, then it might make sense to use a data center in another country.

EL: What does the Asian market look like for building data centers? Are they concerned about going green?

BM: Asia offers a huge opportunity for building data centers. In fact, this area doesn't have many data centers. As a result, you can drive the demand there. The very large banks and trading floors need data centers. They need more of them. The big corporations expanding there need more of them. Although it's a huge opportunity for building data centers, being green isn't so terribly important in East Asia. It's growing in importance, but not there yet.

EL:  How about the Middle East and South America?

BM: The Middle East has a huge demand for data centers. Places like Dubai build cities all at once, and these cities need power. Anything that needs also power needs a data center. Because the Middle East countries create and profit from fossil fuels, they aren't concerned about green data centers. It's just not profitable to go in this direction.

As for South America, I'm not well versed on the depth of the market for data centers there. I do know that Brazil has a need for data centers and also has big power generators there.

Canada is a good, but small market for building green data centers. You'll get all the support you'll need because the Canadian people and the Canadian government understand the need to be green.

EL: Many companies are moving to server virtualization as a way to make their data centers greener. What's your feeling about this?

BM: When it comes to improving your green factor, we haven't seen a gain changing process thus far to say 'here is the great secret.' It makes sense to change and to reduce dramatically the amount of power per server. IBM is trying to get way out there. In the meantime, data center demand keeps growing, and we're just beginning to figure how to keep up with that growth and how to do it while reducing power consumption. As a data center builder and owner, I don't want to be perceived as a power-consuming hog.

EL: Have you talked to people in financial services about having greener data centers?

BM: Being green is on all corporate agendas. It's getting into board rooms. Companies like to be green when and where they can just as long as it's not increasing their costs by more than two percent here and there. If you can make a case for it, companies would rather be green than not be green.

Elizabeth M. Ferrarini - She is a free-lance writer and IT consultant from Boston, Massachusetts. Reach her at elizabethferrarini@yahoo.com.