Just about every IT professional at some point in his or her career has run into an IT disaster based on either having to do more with way less, or poor decisions made by senior management. Charles Nault, founder and chair of Atrion, a New England-based systems integrator, can sympathize with these IT professionals. Likewise, during the past 20 years his company has pitched, some of the senior executives who have caused these IT problems for one reason or another. He says that IT problems are more rampant in small to medium -size businesses where CEOs do not understand the strategic value of IT.  He adds that these types of companies are more vulnerable to network downtime than large enterprise companies. Nault, rather than dwell upon what went wrong where, has written a book called Risk-Free Technology: How Small to Medium Businesses Can Stem Huge Losses from Poorly Performing IT Systems.

Enterpriseleadership.org sat down with Nault to discuss some of the concepts in his book. Here is what he said:

EL. Can you briefly describe Atrion's business model? BTW, how do you market your services?

CN. We think of ourselves as a high-end systems integrator. Our business model includes going into companies and establishing a relationship with a C-level executive, preferably the CEO or the COO. Usually, we just see the CIO or an IT director. First, we want to understand everything we can about the company, especially what it does, how it does it, and what tools will help it do better.

When it comes to getting new business, we hired a marketing company that sets up C-level appointments for us. We found that it is easier to start at the top and work down the organizational ladder. The marketing firm gets paid if I sit down with the appropriate executive. So far, it has worked well for us.

EL. Can you briefly talk about several IT disasters you have run into?

CN. We worked with a company that had a good IT team managed by a great IT director. This person totally revamped the network, making it IP based. The company eventually hired a CIO who had his own set of ideas. The CIO and the IT director butted heads with each other. The CIO fired the IT director. Once this happened, the IT staff had rampant turnover. Because the CIO did not like dealing with us, he gave us the boot too.

We came across a multi-billion dollar with a pieced-together network. Senior management had a hands-off approach to IT, giving full IT responsibility to the new CIO. This individual had two flaws - incompetent and mostly self-taught about IT. He thought he did the company a favor by buying inexpensive equipment and solutions, and making the network run at the lowest cost possible. That is the so-called value he brought to the company. He failed to do any planning.

We came across a hospital CIO whose senior administrators hailed him as its hero for keeping the cost of the new network as low as possible. This CIO apparently went with the lowest bidder for each project. He really did not care about the vendor's credibility, as long as the price was right. Eventually, some of our partners and friendly competitors said they no longer wanted to deal with this CIO because his network was a mess. We tried to sell this CIO some point solutions to correct a few problems, but he would not listen. The CIO's successor had to rebuild the network from scratch. Ironically, the hospital's senior administrators still hold the former CIO in high esteem.

EL. The title of your book is Risk-Free Technology. It is possible to achieve this?

CN. The idea of risk-free technology can come about if IT organizations strive to build what I call utility grade networks. This type of network offers peak performance and little, if any, downtime.  Building this network does not happen overnight. You first need to build a rock-solid network infrastructure with enough redundancy and reliability, the appropriate backup strategies, proper documentation, and well-trained and adequate staff. That is just the beginning. You also need support from senior management. You cannot align an ineffective network with the needs of your business.

EL. Do small to medium-size companies invest adequately in their network infrastructure?

CN. Some do. Here is the issue. Some companies have good IT organizations staffed with people who know that they are doing. They submit propositions and proposals. For example, they do their homework and then propose a good solid architecture.  Unfortunately, someone at the top gets the pen out and starts trimming the IT budget. Before you know it, the IT organization has no choice but to live with an inadequate budget and resources. Eventually senior management gets surprised and angered when the network fails to live up to their expectations. In this type of company, IT management does a good job of planning but often becomes blindsided by slashed projects or shelved projects. In the end, the IT organization might give up on system redundancy or settle for an inadequate service contract.

EL. What motivated you to write this book?

CN. When I met with the multi-billion dollar company with the pieced together network, I said, 'The CEO cannot possibly know what type of a shoestring his network operates on. If he did, he would not sleep at night.' I also knew it was not my place to call the CEO and throw his CIO under the bus. That scenario became my original motivation. As I started talking with CIOs and IT managers who worked for our customers, I learned that they shared a common frustration: Senior executives, especially CEOs, do not want to know anything except how much does it cost and how can I cut costs. IT organizations in small to medium-size companies suffer from a lack of realistic support from senior management. My other motivation for writing the book included being a champion for these IT professionals who did not get what they needed to do a job, and at the same time, give a wakeup call to those CEOs who paid lip service to IT, not realizing how it could make or break an organization.

EL. Will a technology such as cloud computing eliminate some of the networking problems you mention in the book?

CN.  It has the potential to do that. If an organization can use hosted applications and those applications come from a solid organization with a secure configuration, then why not. It can reduce some of the problems associated with the server layer and desktop layer. Few companies will be able to relegate all of their applications to the cloud. Even if they could, they would still need a utility grade networking. For example, if your Internet configuration does not include redundant hardware, redundant circuits, and automatic failover, then you will have more trouble than if you had servers on your location. It could become a double edge sword. If you do it right, cloud computing has a ton of potential.

EL. Which parts of the IT Infrastructure Library (ITIL) are your customers moving towards?

CN. A lag times exist between when you finish the book and the publication date.  Much has changed. I wrote my comments on ITIL during the introduction of version 3 of ITIL. Everyone said that this ITIL version was more condensed and well suited to small to medium-size businesses. Because it was pitched as IT as a service, many of our customers, especially those governed by regulations such as HIPPA and Sarbanes Oxley, peeked under the ITIL v.3 hood. Some of these customers even did version 3 training. Many of our customers have postponed moving forward with version 3 implementations because of the expense. In addition to the training, they usually have the cost of an ITIL consulting firm. In fact, I know of ITIL consulting firms that will not work with small to medium-size companies.

EL. What about qualities practices? Do you see Six Sigma or COBIT in your marketplace?

CN. I see COBIT more than anything else, even more than ITIL. I, however, tend to see COBIT in larger organizations. I have not seen much of COBIT in smaller organizations. I have seen it at some banking institutions because they need to inject it into their Sarbanes Oxley strategy. If you are financial institution, you need to be compliant with this regulation. You need to look for some type of a documented strategy that enables you to carry out those best practices.

EL. Can you discuss how you helped a large company and why it brought you in?

CN. I have a presentation called taming the IT beast that touches on a large insurance company with component IT people. Unfortunately, senior management constantly squeezed these folks for money. They had to look first at what equipment cost, not what it did. They did not have adequate staff. Most of all, they did a poor job of writing documentation. We dealt with these people on the fringe. We provided some remote access multiprotocol servers into their network. At the time, we did not have a close working relationship with this organization.

One day, we got a frantic call that the company's network went down. Business had stopped completely. No one could log into the network. We did not have much access to the network, except with the remote solution we provided. At the time, this company had many dedicated connections. We tried to do some remote troubleshooting, but we did not get anywhere. At noon, the senior management team sent everyone home and closed the business. Thousands of agents around the country could not do anything that day. We eventually got the problem solved late into that night. Because we solved this problem, the company called us in to do a more formal presentation of our services. The company wanted to know specifically how it could avoid this in the future. We began with 'here is your business today. We need to understand what everyone does each day. This information will get us to the point where we can make the company's IT infrastructure rock solid.' We did that. To this day, this company has not had an unplanned network outage.

CN. What takeaways would you give CIOs and CEOs about the business impact of IT versus just keeping the lights on?

EL.  I advocate that companies pull together a technology advisory committee. We did this at Atrion. It involves getting a member of the senior management team to sit at the IT table.  You need to have senior members from IT, as well as leaders from the business units. You also need to have a cross-section of customers, both internal and external, sitting at this table. No way can you isolate yourself from management. If senior management does not want to show up, then you need to work a little harder. Perhaps, you need to do a better job of learning to speak the language of the business.  Do you really know what the CEO and CFO consider important? Ask to sit in on the meetings other departments have.  Observe what people say; refrain from talking about IT. Learn all about the business, both from both an internal and external market perspective. Acquiring this type of knowledge will help you to know how IT can have a better impact on the business objective.

Remember, IT is nothing more than a means to an ends. You need to learn what the ends are. Finally, you need to have a razor focus on effective networking. For example, in my book I reference Cisco's study about people who try to do alignment with networks that are not utility grade. The study found that you create more problems that way. Making the network infrastructure rock solid includes an initial investment in redundancy, appropriate backup strategies, and the proper documentation. Once you make this investment, you will end up cutting IT costs in the long run. You will also gain more efficiency.

EL. What are you looking for in IT talent?

CN.  We want IT people who possess integrity and humility. I say this because they must know how to function as part of a team environment. We have made the mistake of hiring people with a tremendous amount of technical expertise, including the ego to go with it. These characteristics can prove devastating to the entire team. We can spot these people right away. Ego does not work. Next, we look for the core competencies. The IT professional has given way to specialties, such as networking or security. To this end, we look for people with current certifications in specific areas of IT, such as Cisco or Microsoft.

We also look for a specialty area, such as security, routing and switching, or storage. We offer an on-going program so our IT professionals can keep their certifications current.  Some IT folks function as jacks of all trades. We prefer people who have mastered a specific area. We also look for people who have exceptional communication skills. They need to be able to talk in technical terms to their peers and in plain English to non-technical folks. The latter capability is harder one to find.

ElizabethFerrarini is a technology writer from Boston, MA. Reach her at elizabethferrarini@yahoo.com.

These days generics are the hottest growth market in the pharmaceutical industry. And Ranbaxy Laboratories Limited ranks as one of the eighth largest generics producers in the world. With annual revenue of about $1.7 billion, Ranbaxy offers generic drugs that cover the majority of chronic and acute segments. The company sells in 125 countries and has a physical presence in 49 countries. It also distributes about 80 percent of its products through the three top pharmaceutical distributors: AmerisourceBergen, Cardinal Health, and McKesson. Emphasis on new drug research into areas such as metabolic diseases, oncology, and urology help distinguish Ranbaxy from its global competitors.

Several years ago Ranbaxy underwent a business transformation to do a better job of carrying out its mission deliver value everyday to customers. This transformation included making sizable technology investments so Ranbaxy could both accelerate and lower the cost of bringing new products to market, and streamline the process of developing new chemicals and new chemical entities. The results paid off for Ranbaxy. In early 2009 Ranbaxy became an operating company of Daiichi Sankyo, an $8 billion global manufacturer of branded pharmaceuticals and the 15th largest company in this marketplace.

Enterpriseleadership.org recently sat down with David Briskman, Ranbaxy's chief information officer, to talk about the strategic integration of technology to better enable the company's key business processes.

EL. Can you describe the structure of your technology organization?

DB. We have a centralized technology organization comprised of both internal technology staff members and outsource partners in about 30 countries. Most of our applications, technology support, and our governance process follow a centralized model. Our key technology areas include the following research and development, drug discovery, and manufacturing technology.

EL. How will your business model change because of the Daiichi Sankyo relationship?

DB. Daiichi Sankyo ranks number 15 globally in branded drugs. We plan to follow a hybrid global business model that combines generics and the branded drug globally.  Our growth opportunities will include leveraging our capabilities with those of our parent.

EL. I read that your CEO wants to use technology to drive business transformation. Can you describe the areas where technology provides the most strategic value to the company?

DB. Developing a molecule that falls into the multimillion-dollar drug segment, and keeping that intellectual property for years have driven the traditional branded drug market. In the generic market, you have to be very efficient as possible if you want your business to thrive and to be successful. It is a highly competitive business, much like private label, consumer packaged goods. You have to produce a very good basket of goods or else you will not be successful. For us to accomplish this goal, we depend of technology to support our three key business cycles. One key cycle includes moving the product form the research and development cycle to the filing and registration and finally delivery to a particular market.  Our supply chain, another cycle, needs to be incredibly efficient, given our product diversity.

Our third cycle looks at how we run our business. For example, we market directly to doctors in India where customer intimacy is less of a focus. For the rest of the world, our business growth opportunities depend consistently on delivering a good quality selection of diverse products.

EL. Can you describe some of the key technology investments you made to improve the business cycles you mentioned?

DB. We have moved our research and development for new products from a manual process to a highly automated one. We submit all documentation electronically to the U.S. regulatory authority using a specific format. We are one of the early adopters on that technology. It has enabled us to obtain faster approvals on the submissions and subsequently to bring faster products to market. We also have deployed our global regulatory database that allows for our tracking, monitoring, and managing of all our regulatory submissions. This database has facilitated our ability to look at our product suite in a more meaningful way. Before this database, we had to figure out what we registered across all of the products in all of our markets.

We invested very heavily in business intelligence and our SAP supply chain suite. In fact, a variety of our business intelligence initiatives focus on enabling the business to respond better to customer demand. Some of those areas include everything from mobile phone-based automation tools in India to the different data mining, and dashboard tools.

EL. What changes did you make to your enterprise architecture for some of the things you mentioned?

DB. Because we have to be efficient, we prefer not to dabble in lots of different technologies. We have a different architecture and set of applications in research and development. Our enterprise architecture, however, revolves around our supply chain backbone and our Microsoft capabilities. We try to leverage these two platforms.  Our current enterprise architecture is less than ideal on the sales force automation front.

EL. Can you describe how you are handling sales force automation to make your organization efficient?

DB. We have 17 different sales force automation systems. That might sound like an inefficient number of systems. On the other hand, this number of systems complements the way we operate geographically. We have different business models for certain countries. Most of the business advantage does not come from the architecture of a given system, but from the local market intelligence available on those sales force automation systems. Our global studies show that we are far more effective growing our business with our regional and local players versus an enterprise approach to sale force automation.

EL.What is your governance process for making these investments?

DB. We have both formal and informal governance for making technology investments.  Our formal governance process is very straightforward. I sit on both the budget committee and the operating committee.

Each year we go through a very rigorous assessment based on a value framework we adopted from Gartner. It accesses all of the different technology investments to do a multi-cycle review process.

Throughout the year we have councils comprised of leaders from the different business areas. These councils also include my direct reports and me. We meet quarterly to assess the amount of progress we have made against the specific plan. These business councils provide a formal structure for what we must work on, along with any unexpected projects.  Depending on the region and business function, a business council might have as many as 25 people sitting around the board room to an informal gathering of five people.

Most technology projects have steering teams, which comprise our informal governance process. These teams include mostly technology professionals and some representatives from the business units. Together they work with the different business leaders to understand their priorities, vision, and strategies beyond that quarter.

EL. How will your governance process change because of Daiichi Sankyo?

DB. The governance model going will grow because of our relationship with Daiichi Sankyo. We have made most of the strategic investments and put in place the platforms that enable our generic business to run efficiently on a global basis. The exciting opportunity for me is the ability to extend that efficiency to our parent.

EL. Do you link technology to new sources of revenues, new products, or new improved processes?

DB. We rank all of our technology investments on this value framework. The framework's four areas include the following: financial metrics such as ROI, strategic implementation, compliance, and feasibility. The last one involves the ability of our business to take advantage of an implementation.

I produce an annual report that quantifies the business value associated with each investment. We have been through several cycles on this. In the first year we used this value framework, we focused on ROI. I found that we spent too much time trying to quantify dollar values where we should have been looking at qualitative capabilities.

We can say that our new supply chain platform drove our inventory reduction, but other factors contributed to this reduction.  We make sure we can have quantifiable metrics associated with each project. For example, pharmacovigilance is the compliance process for tracking adverse events in drugs used by patients. We do not put a financial benefit on that system per se, but we have started to improve the timeliness of our regulatory reporting.

By focusing on the metrics directly attributable to the investments, we have improved the overall perception of the investment's value. For example, for many of the dashboard and collaboration platforms we have set up, we measure efficiency factors, such as how many reports we run and how many active users we have. We prefer to do it this way rather than this particular report helped us improve revenue by so much. That type of process leads to much interpretative discussions and in turn does not lend credibility to technology. By focusing on the business capabilities we provide, we will derive a perceived value from the knowledge we provide with those capabilities.

EL. How integrated is technology into your business?

DB. It is integrated into the business on several levels - as a centrally managed function and as a strategic driver. We have moved from the perception of being help desk order takers to playing a strategic role in the business. We have become more proactive in our ability to propose business changes and technology investments that will improve the business.

This year my team is leading a project sponsored by our CFO to streamline the financial close process. We are in partnership mode on this project. The same goes of our sales force automation and CRM efforts. We have taken a more strategic stance in bringing solutions to the business and suggesting changes to business operations. For example, we worked on how we could improve our customer management process in India.

EL. What is your process for reviewing the corporate strategy? How will change because of the Daiichi Sankyo relationship?

DB. We have been on a three-year cycle for reviewing and setting our corporate strategy. Our relationship with Daiichi Sankyo, however, will influence how we look at our corporate strategy. I told my team that we do not have to sit down every few years and figure out our corporate strategy and alignment for generics. Instead, we need to get as many good quality products to market and to make sure we deliver them in a timely and efficient fashion. We also have to accomplish this in a compliant and profitable manner.

The generic drug industry is very simple. We support the industry's best practice for new drug development. As our business model evolves with Daiichi Sankyo, we will move forward to leverage our cost advantage in the global branded pharmaceutical market too. Many of our competitors have a federated business model versus our forthcoming centrally controlled business model.

EL. How has the global economy affected your business?

DB. Before 2009, we had been growing at 12 percent per year. Our growth rate is now about six percent. The global economic downturn affects about 10 percent of our business. We have refocused our efforts on becoming more efficient by enabling the appropriate technology and business process to achieve productivity. It has also helped us to leverage and to stick to carrying out more standard policies and procedures that facilitate productivity. For example, we rolled out unified communications and IP telephony to the increase the use of collaboration technologies.

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

Most CIOs accept a new position on the premise they will create an IT organization that will bring great value to the business. Some CIOs, however, find themselves maintaining the IT status quo by keeping costs under control and systems running.  Other CIOs struggle to make important improvements despite shrinking budgets and lack of executive management support. And then some CIOs manage to overcome corporate challenges to bring about a major IT organizational transformation.

John Carrow, the former global CIO of Unisys, likes to think of himself as someone who thrives on delivering the business impact of IT. In fact, during his 30-year IT career, he played a major role in four IT business transformations, including  10 years as the global CIO for Unisys, and four years as the CIO for the City of Philadelphia. Carrow’s IT experience enabled him to move out of the IT role to become Unisys’ vice president of strategic client development, where he worked on developing key accounts and client relationships for the company. He left Unisys to start Carrow Consulting, a strategic technology advisory firm to help small and mid-size companies reset their strategy, and gain alignment with their executive team or their workforce in order to execute a strategy.

Enterpriseleadership.org recently sat down with Carrow to discuss how he handled two major IT business transformations, and dealt with the politics of being a CIO. Here is what he had to say:

EL. How did you create business impact of IT as a public sector CIO?

JC. When I joined the City of Philadelphia in 1993, it was near bankruptcy, had very little automation, and a new mayor, who happens to be the current governor of Pennsylvania. His mission included changing the direction of the City so it operated as a business with a good financial foundation. When I interviewed for the job, I asked the mayor to define his expectations for IT. He replied, ‘I don’t know much about our technology, except that I don’t think it is very good. I expect you to build a monument on the side of a cliff with primitive tools and no money.’ I took the job on that premise. I measured the impact of IT during the four years I was there. We infused a tremendous amount of automation, that not only made things more efficient, but also pulled in more revenue for the City which helped turn it around.  When I started as CIO, we had 1,000 computer users out of a workforce of 25,000. When I left, we had 16,000 computer users who spanned just about every department.

EL. What challenges did you face creating business impact of IT at Unisys?

JC. When I joined Unisys in 1998, it was a $7 billion traditional hardware supplier of technology to the business community. Because hardware was becoming a commodity, the new CEO decided to change the company’s direction to become a service-oriented business, and to have the entire company operate as one entity or one business unit. In the past, we had multiple business units doing their own thing.  He wanted to use technology as the lever to help transform the company. We changed many things, but we centralized the IT organization. We consolidated 56 data centers around the world to one. We rolled out Oracle for ERP, Peoplesoft for HR and Seibel for sales force automation. We collapsed the number of systems we supported by 50 percent. We lowered the overall cost of IT by 40 percent. We standardized and simplified processes across the globe. During my 10-year road trip, I produced many measurements that showed the business impact of IT.

EL. How did you communicate business impact when you were at Unisys?

JC. Because we had a global workforce of more than 35,000 employees, we relied heavily on top-level communications through the management team. We had many all-hands meetings, and Web-based meetings. We had the luxury of broadcast TV capabilities.

EL. Were you at the board of directors meetings?

JC. Occasionally! When we kicked off the transformation, both the CFO and I attended several board meetings where we presented our case for the investments we needed to make. We attended periodic meetings to report our progress. After September 111, we gave the board regular updates about security issues.

EL. Was the business impact of IT ever communicated to stockholders?

JC. Yes! It was communicated to investors as part of the overall going-forward strategy of the company to become a service business. These were underlying transformation toolsets that were being put in place.

EL. Did you provide this information?

JC. Yes!

EL. How did you measure the business impact of IT? Were there certain criteria you looked for?

JC. The most important aspect of it was the financial cost savings associated with the overall transformation. We had forecasted that a sheer reduction of infrastructure, especially the number of systems, would produce a cost savings. We also said that we would put in place a central procurement activity supported by technology. There would be cost savings by reducing the spend we had with fewer suppliers. We reduced 19 different procurement systems to one. We also simplified the company’s multiple financial systems to a single instance financial system with a data warehouse reporting capability. It would reduce the cost of the accounting activities.

EL. How did you track those cost savings?

JC. We benchmarked ourselves on all of these functions over time. That gave us a pretty good indicator of the costs from the first day we started. Periodically along the way we did two or three benchmarks with the same firm to make sure we made progress in the right direction. We used the Hackett Group.

EL. Have you gotten into the politics of being a CIO? That is a subject few CIOs talk about.

JC. How do you avoid that as a CIO? You have politics starting with who you report to. Are you getting the visibility you deserve so you can make a difference trying to bring about change in the organization? For example, I was brought in as a technical expert for the City of Philadelphia. People respected that. The more people my team trained to use computers, the more the politics started to disappear.

Unisys had its own political challenges. I was a technical expert inside of a company full of technical experts. I used to joke that I had 35,000 deputy CIOs all of whom said what direction we should go in. There’s one level of politics. Another level of politics was the relationship inside of the executive committee. How do you get your voice heard? I worked directly for the CFO. I did not like that reporting relationship, but that’s the way it was. Some times it was difficult to get my voice heard especially when another person filtered it. 

EL. You stayed at Unisys a long time? Apparently you found a way to make this work?

JC. We made significant progress. Whenever you make progress with difficult challenges, you feel good about that, and you feel good about what you are doing.

EL. Were you represented on the executive team or did CFO represent your point of view?

JC. It was the latter. I dealt with all of the members of the executive team individually. I would have liked more opportunities to engage with them collectively. I wasn’t unique in wanting to sit at the table. As my confidence level grew over time, I quit worrying about who I reported to, but getting the job done in the manner people expected.

EL. As far as you are concerned the CIO shouldn’t worry about who he or she reports to?

JC. I have heard some CIOs say that they would never take a position reporting to a CFO. I have even felt that way in my life. When I was the CIO at Unisys, I knew I had the support of top-level management, especially the CEO and his executive team. In that case, who you report to doesn’t make a difference. When that support starts to wax and wane, you might not continue to get the right level of support, say, from the CFO you report to. That’s when you have something to worry about.

EL. What methodology is your new consulting organization using to help companies receive a better payback from their technology investments?

JC. I have developed a paradigm based on the transformation I have carried out. I call it the SAGE factor, which stands for strategy, alignment, governance, and execution.

We talk about each of these in isolation. You need a strategy that aligns with the business.  A governance process has to be associated with that strategy in order for you to achieve execution. If you don’t have the first three set up correctly, you really cannot achieve a successful execution. Technology is a piece of SAGE, but it goes beyond technology. At the end of the day, business strategy is what matters.  IT is an enabler, but it is really the business focus that is important.

EL. Can you describe how you helped one particular company?

JC. We worked with a business process outsourcing company that has been a backroom provider of high quality services. The company came to us and said it wanted to change and go after a public sector market. We helped them identify the solution sets it can take to market and how it can best do that. Working together, we built those solution areas.

We worked with a small printing company that has a software development arm. It is very innovative company. This company asked us how it could get its products to market. We have been helping them layout the products, test marketing them, and develop a go-to-market program for those products. 

EL. Given this economy, what are doing to get clients?

JC. At Unisys, I was on the IT audit committee. We worked with the Information Systems Audit and Control Association to implement the COBIT framework not only in IT, but in our overall governance structure.  I developed a good relationship with Ernest & Young and KPMG. When I left Unisys to set up my own consulting practice, both of these organizations referred me to clients who needed my expertise.

EL. What’s next for Carrow Consulting?

JC. I am about to work on a large transformation project within the federal government. That’s all I can say about it. My other goal is to write about the transformations I have been a part of.  What things make a transformation work? What barriers will you encounter? What causes them not to work well? It all starts at the top.

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

In 1974 when Dave Abney joined UPS part-time as a college student loading and unloading packages, the brown uniformed UPS drivers and the clean brown UPS package cars represented the company's brand.  Managers and executives used slide rulers and calculators to handle many office functions. Many things at UPS have changed in 35 years. Abney has held many positions throughout his UPS career, from division manager in New Jersey to his current position as chief operating officer. The brown uniformed UPS drivers and the clean UPS package cars still play a key liaison role between customers and UPS. Today, conserving vehicle fuel and driver time have been critical issues for UPS. Meanwhile, UPS' initial public offering in 1999 gave the company funds to grow from being a shipping company to becoming a $50 billion global transportation and provider of third-party logistics services. UPS has leveraged its customer data, and a customer-based network of integrated systems to offer new package delivery services, to make drivers more efficient, and to pursue new business opportunities.

Enterpriseleadership.org recently sat down with Abney to discuss the UPS' disciplined approach to operational efficiencies, technology spending, and new business development.  Here is what he had to say:

EL. What are you doing to make your drivers more productive and your vehicles more energy efficient?

DA. What you mentioned has been very central to our operational excellence. We have been demonstrating it since 1907. Because fuel is a big part of our fleet and our costs, we have always focused on conservation. Any mile that we do not drive saves fuel and does not cause a carbon footprint. We have probably got as good at that as just about anyone.

Our network is very different from some of our competitors. We do not send different drivers out to take care of air, ground, and residential. We handle everything on one network. This method provides much visible efficiency. Some small initiatives also contribute to our efficiency. For example, we have received much publicity for our no-left-turn policy. In fact, some of my neighbors and friends have asked me how they can get to work without making left turns. Going right or what we call loop dispatch is an efficient way to run our network. It also saves much time especially in heavy traffic. You may think a couple of left turns would not make a difference. On the other hand, if we talk about 90,000 people driving their vehicles all day long, those fuel savings and time savings translate to meaningful numbers.

Our package flow technology allows us to dispatch in efficient ways. Before the packages ever get to an operation, we know what is coming in and can dispatch based on that. In the past without technology, we had to wait until we got the packages, split the packages up, and them assign them to the different package cars. If things did not make sense, we often had to make changes at the last minute and just move packages around. Our package flow technology alone has allowed us to save 30 million miles, three million gallons of fuels, and 32,000 tons of carbon emissions.

You may have read about our alternative fuel vehicles. By the end of this year, we will have more than 2,200. We have traveled almost 200 million miles with these vehicles. We are using all different types of technologies -- hydraulic hybrids that operate off the breaking power. We also have electric hybrid cells. I cannot say if that one particular example fits all conditions at this point. The hydraulic hybrid seems to work well in metro areas where you have many stops and starts. We look at different technologies for the different situations.

EL. What technology do you use to map no-left-turn routes for drivers?

DA. We have installed telematics technology on about 10,000 of our vehicles. Our no-left-turn technology and our package flow technology consist of knowing where the packages are going. Drivers do not use a GPS device that alerts then to the route as they drive. Instead, each driver follows a pre-designated route based on our technology. The dynamic dispatch we are working on would use GPS with factors that might happen mid-route.

EL. Are you leveraging technology to make your customers operate more efficiently?

DA. Absolutely! Until 1998, we focused on running the tightest ship in the shipping industry. We were the best at small package delivery. We still are. As the world started to change, we decided to overhaul our business strategy to enable global commerce to meet our customers' needs. World trade was starting to development, emerging countries were starting to play roles in those trade lanes, and supply chains were becoming longer and more complex.

The paperless invoice is a prime example of how technology has affected our customers. It allows them to ship packages around the world, -- across country borders  -- without having to complete the complex paper invoices, or keep dozens of duplicate copies. In the past, if those copies got lost of if you did not provide complete information, your package could gets held up at the borders. The electronic capture of information eliminates many errors. Because we transmit the information so the country receives it in advance of the package, we provide a smoother transition across the country border.

EL. Is UPS getting into new businesses that will complement package delivery?

DA. Yes, that is part of our new strategy in enabling global commerce.  Since 1998, many things have happened. The funds from our 1999 initial public offering have allowed us to invest in more than 40 acquisitions. Some of these acquisitions have given us brokerage capabilities, such as freight forwarding. For example, we acquired one of the largest third-party logistic providers in the world. It can start from the very beginning of the process by helping customer to manage their transportation needs. It can manage raw goods coming in-bound, and run the warehouse, taking care of distribution.  It could also move all of a customer's transportation needs either through our network or via a shipping line. While we do not own any ships, we would provide all of the information along with the packages to the shipping lines.

EL. Would you assemble a product and then package it for shipping, say to retail stores?

DA. Yes, we do the packaging of computers and other product lines. We even go one step further for our customers. UPS employees repair Toshiba laptops. If your Toshiba laptop malfunctions while you are traveling, you can drop it off at a UPS facility or a UPS store. We will pack it up and send it to our hub in Louisville, Kentucky, where we will do the repairs. We will then pack it and deliver it to your hotel. No one other than a UPS employee touches your laptop during the entire process which takes anywhere from 28 hours to 48 hours, depending on the repair.

EL. What impact has the economic downturn had on some of these businesses?

DA. The economic downtown has affected our customers in some industries, such as retail, more than others. We live in a time that many of us have never seen before. We have a decline in industrial production and a reduction in consumer spending. Like many businesses, we need to make good decisions, not only about reducing costs, but also about how to grow our revenue in these tough times. Being a 103-year old company has some advantages. We know how to manage during uncertain times. We survived the depression, several world wars, and countless economic cycles. We know how to manage change. We have just to make sure we feel very comfortable about it.

We have a responsibility to maintain our financial soundness. We are in a great position to do that. We have to be prudent to hold ourselves accountable. We feel that there are opportunities out there. We know we can take advantage of those opportunities. If we see a business that would answer the needs of our customers, we can invest in it.

EL. Your company leverages much technology to be in different businesses.  and to be really efficient and agile. How do you make technology investment decisions?

DA. First, we measure everything. We use this information to decide where we need to implement technology and where we need to invest in the business. We constantly monitor trade lane information, and the needs of our customers. We then look to see where we need to make investments and answer the needs of our customers. We invest about one billion dollar a year in technology. We look at what the project will cost, what type of a return we might get, and how it will take us to get a return on that investment.

EL. What is the governance process for looking at these capital investments?

DA. We have a governance process around any major investment that we would do. It starts with our management committee, which is the way we manage our business. The committee consists of the CEO, me, and about nine other people. Our people do the analysis to see if the investment would give us the return we need and if it will answer our customers' needs. We then decide whether or not to approve the investment.

EL. How often do you review your business strategy?

DA. It is absolutely an ongoing process. At one time, you could look at our strategy three to five years out. That's not good enough today because the world keeps changing. Our executive level strategy steering committee meets monthly to talk about where we are, where we need to go, how we see the markets changing, and how do we react to those changes.

EL. Have you invested additional dollars in analytics?

DA. We have invested in analytics to ensure sure that we have the capacity to analyze much information, and that we can funnel it to where we need to make our improvements. Analytics is something we have been doing since I got here 35 years old. Back then we used slide rulers and calculators.

EL. Do you have a formal methodology for looking at capital investments in technology?

DA. Yes. We have a committee that meets monthly. We have a set format for how we look at this information, especially how it shows the rate of return, the cost of the project, and how quickly we think we can get a return on that investment. Key members of the committee include the Dave Barnes, the CIO, our CFO, me, and nine other executives. Because our offices are near each other, we are constantly talking to each other. Each morning we go to breakfast together to make sure we catch up with each other. We do the same thing at lunch. We have weekly and monthly meetings.

EL. Do you have a committee that handles acquisitions?

DA. We have a group that looks at mergers and acquisitions. It has close ties to our strategy group. We first look at what the acquisition would provide. If we think it has potential, we then look at what synergies the acquisition would provide us.

EL. What is your feeling about using social media to get closer to your customers?

DA. Our way for communicating back and forth with customers has been through our drivers. They function as ambassadors to our company and our customers. As the company has grown, we started to branch out and advertise. For years, our best form of advertisement was our uniformed drivers and a clean package car vehicle that appeared in front a customer's door every day. We have tailored more and more programs for the Internet. We have expanded our interaction with customers to include social media. We are experimenting with things like twitter. We like being able to interact directly and quickly with customers. Social media will also give us much customer service intelligence about how we can do better job. Again, social media is fertile ground for us.

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.

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.

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.

With roots dating back to the World War I, Brady Corporation manufactures and markets a comprehensive line of identity and protection products, including labels, signs, safety devices, and printing systems. The company operates in more than 26 countries and has 500,000 customers in construction, education, electronics, healthcare, manufacturing, telecommunications, and other industries.

When Frank M. Jaehnert became president and CEO of Brady in 2003, the company's half billion in annual sales had stalled, profits had declined, and employee turnover had increased. Jaehnert gladly stepped up to the plate and accepted the challenges before him. He immediately began a major restructuring effort focused on controlling costs and asking his leadership team to set higher goals for the company to achieve. Jaehnert's vision was for the company to become an international market leader in the maintenance, repair, and operations space. Within three years, the company achieved its growth targets by expanding global operations, acquiring companies that could broaden Brady's product line, and making on-going capital investments in technology. In 2007, Brady got named to Forbes' Platinum 400 List of American's Best Big Companies.

Brady closed out its 2008 fiscal year with more than $1.5 billion in revenues. Jaehnart says, "Our first quarterly results for the 2009 fiscal year had the highest sales and the highest profit in our corporate history."

Enterpriseleadership.org recently sat down with Jaehnart to talk about his strategy for creating shareholder value by investing in technology, empowering his staff to fuel organic growth, and taking belt-tightening steps whenever necessary.

EL. Can you describe some of your key capital technology investments?

FMJ. In 2004, when we were at $500 million in revenues, we invested about $30 million to move our enterprise resource planning system to the SAP platform. That was a huge investment. Today, about 70 percent of the company uses this platform. We have one system for the entire company. We recently made sizable investments in three cloud-based computing systems.  These systems include the following: Salesforce.com, a customer relationship management system; GetPaid, a framework for processing online payments; and Workday, a human resources management system.

EL. How did you go about making these investment decisions?  Did you follow a formal process?

FMJ. Improvements in our productivity and in our competitive environment drive the company's overall goal to keep getting better at what it does. As a result, we challenge all of our teams in all of the functional areas, such as finance, human resources, and technology, to look for ways to improve how they run their businesses or their functions. They seek out solutions from vendors that offer the best-in-class products. Before we make any type of an investment decision, we do financial calculations based on the Economic Value Added (EVA) metric or economic profit developed by Stern Stewart. We look for good returns on our investments.

EL. Can you be more specific about how you measure shareholder value creation?

FMJ. That's an interesting question. It doesn't matter if it's a technology investment, an acquisition, a new product development investment, or the purchase of manufacturing equipment. We run every investment through an EVA calculation.  For example, you determine your cost of capital and then it becomes a component of the cost of equity and the cost of debt. You might want to create 10 percent more profit than your cost of capital. If your cost of capital is $100 million, you want to make sure that your return is more than $100 million to cover your cost of capital.
 
The ultimate shareholder value creation is if the stock price goes up or the dividend amount goes up. In this economy, the share price could go down because of external influences. The company might still see an increase in EVA, but real shareholder value comes from the share price plus dividends.

EL. What was the executive governance process for the SAP investment?

FMJ. Before we moved to SAP, we had a third-party company managing our many legacy systems for ERP. Unfortunately, this company had its own share of problems and was up for sale. We knew we wouldn't get the support we needed. We had to move right away to another system. On the other hand, an ERP system implementation is a big deal. We spent much time trying to justify this capital investment.  For example, we looked at how much money this system could save us, what additional information it could give us, and what reductions in administrative costs and sales costs we could expect. We presented our proposal to the board of directors. We went back and forth answering questions the different board members had. Eventually, the board approved the proposal.

EL. Do you have an executive committee that looks at technology investments across the company as part of the governance process?

FMJ. We don't have one committee. We have different committees. The executive committee includes all of my direct reports. They have a say on every major decision. We have an engineering committee, a new product development committee, and a technology committee. We don't have a manufacturing committee. Each manufacturing site makes decisions about its routine machinery and equipment. If a manufacturing site needs to move to a more advanced technology, then the engineering committee works with the machine manufacturer to make the business case for developing the new manufacturing technology. The business case then goes before the executive committee. I look to my CFO's expertise to determine if this investment will benefit the company financially.

EL. What do you expect from your chief information officer (CIO)?

FMJ. I consider my CIO, who is one of my direct reports, to be a business leader. He'll also tell you he's one, too. In fact, I expect all of my direct reports to be entrepreneurs who have ideas that can benefit the business. Our priorities include helping the company to grow sales and profits and to create shareholder value. I'm not looking for a CIO to be just a technologist. My CIO knows how to apply his technological expertise to make the company grow and to become more successful. The same goes for my human resources person, and my CFO. For example, if my CIO might see an opportunity for us to save millions by having a call center in the Philippines, then he'd do his homework to make sure we could support it and we could integrate it seamlessly into the company. As a result, it all comes down to what each business leader can do to improve the company.

EL. How has the economic climate affected your business?

FMJ. At the same time we announced out best first quarterly results ever, we also announced   a 10 percent cut in the workforce going forward. We have a freeze on salaries. We perceive a long and a deep recession. It felt good to have the best quarter ever. On the other hand, it felt like we contradicted ourselves when, we at the same time, announced some cutbacks. Up until a few months ago, some of our businesses were working three shifts just to keep up with customer demand. We've started to see a decline in our work volume.

EL. Can you give examples of how you've leveraged technology to get closer to your customers?

FMJ. By providing more information about the customer, Salesforce.com, for example, will enable our sales people to be more responsive to customers’ needs. This system isn't a response to the recession. Rolling this system out in the middle of a recession will help us to save money by making our people more productive.

In many ways, we connect to our customers through our SAP system online. Sometimes we even provide software for our customers to run. For example, Grainger, one of our largest distributors, uses our software so customers can create signs. If you go to www.grainger.com and click on signs, you can design your own sign online. You can see how it looks. You can change color and letter size. You can pay for the sign by credit card. All of the information gets transmitted to us and we produce the sign.  That's one way how we work with a large customer. It isn't all about SAP.

EL. What is your business strategy and where role does technology play in it?

FMJ. Our business strategy is very simple. We want to be number one or number two in all of our businesses. We have to define which businesses we're in. The role of technology is to help us to get to wherever we need to head. For example, to keep our sales people better informed about customers, we decided to go with Salesforce.com and BlackBerries.

EL. Do you have a formal process to set your business strategy?

FMJ. We talk about strategy every month. I don't believe in having one big annual meeting to establish what we're doing for the next two years, and then going off an executing against this one plan.  Because things move so quickly, we constantly have to keep on top of our strategy. When I became CEO in 2003, we did a three-day strategy session. I announced that we'd have a strategy session the following month. The next month, I announced the same thing. That's how our monthly strategy session came about.

You can't go off to a three-day, off-site meeting somewhere in Florida and expect to come back with your business strategy. Albert Einstein didn't go off to an off-site meeting with the hope of inventing the theory of relativity. He refined what he developed over time. The same thought process should go into developing a company's a business strategy. At first, everyone had some angst about the monthly strategy meeting, but today we can't live without it.

EL. How does the monthly strategy meeting process help your team to make better decisions and to deal more effectively with the board of directors?

FMJ. The meetings consist mostly of my direct reports. On occasion, we'll invite people who can help us to make better decisions. For example, when we talked about the adjacent markets we'd like to pursue, we had two middle managers present their findings about these markets. These experts went out and investigated these markets for several months. They know more about this subject area than we'll ever know.

During a session, we might look at how we can improve a particular business. Can we take it in a different direction or in another geographical area? Has the marketplace or the customers changed? We might try to answer questions like those.

During a two-day strategy session we had with board in May 2008, we gave a presentation on what we plan to do for the next five years. Our monthly strategy sessions helped us to put everything together and to make sure we understood what questions the board might have. For example, if we were going to talk about a possible acquisition, we might prepare our respond to questions about debt level and leveraging.

EL. How has the belt tightening affected your direct reports? Are they working harder on how to create business impact?

FMJ. During the past five years, we've acquired more than 30 small companies. We've focused on how and what we could improve and took the appropriate action. We consolidated factories and sales forces to become more productive.  We cut back on discretionary spending for things such as seminars and travel. In some cases, we took out a management layer.  We now have a heightened sense of urgency, but it's not like we weren't doing anything before the downturn in the economy.  Our management team has much experience dealing with ups and down in the economy. We've just taken it to another level.

EL. What quality practices do you use the most?

FMJ. Some companies transform themselves into a Six Sigma or a Lean shop. They even wrap their culture around Six Sigma or Lean. In contrast, our culture has always and will always be dedicated to creating shareholder value. To this end, we use techniques such as Lean, Six Sigma, Kaizen, and Value Stream Mapping for how we can create this shareholder values.

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