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Tom Parish
by Elizabeth Ferrarini

 

Most CIOs could learn a lot from Jack Cooper. During his 30 years as CIO for Fortune 500 companies such as Bristol-Myers Squibb, Cooper spent billions of dollars on systems, and countless hours carrying out initiatives so his IT personnel could use these systems both cost efficiently and cost effectively. For example, Cooper returned $1.5 billion a year in cost savings to Bristol-Myers Squibb by centralizing worldwide IT operations for finance and manufacturing into an ERP system managed by an IT shared services organization.

 

Retired since 2001, Cooper could have gone off and played golf. He has chosen to do otherwise. His consulting firm, JM Cooper & Associates, helps CIOs who are frustrated by installed systems that haven’t met their expectations.

 

Cooper recently took the time to answer questions about what CIOs need to be doing to assess the value of IT to their companies. Here’s what he had to say:

 

EL: A lot of CIOs talk about realigning IT with the business units.  But how well do they achieve this?

 

JC: That’s a good question. It’s a lot of hard work. First you need a strategy for IT -- what role it plays in the company, and what kind of value it can add. Unfortunately, this hasn’t been one of the key focuses for CIOs, who usually have short-term strategies. For many CIOs, thinking like this is like a new suit they are being asked to wear.

 

EL: What is the one big change you’ve seen in IT over the years that  now can make or break a CIO’s success?

 

JC: We’ve seen a lot of change in IT for the past two decades. Since the 1990s, technology has driven IT spending. In fact, the IT expenditure curve peaked in 2001 and then went down, facing many sharp cuts. Today, IT has a different value equation. So, CIOs today have to ask where their expenditure curve is headed. Expenditures aren’t going to fall, but we aren’t going to return to the spending boom of the dot.com days. The increase in spending will be built on the value of what IT contributes to the enterprise. CIOs must understand how IT can map value to the company.

 

Some CIOs know how to tap into new technologies such as RFID, which can offer companies a unique, competitive advantage. CIOs need to learn how to ride the winds of change by understanding what role technology has in the firm, in the industry sector, and in the competition. And this task has to be done well.

 

EL: When you were at Bristol Myers Squibb how do you align IT with  the objectives of business units?

 

JC: Aligning IT with the business units had more clearly defined goals than what most companies might have. We were trying to drive huge amounts of cost that had built up, starting with the 1980’s, because of a high gross margin business, typical of the pharmaceutical industry. In fact, we were seeing gross margins as high as 90 percent.

 

Bristol was making a ton of money. In the mid 1990’s, we asked ourselves do you want to put on the brakes after you go off the cliff or do it as you are coming up. Everyone could see that the drugs coming forward weren’t going to be as robust as their predecessors. Bristol set out to restructure the company and take out up to $4 billion in cost.

 

My role was to read this. With some risk, there was an array of technology that could make this easier for IT. From 1995 to 2000, my role consisted of developing those productivity benefits, which changes the culture of the company.

 

EL: Can you go into more detail about what you did to reduce cost at  Bristol Myers Squibb?

 

JC: In 1995, I lead a task force to determine how both finance and manufacturing could easily cut costs and make significant productivity gains by consolidating similar functions. We didn’t need 85 worldwide locations processing accounts payables. But each plant worked autonomously; the manufacturing VP couldn’t look at all production resources and determine where products should be produced.

 

A two-year re-engineering initiative resulted in an integrated SAP ERP network run by a separate business unit based in Princeton, New Jersey. The system handles everything from order entry to production sourcing. We formed an IT shared service to support Global Business Services. We wouldn’t have the economies of sale or control of funds if we didn’t have one single instant service run by one IT group. Now Wal-Mart gets one invoice showing all of our brands.

 

The cost savings resulting from that initiative were invested in advertising, research, and additional sales staff. These areas will increased the company’s competitive strengths.

 

EL: I haven’t been seeing much in the trade press about the shared services model for IT. Is it still popular with large companies?

 

JC: It’s a difficult task. Some companies have been successful with it, others haven’t. A company has to decide whether a three percent cost reduction is worth the trauma of making the cultural change of going with a shared service. You also need a fertile environment with many independent operating divisions. If it’s a monolithic company with no redundant services, there is nothing to be gained by consolidating a task such as IT. Good candidates for an IT shared services include one that’s a conglomerate of services and these services have lots of replication. To become a shared service, the CIO next needs to have management support.

 

EL: How has the governance model changed over the years?

 

JC: Ten years ago, the IT governance model automated basic functions, such as payroll or accounts receivable, as they existed. IT owned the function. But processes such as shared services, ERP, and company-wide plans changed the governance model. Now the end-users design and own the systems. This shift in ownership made it necessary for IT, in some cases, to give up control of some major systems. As a result, the governance model switched out of IT to a joint group comprised of the end users and IT. Some CIOs didn’t see this coming.

 

When you go to a shared-services model, you can’t partner with just one functional head. The governance model has to go across multiple units, reaching high in the organization for partners. Remember, you might be combining the finances of two or three divisions.

 

Now we’re starting to see a new governance model, of which CIOs are not yet aware. Now business units want to partner outside the firm, in areas such as supply chain. Going across a chain of sources becomes a more complex governance model. You don’t own any of the sources, and thus, can’t go to any one CEO and say, these folks aren’t cooperating. This model offers huge cost savings in available customer service.

 

EL: How does this new governance model affect pharmaceutical  companies?

 

JC: CIOs in these companies need to understand how they can develop and carry out practices that will foster a legitimate partnership across the supply chain. A substantial accelerator for this to occur includes compliance with state and federal regulations. This effort requires harmony across the supply chain, so, in the case of the pharmaceutical companies, illegal drugs don’t come in the system. You have to control each drug’s pedigree by shipping from the appropriate manufacturer to the appropriate wholesaler.

 

Today, CIOs at major pharmaceutical companies aren’t working together to ensure a compatible standard needed to control the pedigree of drugs. Pharmaceutical must ensure that the integrity and the quality of their drugs are consistent throughout the supply chain. Florida now has a law that requires this. You can get jail time if you can’t validate the drug’s pedigree.

 

EL: Does a CIO need to have good selling skills?

 

JC: Yes, but it is a different type of sell. CIOs fall short (and this includes me) in working on the value analysis for IT projects. It has to be based on ROI, a net cash value for the project at the end of a period of time, and the net cash into the project has to reduce the cash expenditures. Most CIOs don’t have a scorecard in front of them, which could determine such things as how they’ll get their raises, and how their departmental budget will be funded. CIOs need to articulate what value IT contributes to the company by having a scorecard that shows the results, and the entire management team has to agree on what’s on the scorecard. This is a tough job and a new role for CIOs.

 

EL: Are there other areas where CIOs fall short today?

 

JC: During the past six years, we’ve gone from building systems with thousands of users to non-stop, interest-based systems with millions of users. Today, if one of your systems goes down, it can have a profound effect on your company. Many CIOs don’t know the cost to the company if specific systems go down and the number of users affected. If you have this information on your scorecard, you can recognize the quality requirements for the system and provide the proper amount of support for that system.

 

There are some wonderful tools, such as the IT Infrastructure Library, that  take your infrastructure from alpha to omega.

 

EL: What are your feelings about hiring offshore IT  talent?

 

JC: It’s a mixed bag. IT departments should definitely consider it because of the cost savings. But before CIOs go to domestic outsourcing or offshoring, they need to think about the management role that has to be satisfied. Internal project control takes less management than outsourcing or offshoring. If you want to go either route, you need to have a stronger, better-defined measurement to control the situation.

 

EL: What is one of the key exercises you give CIOs during one of your  executive leadership seminars?

 

JC: I ask them to take a two-week period and measure how much time they spend managing down in the organization, such as calling in a project manager, across the organization with peers, and up the organization with executive staff, such as the CFO. Some CIOs find themselves managing down 90 percent of the time. These CIOs are successful getting things done, but they aren’t successful selecting the right things to get done. Then you have the CIOs who spend 80 percent of their time managing upward. People who work for these CIOs often find themselves drifting with the wind.

 

Given governance and compliance models, CIOs need to be spending more time managing horizontally. They need a model for how much time they spend on the three management levels.

 

EL: If you were to put together a center for IT leadership at a  university, what courses would you offer?

 

JC: I’ve seen some programs offer courses such as “How to Run IT as a Business.” The course should say “How to Get More Value from IT.” IT isn’t a profitable business; it can offer value to the company. Some important areas I’d like to see taught include governance and compliance, delegation of authority, and managing on a complex spear.

 

In particular, I’d say that Sarbanes-Oxley compliance is huge. CIOs can be facing jail time if they don’t adhere to the financial flow of the company, which protects the audit committee from being exposed to any liability.

 

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

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Tom Parish
by Elizabeth Ferrarini

Information technology has become pervasive throughout academic life at the University of Pennsylvania's Wharton School. In scale alone, IT at Wharton ranks as the largest among business schools in the United States. Deidre Woods, Wharton’s CIO and associate professor of computing, heads up a staff of 100 IT professionals who oversee an infrastructure of 9,500 desks, 200 servers, and support 10,000 Microsoft Exchange accounts, and 22,000 email alumni addresses.

 

Establishing good working partnerships has helped Woods carry out a range of activities that have helped enable Wharton to continue as the top business school in the country. In fact, Woods has built her entire IT career at Wharton on this strategy. She recently sat down with Enterpriseleadership.org to discuss what types of partnerships she nurtures, where governance fits into the organization, and what she expects from vendors and her IT staff.

 

EL: What is your strategy for IT at The Wharton School?

 

DW: The strategic part of my job is to provide the technology to enhance Wharton’s reputation has a thought leader and disseminator of relevant business information globally. It takes many tactical pieces to carry out this goal out. That’s where we get into running everything. We’re also tasked with protecting the institution’s intellectual property.

 

EL: Can you talk about one of the important technology initiatives  you’ve worked on with students?

 

DW: We’ve used innovation to strengthen the school’s reputation; this forms the underpinning of the projects we’ve developed with and for our students, faculty members, and business leaders outside the school.

 

In mid 1990’s, we became the first business school to provide students with Internet access. We worked closely with a group of students to find out what the first version of the system, called Spike, should look like. Since that time, we’ve revised Spike many times. In fact, Spike has turned into a verb. Students know it as a place to get everything, from their course schedules, to event calendars, and to do things such as reserving group study rooms.

 

EL: How do you balance where you put your IT dollars for hardware and  software?

 

DW: We buy turnkey systems to do specific tasks. For example, we bought our admissions systems from the University of Virginia’s Business School. The system works very well by providing students all of the information they need to apply. Spending thousands of dollars to improve the system’s interface would not make sense. Instead, we’ve put a lot of resources in applications like student blogs and student discussion groups, so potential applicants will get to experience life at Wharton.

 

EL: Do you support any commercial research ventures the school  offers?

 

DW: We provide the interface, sample programs, and Help Desk support for researchers to get global access to financial datasets through a service called Wharton Research Data Services (WRDS). About 10,000 researchers and faculty members at 125 academic institutions subscribe to this service. WRDS has become a standard for the way business research is done.

 

Another project we support is Knowledge@Wharton, a Web site and biweekly newsletter of insightful academic business research edited for professionals who read publications such as The Wall Street Journal and Business  Week. The service has about 450,000 subscribers in 189 countries. We support two aspects of the service – the knowledge network that runs from us to other institutions around the world, and the corresponding infrastructure that provides the foundation for the knowledge network.

 

EL: Describe one of the key projects you have done with faculty  members?

 

DW: Four years ago, our dean asked my group to look at how  technology can play a role in business education in the 21st century. We created kind of a partnership between the faculty and members of the IT staff. A faculty committee reviews professors’ proposals for classroom changes, and if the proposal is accepted, the faculty member will get the necessary resources, including hardware and software. Right now, we’re working on 23 such projects with faculty members, and we’ve got five projects lined up for 2006.

 

EL: Do you have any partnerships with commercial entities?

 

DW: One of the partnerships we have is with the publisher Addison-Wesley for a commercial product called OTIS, an equities portfolio manager. We’ve sold it to 70 colleges. We’re also working on another commercial project.

 

EL: What types of governance do you have to protect intellectual  property?

 

DW: We’d like to have more governance. When it comes to issues such as security, I work with my colleagues across the University. In fact, several years ago, the University hired a chief of security; it has been part of her task force to set standards for handling data. If a policy means more work for us, we accommodate the standard. This way everyone will benefit.

 

When it comes to IT at Wharton, we tend to invest in resources for external reviews of our systems. For example, we ask Microsoft, one of our key vendors, to do a routine bill of health of our environment. Ernst and Young has done independent privacy assessments for us.

 

EL: Do you use quality practices such as Six Sigma?

 

DW: We haven’t, because the model for using these types of disciplines doesn’t fit us. Unlike universities, corporate IT departments usually require a lot of process to carry out projects. On the other hand, we have to turn projects around quickly, regardless of the size. We tend to be more focused on results, and our bottom line tends to rule what many corporate IT departments do. We pay close attention to how we use our resources to carry out various projects, and we also measure our results differently than do corporate IT departments.

 

EL: What types of measurements determine IT success?

 

DW: We are measured qualitatively on the best practices we use to leverage IT at Wharton. Serving as an example of IT best practices for IT departments at other business school has become a criteria for measuring our effectiveness. And keeping all of our constituents working with us provides the best benchmark for our success. For the past five years, we’ve gotten very high marks for how well IT at Wharton has enhanced students’ educational experience.

 

EL: Have you read Nicholas Carr’s book from Harvard Business Review  Press, Does IT Matter?

 

DW: It’s a good book. I agree that things such as email, database servers, and desktop support have become commodities. These things, however, form the foundation of more strategic initiatives.

 

The book forces IT professionals to go through the exercise of determining how well they are going, and how they can distinguish themselves from other organizations. During the dot.com boom, we had a tough time hiring good IT resources. Everyone wanted to work on the latest e-commerce venture. Business publications, such as The Wall Street Journal, now report that  companies have become more rational about IT. That’s what Carr’s book is all  about.

 

EL: I heard that some of your classrooms don’t have any Internet  connectivity for students. Why did you decide to do this?

 

DW: When we opened our newest building three years ago, we gave faculty members the choice of how they wanted to teach. They all wanted to preserve the live interactive experience and to add technology as they needed it. The U-shaped classrooms enable students to communicate with each other easily and with the instructor. The building has lots of group study space and labs equipped with computing resources, and each classroom makes available on-demand digital recording for the faculty.

 

EL: You interact with many future business leaders; so, what’s their  attitude towards IT?

 

DW:Many of our MBA students have grown up with the Internet. These students have also worked in organizations where they’ve been exposed to some aspect of IT. Since our students will be managing departments; perhaps, IT; and eventually, companies; they’ll need to know how to partner and work with their organization’s IT department. To this end, we try to be a model for the most effective and harmonious way to do things.

 

EL: When it comes to working with vendors, what’s the most important  thing you want out of the relationship?

 

DW: We work closely with a few well-known vendors such as IBM, Microsoft, Dell, and Sun Microsystems. Yes, we want value for our money. We also want to form a partnership that provides us with good service when something goes wrong.

 

EL: What disruptive technologies are you considering?

 

DW: Computer trade publications talk about how messy Web interfaces are. How do you move beyond HTML to have a better Internet experience? Rich media Internet applications makes sense for us to use in our learning laboratory environment.

 

When it comes to Spike, we’re looking at what types of services we can provide to students’ mobile devices. Our challenge here is to figure out what’s appropriate in a business school environment.

 

EL: What types of IT manpower resources work best in your  organization?

 

DW: We tend to hire a lot of Penn graduates right out of school. Sometimes our graduates will go to work in industry and then come back here; it’s kind of word of mouth. If we don’t have any eligible candidates to promote from within, we’ll go outside and hire someone with the required amount of experience.

 

We tend to look for professionals who have a track record of doing things well and knowing how to manage projects. Even our most junior people have some project responsibility. Being able to deal with our constituents is very important to us. We can tone down someone who has an overdeveloped sense of responsibility, but we can’t teach someone how to get along with others. And because things move quickly around here, we need people who are current in technology. Intellectual curiosity is another trait we look for. My job is to think about where we’re going. It’s everyone’s job to help us get there.

 

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Elizabeth Ferrarini is a free-lance writer based in Boston,  Massachusetts. Reach her at mailto:elizabethferrarini@yahoo.com.

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Tom Parish
by Elizabeth Ferrarini

 

With annual revenues of $1.5 billion and just 1,400 employees, PMI Group holds its own in the competitive business of writing private mortgage insurance to protect lenders if the borrower defaults. PMI Group insures about 50,000 homes per year. In fact, Daniel L. Roberts, PMI's executive vice president and chief information officer, thrives on finding ways to use IT to keep PMI ahead of larger competitors. He accomplished this goal by leveraging his knowledge of IT with experience running PMI operational units, such as claims, policy servicing, billing, and structured transaction operations. As a result, some of his IT initiatives have received awards such as Computerworld's 'Best Practices in Mobile and Wireless for 2005."

 

Enterpriseleadership.org recently spoke with Roberts about some of his IT initiatives, governance, and processes to align IT with operational objectives. Here's what he had to say.

 

EL: Can you provide an overview of your IT department?

 

DR: We've got about 180 full-time employees, and about 150 contractors who support operations in the United States and Europe. Our mix of servers includes about 24 AS400s, 75 Sun Solaris, and 400 Intel-based Window servers. Major applications include PeopleSoft for human resources and finance, Cognos for business intelligence, and corporate reporting, WebSphere from IBM, and a variety of Microsoft Office and Exchange products. FileNet provides the foundation for our image management system; we built the transaction part of this system.

 

EL: What technologies did you use to build your imaging  system?

 

DR: At one time, we used to receive documents such as a loan default via FAX or courier. Several years ago, we started to accept documents via the Web. Technology from Cyclone enabled our customers to securely transmit their documents and to receive a status report of their transactions. Transaction Director enables customers to log on to a secure Web site and check on the status of those transactions.

 

A piece of software from Pyramid Technology sits on top of FileNet and allows for intelligent workflow. For example, we enable our customers to electronically send us documents, such as W2 statements or credit reports, which make up the massive loan files. We used to require that customers send these documents either via FAX or courier, and Pyramid allowed us to set triggers to let us know when certain documents are due.

 

Now, we can image the loan file. Each one of our offices has an electronic scanner, which can feed documents into our imaging system. Software from Kofax allows us to take a FAX image and turn it into a Tiff, which then resides in the FileNet storage system. About 50 percent of our customers send us documents electronically.

 

EL: Can you talk a little about the award you received from  Computerworld?

 

DR: Instead of lugging around a laptop for email and to access the Web, we enabled our sales employees to do these things via their Blackberries. We integrated these devices with our Exchange servers so our sales people could get email wherever they are. By integrating the Blackberries with salesforce.com, the sales people can enter contact information or make notes in their Blackberries or view sales literature before ordering it. We got the award because the sales people became more productive by capturing pertinent information right away and responding immediately to customers' email messages.

 

EL: What forms of governance do you have in place?

 

DR: We've got both a tactical and strategic layer of governance. Our tactical IT steering committee consists of business unit heads. At our first monthly meeting of the year, we tentatively establish the projects for the year, their priority, and their budget. We typically handle 100 projects worth no more than $250,000. As we go along, we might eliminate a project, add new ones, or change the priorities of some projects.

 

The strategic layer or the resource allocation board consists of senior vice presidents. At our first quarterly meeting each year, we establish a capital budget for projects above $250,000. At each meeting, we rank the priority for each project, introduce new projects, or eliminate some.

 

EL: Do you use any quality initiatives, such as Six Sigma, Lean, or  the IT Infrastructure Library?

 

DR: We haven't adopted any of those specific programs. We've been intrigued with Balanced Scorecard from Cognos. When we establish both corporate and business unit objectives, we can use the Balanced Scorecard to identify key metrics that will tell us if we're on track or not for a particular objective. The Cognos Metrics Manager tool allows us to monitor monthly whether or not we achieve those particular metrics for those objectives. We are still in the process of refining this.

 

The process has enabled us to make some very clear and discrete decisions about what programs to offer which customers, what investments to make in IT, and to call out the six or seven key objectives. In turn, the CEO can provide all employees with a clear line of sight about the company's key strategies and level of profitability.

 

EL: What cost-cutting or cost-avoidance programs have you carried  out?

 

DR: Our imaging system has helped us reduce costs and provided us with a competitive advantage. It has provided a payback in hard dollars along with improving the quality of service we provide. For example, our field operations shrank their budgets while gaining some incredible performance and turnaround time. Some of the offices doubled the number of loan files they processed in a day.

 

EL: Are you looking at grid computing?

 

DR: We evaluated it and decided it wasn't for us now. Since we've got limited capacity, we're going to focus on those technologies that will give us the most payback. Blade servers and virtualization are two data center technologies at the top of our list. Each of our legacy applications runs on a separate server, which are underused. We'll move these applications to blades and use VMWare to virtualize some of the older application. This technique would enable us to eliminate 28 servers and provide more space in our data center.

 

EL: What is your cost structure for IT?

 

DR: We've borne all of our costs from cost centers. Each operational department assists me in presenting its approved budget to management. However, as we've become more global, we've started to allocate foreign operational costs, which we bear domestically for running their servers. Our group in Ireland is beginning to see a memo bill each year for those charges. We want to have a specific cost allocation for those business units. We won't eliminate cost centers; we'll get to a more discrete allocation of costs.

 

EL:What process do you use to make the alignment clear to the  business units?

 

DR: Governance aligns our business objectives with IT projects. To accomplish this, we use goal mapping, which is an embellishment of the Rational Rose. The goal maps provide the operational department with the business objective they're trying to achieve through technology and the value of achieving the objective. The value goes into their budget. For the imaging project, the operational department made a commitment to put the cost savings into their budget as soon as the goal line was achieved.

 

We had a clear vision in front of us. We had to deliver by a certain date, and the operational department counted on us to have a cost reduction in their budget. If they didn't get that cost reduction, both of us would talk it out. That level of clarity does achieve some alignment. Both the operational department and the IT folks have a clear mission of what to get done, when, and what is the budget.

 

EL: What types of human relationship techniques do you use to get  everyone on the same page?

 

DR: When you're a small business in a very competitive pool of big players, you need to make everyone feel like they're a major contributor. I educate myself about the business imperatives and try to help my counterparts understand how technology will play a roll in these imperatives.

 

After being with the company for three months, new employees have to go through a five-day training program called the Business of PMI. Employees' eyes start to open up as they delve deeper into the inner working of the company. They get to sit side-by-side with everyone from customer service representatives to senior executives. For example, they observe how a customer service representative handles tough questions from callers.

 

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Elizabeth Ferrarini is an IT consultant and writer from  Boston, Massachusetts. Reach her at mailto:elizabethferrarini@yahoo.com.

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352 Views 0 Comments 0 References Permalink Tags: article, best_practices, compliance, governance, innovation, it_management, itil, open_source, security, strategy
Tom Parish

by Elizabeth Ferrarini

 

By combining two different service quality methodologies, Xerox Corporation realized more than $150 million in economic profit during 2004. Dave Rowlands, the vice president of Lean Six Sigma for Xerox North America, says that a good chunk of this profit came from reducing IT costs in areas such as application development and network infrastructure. Rowland's recent book -- What  is Lean Six Sigma? -- explains how the marriage of the two service quality methodologies can help midsize to large organizations cut costs in most operational areas, while improving service to either internal or external customers, or both.

 

Rowlands recently took time to talk about the concepts in his book, and to provide plenty of examples of how Xerox used Lean Six Sigma to cut IT costs. Here's what this 14-year veteran of Xerox had to say:

 

EL: Can you provide a quick overview of the key differences between Lean and Six Sigma and what do you get when you combine them?

 

DR: Six Sigma focuses on reducing variations, capturing the voice of the customer, and reducing the cost of delivering customer requirements. On the other hand, "Lean" is a methodology that came out of manufacturing. It focuses on creating value flow to the customer and not creating any type of cost associated with non-value add. The combination of the two can result in making work better (using Six Sigma) and making work faster (using Lean principles). This quality improvement method provides you with tools to identify quality problems and to eliminate waste in your work area.

 

EL: Did Xerox develop the concept of Lean Six Sigma?

 

DR: We're one of the early adopters of putting both concepts together. In the early 1990s, we started using Lean in our manufacturing operations. We got very good at producing things better at less cost. As 2000 approached, I talked to our quality team about doing both Lean and Six Sigma. At first, the team was hesitant about the move for two reasons: few companies were doing it, and no one had a good understanding of how the two methodologies could work together.

 

EL: Are there any differences in the way you apply Lean Six Sigma to  IT initiatives than to sales or marketing areas?

 

DR: No. You use the same methodology for IT as you would for other areas. For IT, a lot of the voice of the customer area focused -- at least for us -- on internal customers, the people who use these systems within the company.

 

EL: Can you talk about the specific IT areas in which you've applied  Lean Six Sigma?

 

DR: We've used it to reduce infrastructure costs resulting from our outsourcing agreement with EDS. Specifically, we've looked at how we could get a higher level of Help Desk service at a lower cost and with faster turnaround. We applied it to storage by examining how we could reduce the amount of storage required and the number of servers. We also looked at how we could do a better job of predicting when to consolidate servers, and purging and archiving what we do.

 

The basic Lean Six Sigma tools enable you to collect data, and then structure that data so you can make rational decisions. To this end, you'll be able to either elevate your level of service or reduce your cost for the same level of service.

 

When it came to applications development, we looked at how we could get faster adoption rates for the things we developed, how we could test things more efficiently, and how we could predict earlier in the process when something was going to reach maturity.

 

EL: Looking at infrastructure areas, can you discuss some specific projects to which you applied Lean Six Sigma successfully to reduce costs?

 

DR: One project consisted of looking at the infrastructure cost per telephone and the level of service our sales group in Canada was providing to customers. Our research showed that we were paying a certain price for all of these internal phone and voicemail systems. By mapping out the different source of phone services and the cost for each, we were able to devise a new model for telephone service for our sales force. We migrated these folks onto a consolidated plan that provided a remote voice mail link which could loop back to the main Xerox phone system. So we offered them the benefits of a cellphone at the reduced cost of a standard, high-volume plan. At the same time, we got rid of the unnecessary telephone infrastructure and the support.

 

As the applications development projects get larger, the business requirements documents get more complex, and the variation in our estimates of how many errors there are gets even larger. As a result, we get worse at predicting when a project will be released and the level of maturity. We use Lean Six Sigma to study the correlations between the size of the project and the estimation for what it will take us to finish it.

 

We've also used Lean Six Sigma to study the role throughput yield of developers. Yield is the one-stop process of looking for defects. Role throughput looks at how many of the steps in a multi-step process you can get through without defects. It's a good indicator of how much rework and how much cost is involved. For example, poor role throughput yield means there is a lot of hidden waste in rework and inspection. In turn, you'll have poor predictability of release.

 

EL: What improvements have you made in application development as a  result of your Lean Six Sigma findings?

 

DR: We changed the way we set up large projects teams to avoid unnecessary manpower costs. For example, we found that you'll get better cycle time if you use more developers on a project. However, the marginal yield -- the amount of additional testing needed -- drops off dramatically with just three developers. So, we now assign three or four developers to a sub-section of a project.

 

EL: Can you give me an example of a non-IT area in which you  successfully used Lean Six Sigma?

 

DR: Another example was our spare parts usage throughout our 14 different service districts. We looked at the usage of parts for identical pieces of equipment. We had a 200 percent variation from best to worse. For example, the best in the country could create a level of service with half the parts budget of the worse in the country. Mapping helped us to find out the differences in the process and move everyone to the best. Then we looked at how we automate these into our ERP system.

 

EL: What kinds of analytical tools or software packages do you use to  carry out your Lean Six Sigma analysis?

 

DR: We use a lot of basic analytical tools such as process maps, and praetors. When it comes to the next step of understanding the real differences between different processes, we use statistical tools, such as hypothesis testing. Minitab is an industry standard for doing control charts and hypothesis testing. Our approach is to get results by using the simplest tools possible.

 

EL: Are you doing a lot of Lean Six Sigma projects with your external  customers?

 

DR: We've taken the approach that we aren't trying to sell you copiers; we want to provide you with document management solutions for problems you have and find opportunities for you. We might talk to a customer about doing a workflow assessment in their office. In this case, we'll use Lean Six Sigma to find ways to reduce the time it takes them to do work, to improve the quality of work, or to reduce the cost, all at the same time. For example, we used Lean Six Sigma to study a large bank with 3,000 copiers and printers located in various offices. Just by understanding who was using the information, how they were printing their information, and what their costs were, we cut their number of machines to 400 and cut their costs by one third, while continually improving the quality of service.

 

EL: How has Lean Six Sigma initiatives contributed to Xerox's bottom  line?

 

DR: The ultimate measure we use is called economic process. It's a net operating profit after tax and after cost of capital. It directly benefits our shareholders. If you generate economic profit, you're generating bottom profit for the shareholders. It helps us to decide which projects to go after. You can do a cost-saving project, revenue producing project, or an inventory reduction project.

 

Internally, we've generated more than $150 million in economic profit during 2004. These are reductions in our operational costs and driving our revenue.

 

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Elizabeth M. Ferrarini is an IT consultant from Boston,  Massachusetts.

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Tom Parish

by Elizabeth Ferrarini

 

Governance. Quality initiatives. Proven technologies. All of these things have a high priority at Booz Allen Hamilton, one of the largest and the most successful business and IT consulting firms in the world. The company employees 15,000 employees and has revenues exceeding $2.7 billion. Areas of consulting to the world's largest organizations and government agencies include strategy, organization, operations, systems, and technology.

 

Enterpriseleadership.org sat down Booz Allen's Daniel M. Gasparro, the firm's chief technologist who is responsible the IT governance model and IT plan and related budget. Here's what he had to say.

 

EL: Describe your IT organization?

 

DG: Our IT staff includes 210 employees and 50 subcontractors who maintain our Help Desk and telephone systems. We have networks reaching six continents in 100 different countries where we have offices. Our connectivity services range from virtual private network (VPN), to multiprotocol label switching (MPLS), to services to connect them. As a consulting firm, we deal exclusively in intellectual property, so, to this end, we've got an extensive collaboration capability based on Microsoft's SharePoint. This system includes a knowledge management component and project management capabilities. PeopleSoft drives our human resource system, and we have a combination of financial systems for our government and our commercial sector.

 

EL: Your folks went to MPLS in 2004. What has been the bottom line benefit, and in what applications have you seen performance improvements?

 

DG: We've derived a cost benefit based on the ability to increase bandwidth without having to spend more to get it. We're getting more megabytes per dollar. For example, we've been able to double our bandwidth in some locations without increasing the cost to the firm. Because of MLPS, we've been able to add another layer of service capabilities through the Cisco routers. We can now rank applications based on priorities to the business; for example, financial transactions at certain periods of the month take priority over other applications. And, we're now putting applications in the appropriate business classes based on levels of reports.

 

EL: What is your governance model, and how does it work to benefit  the business units?

 

DG: It's comprised of a steering committee with senior members from both our commercial and government businesses. Customer councils support this committee by providing accurate and reflective business information in our IT supply and delivery. These customer councils consists of two groups: (1) the administrative systems council focuses on all of the IT professionals who run business systems, such as human resources and finance, as well as the business owners; and (2) the client technology council includes business unit professionals who study how the firm can market more competitive services.

 

EL: Can you go into more detail about the role of each  council?

 

DG: The administrative systems council devises the business case and the strategy to carry it out. This group takes their business capability and mirrors it together with business plans. The CFO who chairs this council takes the business plan to the IT Steering committee

 

The members of the client technology council harness a way to drive our own strategy to become more competitive. For example, this group discussed the features that our collaboration software needed in order to leapfrog the competition.

 

EL: Given the IT nature of your business, can you tell me how you've used IT to make your clients more competitive? Are there any examples that stand out?

 

DG: Our investment in our new collaboration architecture is a good example. First, we replaced the infrastructure, such as email. We're now in phase two, which includes replacing our old collaboration systems with a tool that can help us revise our IT governance approach.

 

EL: I read that you've put off moving to Voice over IP (VoIP).  Why?

 

DG: Most of our business doesn't involve a network. Many of our employees spend the majority of their time at client locations. A study of our traffic patterns showed that VoIP provided us with no real advantage. On the other hand, we're exploring the potential use of public VoIP services, which could provide our client staff with an advantage when they are working in international locations. However, our employees who tried one of these services said it wasn't yet ready as a business-class service, and that it also had some security issues.

 

EL: Within IT or within your consulting practice, do you have any  particular quality programs that you use more than others?

 

DG: We're in the early stages of deploying the IT Infrastructure Library (ITIL). We put the Service Desk in place in 1997, and initiated Change Management in 1999. We're planning to carry out Incident Management and Configuration Management, and our plan also includes expanding the Service Desk to include more infrastructure capabilities, including televideo.

 

Our Service Desk and Change Management runs on packages from Vanta, a company owned by PeopleSoft. We're going to be using a package from Telelogic for the other initiatives.

 

This approach isn't my ideal long-term architecture because the Service Desk and Change Management have to be linked. Both also have to be driven by different business requirements.

 

EL: Based on the consulting work you've done, do you have an idea  where the Fortune 500 stand with the adoption of ITIL?

 

DG: Hewlett Packard is the only company we know of that has integrated all ten of the ITIL processes, and we've found that one third of Fortune 500 have started to carry out some of the ITIL processes. Another third of the Fortune 500 companies are examining how to approach ITIL. However, the ten percent that has been doing something with ITIL hasn't been following the ITIL framework very religiously.

 

In looking at ITIL, many companies evaluate how they use it to carry out processes around lifecycle management. Most organizations, on the other hand, have three basic functional groups: planning, integration, and operations. ITIL is about putting in a supply-and-demand framework to align to the business. If you throw an integrated process across those functional teams, the nature of the IT organization will resist the integration process and bring Change Management to the forefront. As a result, we're looking at a phased approach to ITIL because Change Management is going to be major problem.

 

EL: As you go further into ITIL, will you have to make any changes to  IT employee skill sets?

 

DG: We're looking at realigning the careers of many of our IT employees. Many employees have functional certifications in areas such as Cisco. We want more of our employees to have process certifications in areas, such as ITIL, rather than functional certifications.

 

EL: Any comments on Nicholas Carr's book, Does IT Matter?,  or his Harvard Business Review article, "IT Doesn't Matter"?

 

DG: I wrote an article called "Evolving Toward a  Services-based Organization" for Network magazine, in response to his article. Carr failed to discuss the nature of the dialog between IT and the business units. Ten years ago, the dialog between the two focused on how IT could help the company achieve a competitive advantage. Today, we talk about IT as an enabler.

 

How do you engage IT in a productive dialog with the business units? Quality measures, such as ITIL, stress a governance model that aligns with the business demands and IT. The governance model is the forum for IT to have a discussion with the business.

 

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

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Tom Parish

by Elizabeth M. Ferrarini

 

The CIO role at organizations with more than a $1 billion in annual revenues has changed. That's the finding in Ellen Kitzis's, book, The New CIO  Leader. A group vice president at Gartner's Executive Programs -- a membership-only program for more than 2,000 CIOs -- Kitzis says that many large corporations have one corporate CIO, who is responsible for the overall strategic direction of IT, and dozens of other CIOs, who are responsible for keeping systems up and running. However, that CIO model doesn't quite fit The Hartford Financial Services Group, one of the largest and the oldest financial investment and insurance companies based in the U.S.

 

With annual revenues of $2.3 billion, The Hartford has a corporate CIO and senior vice president (Ken Auman) and five regional CIOs, each directly aligned with a specific business division. Together, this team of six IT senior executives oversees the leadership of 1,800 IT professionals. The role of a divisional CIO at The Hartford, however, can make or break how competitive a division's product will be in the marketplace.

 

Andrew MacDonald functions as the CIO for the personal lines division, overseeing a staff of 250 IT professionals and about 150 contractors, depending on the projects at hand. He, along with the other divisional four CIOs, reports directly to Auman and indirectly to the president of the personal lines division. MacDonald's role does consist of developing and maintaining systems support of the personal lines operation. Moreover, his role has two strategy components: ensuring that the IT team can provide products and solutions to meet the division's ongoing needs, and providing defined business value through key investments to meet future needs. Prior to joining The Hartford in 2002, MacDonald worked as a vice president for strategic alliances for a worldwide product vendor, where he gained experience delivering complementary products to support the mission of international organizations.

 

Enterpriseleadership.org recently spoke with Andrew MacDonald about his role  as a divisional CIO. Here's what he had to say:

 

EL: What does your governance model look like?

 

AM: The company has several governance boards -- one board covers the needs of the property and casualty business, and the second board governs all of the business strategies. The latter looks at how we're going to drive business value for The Hartford. A portfolio management team governs corporate business strategy execution within each division.

 

EL: At a recent Computer Science Corp. conference, you told the audience they need to take a hint from the fast-food industry and adopt a pilot approach to developing new products. Can you talk a little more about this concept?

 

AM: Traditionally, the insurance business has not taken advantage of IT. That attitude has started to change. We're now seeing a lot of new players getting their products faster to market than some well-established companies.

 

At the conference, we talked about how companies can approach new ways of doing business by deploying IT systems. For example, the fast food industry tends to identify a market, tests the product in a specific market, and then decides if the test results justify rolling out the product to other markets. We also tend to identify pilot opportunities, test the market with the new product, and weigh our market share opportunities. We use new techniques, such as speed to market, to gauge their effectiveness. For example, the configurable engines in our rating systems and our underwriting systems enable us to make product changes very quickly.

 

EL: Computer Sciences Corp. is a big Six Sigma company. What kinds of  best practices do you use at The Hartford?

 

AM: Many years ago, we started using Six Sigma methods to make business operations more efficient. The large-call customers that support our customers have benefited greatly from Six Sigma.

 

We've started to look at how IT can leverage Six Sigma alongside of our mainstay best practice, Capacity Maturity Model Integration (CMMI). These two best practices can help us to measure our IT transformation and to help us make better use our of IT talent across the five divisions.

 

We use CMMI to measure the effectiveness of our applications development process. We also use the IT Infrastructure Library in support of our actual products.

 

We recently created a shared service that is deploying both CCMI and ITIL across our five divisions. This shared service enables my group to focus on the applications suite used in the personal lines division.

 

EL: You mentioned an IT transformation at The Hartford. Can you go  into more details about this?

 

AM: We began this transformation in 2003 to look at how well we get things done. We needed to drive more capabilities into IT. Where it made sense, we decided to leverage outsourcing to maintain some of our legacy applications. This structure has enabled us to have our talented IT people work on new products.

 

EL: How is the transformation helping to drive cost out of  IT?

 

AM: Each division's portfolio management group is helping its respective IT organization make better business decisions. For example, we want to create full transparency about where we spend our money. This goes for both on-going maintenance and the investment in new products. What does and what doesn't provide a competitive advantage to The Hartford are important business decisions. That's the whole idea behind the transformation. The process has created a much-needed dialog between IT and the divisions. It has allowed that transparency to be leveraged.

 

EL: Do you have any CIO rotation program going on where you spend  some time running a business unit?

 

AM: No, we don't have any such rotation program. The model is to have each CIO linked to the respective divisional organization. We try to sit with the division folks, attend their leadership meetings, as well as meetings with the corporate CIO and the president.

 

EL: As part of the transformation, what types of IT talented are you  seeking?

 

AM: We're focused on how we can hire the best talent possible and to continue to nurture talented professionals. We're hiring a lot of MBAs to be business analysts. We're also looking for professionals in project management and software architecture. We're heavily developing both of these areas.

 

EL: What is the role of business intelligence in your  organization?

 

AM: We're tracking other IT shops to determine what capabilities they have to support their business units. Specifically, we want to look at how some of our competitors are leveraging IT to deploy new solutions. We're constantly looking around to see if they are using best practices or are there better things we should be doing.

 

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Elizabeth M. Ferrarini is a freelance technology writer and  IT consultant from Boston, Massachusetts. Reach her at elizabethferrarini@yahoo.com.

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Tom Parish
by Elizabeth M. Ferrarini

 

Mark Iwanowski has taken several major risks in his professional career, as well as helped to prevent IT risks. During his four years as chief information officer for Oracle, the world's largest enterprise software company, Iwanowski spearheaded the integration of Oracle's global IT with Oracle's global product support. The end result was the transition to an IT services model, resulting in $1 billion in cost savings.

 

He left Oracle to become an executive-in-residence at Trident Capital, where he serves as CEO of KSR, a provider of risk management services. Iwanowski has been responsible for helping KSR acquire several companies. He also serves on the board of directors for several Trident portfolio companies. Prior to Oracle, Iwanowski managed an outsourcing operation for SAIC, the world's largest private systems integrator; and previously oversaw a $200 million sales and research and development budget for Raytheon Corp.'s Submarine Signal Division.

 

Mark Iwanowski recently spoke with Enterpriseleadership.org about the cultural and management risks he faced in consolidating IT at Oracle, and the career risks he has taken. He also gives some advice to other CIOs who want to venture in his footsteps. Here's what he had to say:

 

EL: Larry Ellison, Oracle founder and CEO, moved to transition Oracle from a software product company to a service company. How did that affect you as CIO?

 

MI: The IT challenges included how to consolidate a lot of decentralized IT operations and Oracle software redundancy, how to get local managers to give up control of their IT operations, and how to get the local corporate managers and the development staff to support a consolidated global IT service model.

 

We pulled it off because Larry Ellison, who I reported to, gave me 100 percent of his support. Local managers eventually accepted the economic benefit of having one global incident of Oracle software. For example, prior to this move, we had 50 incidences of Oracle email running worldwide. I'll admit that the move was painful and risky for IT. Despite Ellison's backing, we still had to convince these people that the move was in their best interest. At the same time, we had to make them a satisfied service user.

 

EL: Can you go into more detail about some of the data integrity issues a  CIO of a global company has to deal with daily?

 

MI: You can lump all of the data integrity issues under the umbrella of how you manage risks that involve the company's operations. Keep in mind, the CIO ends up touching just about every level of the company -- from dealing with the board of directors about Sarbanes-Oxley to fixing a failed fiber link for managers in countries affected by an earthquake. Unlike any other part of the organization, IT, and especially the CIO, has to deal minute by minute with managing risks. To this end, the CIO has to build risk management into every aspect of the IT organization.

 

EL: Can you describe some of the key challenges you encountered as CIO of  Oracle?

 

MI: Because we were a major software company, the IT organization became the first beta test site for Oracle products. Another challenge IT faced included managing a 24-by-7 business that exists in 150 countries around the world, and keeping up with the data integrity requirements relevant to each country. For example, a privacy law in one country might directly conflict with the tax retention laws in another country.

 

EL: You've gone from being a CIO to an executive-in-residence of a venture capital firm to being CEO of one of the firm's funded companies. Should the CIO role be rotational among executives in a company?

 

MI: First of all, professionals from all types of backgrounds -- ranging from finance to engineering -- fill the CIO role in global companies. You can group CIO backgrounds into two camps: those who've come from the business side of the house where they rely on others to make technology decisions, versus those who've come up the IT ladder and have had to learn on the job how to run a business.

 

Each camp offers its own downside. The professional from the business side of the house might not be able effectively to communicate how IT can help the business units. Conversely, the career IT professional could find him or herself feeling uncomfortable about answering regulatory questions (such as Sarbanes-Oxley) posed by the board of directors. Because of the Bernie Ebbers's trial, board members have become more and more accountable to compliance issues. No one wants to see their company featured on the front page of The Wall  Street Journal.

 

Rotation in and out of the CIO role could help professionals from either camp minimize their respective shortcomings. The IT professional could get some experience managing a business unit, and the business professional could get more hands-on experience with a technology-intensive operational unit, such as manufacturing. The bottom line here is that the CIO needs to be able to answer the ABC questions -- asset management, brand protection and compliance-related management issues.

 

EL: What were some of the best IT practices you introduced at Oracle?

 

MI: Because IT operated in a beta mode and we went through a global consolidation, I brought in and deployed a team of Six Sigma blackbelt professionals throughout the organization. They helped us to find and correct weak IT links. Once we consolidated and standardized IT globally, I worked closely with the software development side to adopt the Capability Maturity Model Integration. Several years ago, Oracle received a lot of negative press about releasing buggy software. The CMMI best practice helped the company to carry out a more rigorous quality assurance process for testing software.

 

EL: Why did you leave Oracle and go to a VC firm?

 

MI: Early in my career, I was involved with two startups. Before Oracle, I ran an outsourcing business at SEIC, which had its own venture capital firm. Business unit managers, like me, participated in decisions about what companies the VC firm acquired or funded. In time, the success of one of those acquisitions became my charter. SAIC gave me the chance to help other entrepreneurs build their business.

 

Although it is a major corporation, Oracle offers a culture of entrepreneurship. That's Larry Ellison's mantra. The company's software supports every aspect of the enterprise. It's is a good training ground for dealing with innovative products and technologies that mid- to large organizations want to deploy.

 

I always wanted to leverage investing in startups with overseeing one. Trident gave me the opportunity to wear both of these hats.

 

EL: What advice would you give to a CIO who wants to move out of this role completely, and, say, become a venture capitalist or CEO?

 

MI: A lot depends on the person's aspirations. I know many CIOs  who want to stay put. They like being tied to the technology ladder. A CIO of a technology-based company should have no trouble moving into a CEO role or even a spot in a venture capital firm. That's what happened at MCI. However, this role change might be hard to accomplish if you're working for a major healthcare organization.

 

In 2005, I was at a conference panelist with three other former CIOs  who were now at venture capital firms. We were asked how we made the transition into our new role. In summary, I offer the following: "If you like being in an entrepreneurial space and building a business, then consider the CEO role. On the other hand, if you like being absorbed in the latest technologies, and you can step back from daily management duties, then consider becoming an executive-in-residence at a VC firm."

 

EL: What is your game plan for the next few years?

 

MI: I want to continue in the role I have. Eventually, we will find a COO who could step into the CEO role. When that happens, I can move into the chairman role and also help KSR acquire new companies and or help Trident to fund new ventures.

 

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Elizabeth M. Ferrarini is a free-lance technology writer from Boston,  Massachusetts. Contact her at elizabethferrarini@yahoo.com.

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Tom Parish

by Elizabeth Ferrarini

 

Staying on stop of best business practices in IT -- especially for privacy, security, and new technologies -- has become a hallmark for the CIO at one of the largest teaching hospital organizations in the United States. Dr. John Halamka has managed to combine his training as a medical doctor with an innate ability to understand all aspects of computer networking.

 

Dr. Halamka oversees the IT needs for CareGroup Health Systems' three major Boston-area hospitals -- Beth Israel Deaconess Hospital, Mount Auburn Hospital, and New England Baptist Hospital -- and three community hospitals. Together, the six CareGroup facilities have about 12,000 employees, including 3,000 doctors who see about one million patients per year. Halamka is also an associate dean of Harvard Medical School where he spearheads all of the technology programs.

 

Halamka got a jumpstart on EDI long before HIPAA came along, and his security and privacy practices at CareGroup appear as a case study in a book by the National Academy of Sciences. He took a minute to answer some questions about what he has been doing in EDI, security and privacy, how he keeps up with technology, what he learned from an outage that plagued two hospitals for almost two days, and what types of technology he uses every day.

 

EL: Can you summarize the high points of your entire network  infrastructure?

 

JH: About 225 employees maintain the IT infrastructure consisting of 8,000 desktops, 32 terabytes of storage, and 25,000 network ports throughout the 45 miles of wide area network (WAN). A 155MB per second SONET backbone connects the WAN. Most of the networking gear -- firewalls, virtual private network (VPN), routers, and switches -- comes from Cisco. Either Hewlett Packard UNIX servers or Compaq Windows 2000 servers front end several EMC Symmetrix storage area networks. A StorageTek tape library handles all enterprise backups.

 

EL: Once you were finished planning for Y2K, you had to start worrying about HIPAA. How did you lay the preliminary foundation for HIPAA requirements such as electronic data interchange (EDI)?

 

JH: Back in 1998, even before Y2K, the CIOs of our provider organizations formed a consortium to enable the entire New England payer provider community to create EDI transactions among ourselves for free. The New England Health EDI Network went live in 1999 before HIPAA EDI transactions for benefits and eligibility.

 

Since that time, we've used a common infrastructure -- basically Napster for healthcare -- or point-to-point interaction using a VPN between payer and provider. The VPN sends encrypted transactions through a common gateway we've built for referral authorization and our claims, and Web status inquiries. In October 2002, we completed all of the EDI HIPAA transactions for New England.

 

EL: Privacy is a challenging area for all types of organizations. How would you rate your privacy best practices for the past few years?

 

JH: I'd rate them as excellent! We're one of the test cases  featured in the leading book about healthcare privacy. For The Record --  Protecting Electronic Healthcare Information, published by the National Academy of Sciences, covers best practices in authentications and access control, auditing, physical security, and disaster recovery.

 

EL: What kinds of initiatives do you have in place for  privacy?

 

JH: Since the early 1980s, we've been auditing every transaction that goes through any one of our clinical systems. We've got a Web site called PatientSite where any one of our patients who has received the appropriate authentication credentials can review his or her security audit online. We can also give a patient a printout of the security audit.

 

We've got a strict no-tolerance policy for confidentiality violations. About three or four employees get terminated every year because of these violations.

 

EL: What have you been doing to increase privacy?

 

JH: Each employee needs to be completely trained in all aspects of privacy. For example, every patient needs to be notified about our privacy policy and to sign off on it. A patient needs the opportunity to opt out of certain things, such as automatic enrollment in fundraising activities. We require a great deal of manpower to train our 12,000 employees. So we've selected individuals from key departments, such as IT, human resources, and medical records, to work together to conduct training sessions.

 

EL: You can't have privacy unless you have security. Unfortunately, HIPAA still doesn't have a hard and fast security rule right now. How did you decide what best practices to use?

 

JH: You need to sort of make one up. In other words, ask yourself, what are those security elements that are absolutely required to meet the privacy regulations, effective April 2003.

 

We've had some very good security best practices for many years. For example, every Internet transaction always has 128-bit secure sockets. All strong authentication passwords must have a minimum of six characters, consisting of alphanumeric characters; these passwords expire in 90 days.

 

Based on the information in For The Record, we created a grid to rank the security provisions for each one of 400 different IT systems. Because there is no security rule, we're not sure if 128-bit secure sockets are good enough. What about Triple DES? We looked at all of those things that didn't meet the spirit of best practices. We've begun to remediate, for example, systems that didn't have passwords or didn't have audit trails.

 

EL: What are your feelings about security technologies such as PKI  and biometrics?

 

JH: We tried PKI about four years ago. It didn't work for us. Maintaining 12,000 certificates for that many employees can became an administrative nightmare. We use PKI, in one sense, to do secure email between our trading partners. A company we use offers a secure, SMTP gateway for certification exchange between organizations. Each transaction remains encrypted as it travels over the public Internet from payer to provider or between two large provider organizations. These aren't personal certifications, but organizational ones.

 

Biometrics doesn't work very well in healthcare. You can't have false negatives. Imagine you're attending to a critical patient. You can't get the patient's chart because the patient has a sweaty thumb print.

 

EL: Is there any special device you use to handle  authentication?

 

JH: We use a device from BlueSocket on both our wireless and our wired networks. The device hits the LDAP directory. We think WEP or the wired equivalent privacy protocol isn't sufficient. It uses a single key for all clients. Once someone cracks the key, your security is compromised. With the BlueSocket device, you need to specify your user name password in order to access an application.

 

EL: Shifting gears from security and privacy, what types of new technologies are you considering that will enhance the quality of care physicians provide to patients?

 

JH: We're carrying out RFID to track critical medical equipment in the emergency department using devices from Pango Networks. Over the next year, we'll be using bar-coded wrist bands, bar-coded medications, and bar-coded employee badges to track medication administration.

 

We have two million square feet of wireless to ensure our clinicians have all of the information they need to deliver quality care.

 

EL: Several years ago, The Boston Globe and all of the computer trade press publications carried the story about a network outage at two of the CareGroup hospitals. Can you briefly tell what happened and what you learned from the experience?

 

JH: On Wednesday, November 13, 2002, the network experienced a major slowdown for three days. The CISCO technical support team found the Layer 2 structure of the network to be unstable and out of specification with 802.1d standards. The management VLAN in some locations had 10 Layer 2 hops from root. The Spanning Tree Protocol (STP)  imposes a maximum network diameter default of seven. Thus, two distinct bridges in the network should not be more than seven hops away from one to the other.

 

A major contributor to this STP issue was the network and  Picture Archive Communication System (PACS) network, for sharing high-bandwidth visual files and other clinical data; this was 10 hops away from the closest core network switch, three too many for the spanning tree to handle. To eliminate its influence on the CareGroup network, we isolated it with a Layer 3 boundary. All redundancy in the network was removed to ensure no STP loops were possible.

 

I learned that infrastructure must be lifecycle-managed per a multi-year strategic plan and not simply replaced at end of life. You need to retire legacy network. You also need to demand review and testing of network changes before you carry them out. Good downtime procedures must accompany each application we carry out. Another lesson is that a disaster recovery plan addresses all the details of a disaster. You need to plan employee logistics, communicate realistically, prepare baseline backups, and focus disaster plans on the network, not just the integrity of the data.

 

EL: One of your colleagues said that you're really a bionic CIO. What  types of devices do you carry with you at all times.

 

JH: I'm connected at all times and on call at all times. I have a Blackberry 7290 (Bluetooth enabled GSM/GPRS phone), which I use to answer 500 daily emails. It's also fully integrated via Bluetooth into my 2005 Toyota Prius so I'm completely connected when I drive. I also carry a nationwide pager for redundancy. My medical information is implanted in my right triceps, should I ever need medical care.

 

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Elizabeth Ferrarini is a free-lance writer from Boston,  Massachusetts. Reach her at iswive@aol.com.

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Tom Parish

by Elizabeth M. Ferrarini

 

Once upon an Internet time, an upstart company climbed out on the leading ledge of ingenuity to shake a legacy industry to its core. In 1983, E*TRADE Financial completed its first consumer-based electronic trade via Compuserve, a dial-up, PC-based online service. A decade later, E*TRADE began offering brokerage services directly to individual investors through several online outlets. E*TRADE.com opened for business on the Web in 1996. Today. the site handles about 180,000 transactions between 9:30 and 4:00 p.m., and can have from 50 to 100,000,000 Web hits a day.

 

Because of the site's initial popularity with consumers, E*TRADE Financial's IT organization decided to nip two potential challenges in the bud: how to build an infrastructure to handle an infinite volume of financial transactions, and how to give customers assurance that their identify and assets would always be secure. Enterpriseleadership.org spoke with Greg Framke, CIO of E*TRADE Financial, about the adoption of open source software and the on-going search for better security tools and techniques. Prior to E*TRADE, Framke was director and COO for global equities technology at Deutsche Bank in London.

 

EL: Describe your IT infrastructure?

 

GF: To us, E*TRADE.com is one, big application, which serves as our storefront. We're a direct provider of financial products and technology to consumers. Our technology isn't any different from that of any other financial services company.

 

The infrastructure consists mainly of one- and two-U Intel-based machines running RedHat Linux. Our Web servers run Apache and our application servers run TomCat -- two Open Source products. We're finishing up a migration of BEA's Tuxedo, a transactional monitoring middle layer that is 90-percent Apache and 10-percent IP of our own. Our data warehouse runs on a distributed, clustered Linux DB2 installation. Our highly available, clustered databases run mostly on Sybase. We use it for replication as well.

 

EL: You've been running Linux since 2000. Can you talk about the  decision to move to it?

 

GF: From 1997 to 2000, we were a big user of very expensive Sun Microsystems's 4500 enterprise servers. Sun was the vendor of choice for companies plugged into the Internet, but several undercurrents were going on. Linux was maturing as a set of routines. Likewise, we were in touch with several large companies and were running production Linux or open BSD systems.

 

We analyzed what it would mean to deploy Linux, and were amazed to learn that we could save tens of millions of dollars a year if we did so. In late 2001, we ported some of E*TRADE.com to Linux as a trial. When Hewlett Packard and IBM announced their support for Linux, we had no trouble selling it to our CEO, and the following year, we started aggressively to deploy Linux throughout our enterprise. It not only enabled us to save money, but it performed better and is more stable than Sun. It's been an incredible win for us.

 

EL: What are some of the big things that stand out about going to  Linux?

 

GF: We average about 400,000 unique log-ins per day. Linux enables us to handle this volume better than Sun would have done. Before Linux, we had 10 and 12 CPU Sun machines. Now we deploy one- and two-U machines in a stack. Adding capacity consists of buying a stack of very inexpensive machines. When machines come off warranty, we don't bother to put them on maintenance. We just let them run until they fail.

 

EL: Are there any other areas where you're considering deploying  Linux and open source?

 

GF: We continue to deploy open source wherever it makes sense for us. Right now, we're testing some open source security products. They're pretty specific, and there's lots of them. We're also looking at open source databases.

 

EL: Have you experienced a security snafu?

 

GF: We don't publicly disclose security snafus. However, we perceive ourselves to be a leader in security. We're very public about what customers can do to protect themselves and what we do to help protect them. We have a track record of being out there in front and doing a good job of security. In January 2006, we came out with the complete protection guarantee. It will protect consumers from any security issues they may have. A month later, Charles Schwab introduced a similar program.

 

EL: You're in a highly regulated business. Are any of your compliance  solutions running on Linux?

 

GF: This is one of these niche technology areas that tend to come out first on Microsoft. A lot of vendors feel that many of their customers are better able to support Microsoft. I'd argue that Linux or UNIX is just as easy to write to, or port to.

 

EL: Database security is often overlooked. What are you doing about  it?

 

GF: We encrypt all of the data -- either electronically or physically -- that leaves the premises for any particular reason. We deploy a variety of techniques within the enterprise to encrypt data.

 

This is an area that has room for technology improvement. It's going to be an area of growth, just like the proliferation of technology solutions to consumers.

 

EL: In 2005, you made the RSA SecureID token technology available to your customers. Why did you select this technology, and how does it work?

 

GF: We started offering the RSA SecureID token to all of our customers in April 2005. The technology is great. It's a little piece of hardware about the size of a key chain with a display on it. The six-digit number on the display changes every 60 seconds. To log into our site, you need your ID, password, and the six-digit number. If you are missing one of those three pieces of information, you can't log in. This is the best defense on the marketplace against key logging and Trojans. If someone steals your identify -- either offline or online -- he or she would still need that token to get into your account.

 

EL: Why did you select RSA, and what has been the acceptance rate for  the SecureID token?

 

GF: We looked at a couple of other security vendors' products. The RSA solution fit well with our technology and our infrastructure.

 

Security and privacy have always been important to us. We knew that two-factor authentication wasn't going to be the best practice for long. In 2003, we began to study this issue and to look at what was in the marketplace, and we decided that the hardware-based token offered the most amount of protection, offered mature technology, and was the easiest to carry out. Our customers responded favorably to surveys about using this technology. In fact, the customer pilot went great.

 

The acceptance for tokens doubled month after month. We have a sizeable number of customers who log into E*TRADE.com using the token (we don't publish how many). According to our surveys, the token has made customers feel more secure about doing business with us. In fact, we've seen an increase in the number of assets customers hold with us. We think there is a direct correlation between the two findings.

 

EL: Since you are in such a technology-intensive business, how do you  distinguish yourselves from others in your space?

 

GF: It's a tough market right now. Self-directed investors are a demanding customer base. You have to meet that demand. To this end, we've always given our customers value. Our flexible technology has enabled us to get innovative products to market faster than our competitors. For example, we were the first to offer a two-second guarantee: If we don't execute and confirm your trade on E*TRADE.com within two seconds, you get a free trade.

 

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Elizabeth M.  Ferrarini is a freelance writer from Boston, Massachusetts.

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Tom Parish

by Elizabeth M. Ferrarini

 

Can an organization's IT infrastructure helped to differentiate the organization strategically in the eyes of its competitors? In the infamous Harvard Business Review article, IT Doesn't Matter (May 2002), author  Nicholas G. Carr provides a gloomy prognosis of this happening today.

 

FedEx, however, has managed to create an IT infrastructure that has glowed brightly in the eyes of competitors since it started in 1971. In 2002, about $22 billion worth of business passed through FedEx's extensive package delivery networks.

 

Rob Carter, executive vice president and chief information officer of FedEx, says that his company's IT component "is the competitive glue that holds all of our businesses units together." While Carter refers to himself as a classic CIO overseeing applications development, the network infrastructure, and five data centers, he sets the technology direction for FedEx's global IT organization which has 6,000 employees and operates on a $1.5 billion annual budget.

 

Carter, who joined the company in 1993 and has received many industry recognitions, such as InformationWeek's Chiefs of the Year. He talks about FedEx's technology that built the package delivery business, FedEx's educational initiative to devise a major technological center in the South, best practices and cost models used by FedEx's IT organization, and, of course, Carr's article.

 

EL: In David Kirkpatrick's Fortune magazine opinion piece (May 28, 2003) about Nicholas G. Carr's Harvard Business Review article, IT Doesn't Matter, you say, "Everything in the company has IT inputs. It's the software stupid!" Can you explain what you meant?

 

RC: Carr's basic premise in the article is since the infrastructure is built out, you don't need to pay attention to technology anymore. To some extent that's true. We have a broad set of technology infrastructure in place. My comment, it's the software stupid, refers to the applications within the infrastructure as the key elements that differentiate you in customers' eyes. These applications will drive your internal productivity.

 

The battleground continues to be the application of that technology not the fact that you happen to have a computer system that runs payroll.

 

Everything we do at FedEx has a technology underpinning that supports not just our internal operations but the information we're able to provide our customers about shipments in the FedEx networks. We built the FedEx brand with a set of capabilities including, not only the operational excellence of FedEx, but the technology that allowed us to achieve this excellence.

 

EL: Can you summarize the technology that built your company and changed the competitive climate for well-established companies such as United Parcel Service?

 

RC: Our package tracking system was a unique offering at FedEx. It really built the industry of express transportation and information about the shipment. In 1978, Fred Smith, the chairman and founder of Federal Express (incorporated in 1998 as FedEx), said this great quote which is worth repeating: "The information about the shipment is as important as the shipment itself." Moving packages reliability was a key component of our initial success, but we were then, as well as now, about making customers aware of what was happening with their packages until they reached their final destination. We created that visibility to go along with the industry philosophy of reliable delivery.

 

Our package tracking system kept us ahead of the competition for about two decades. It wasn't until the 1990's that our competitors started to understand the value of the information and began to build their technology and information networks.

 

EL: If you apply what Carr says in his article, you're going to have shorter competitive windows for new, innovative technologies. What's your feeling about that?

 

RC: We don't know what yet-to-emerge killer applications will enable us to change the way we do business. It's like this: In 1899 when Charles Duell, the commissioner of the U.S. Patent Office was leaving his post, he remarked that we didn't need the Patent Office any more because everything that can be invented has already been invented. There are endless things yet to come; there's no question in my mind where we are with the application of information and technology.

 

Today, competition is more active and fierce than it was when we started the business. Everyone wants to provide the best possible information about every shipment moving through their systems.

 

I don't think any technology innovation will have a two decade advantage anymore. Some may have a couple years advantage as you get new technologies out there and customers adopt them. A certain first move advantage occurs. These customers get so hooked on your technology and your pricing they become so overwhelmed at the thought of switching to another competitor's offering.

 

EL: You have a gigantic IT organization. How is it organized?

 

RC: The majority of our IT organization lives inside of a shared services called FedEx Services. It provides applications support, and infrastructure support to all of the operating companies at FedEx Corp.

 

FedEx Services has a hierarchy of boards of governance, including an executive committee and strategic management level. All of the various lines of business report to the latter.

 

Our internal business partners work with various IT project management teams to launch new product offerings and or new business initiatives and strategies. The different tiers of governance bodies set priorities and plan the resources for IT for the upcoming months and years.

 

EL: Have you been looking at new businesses such as outsourcing transportation logistics for your customers, such as Ryder does?

 

RC: FedEx Supply Chain Services competes with Ryder on that kind of transportation management function. We go in and run sets of transportation services for companies.

 

EL: Have you adopted certain best practices models such as Six Sigma or  the IT Infrastructure Library (ITIL)?

 

RC: We know about ITIL. However, we've based most of our governance process on a component of Six Sigma. We've internally developed program methodology and governance structure that supports the IT component of our ISO 9000 certification. We've used a lot of the best practices out of the Capability Maturity Model, Six Sigma, and some IT Infrastructure Library.

 

I became quite enamored with the ITIL. In fact, the ITIL set of books are quite good and their content has provided basic reference points for a lot of our IT practices. Many of our groups use specific areas of ITIL, such as change management, but we don't use it end to end.

 

EL: What costs models do you use for IT?

 

RC: For the most part, we allocate costs back to the business units based on usage. This method isn't as fine grained as charging back for transactional services.

 

EL: A lot of companies got hit by the dot.com bust because they built out their infrastructure. How well did you folks weather this event?

 

RC: We continued to support huge growth in our Internet-based customers throughout the dot.com boom. Since the inception of FedEx.com in 1994, we've experienced at least 100 percent growth in all areas of our services. This site has provided us with massive customer interaction and customer service. We had no down side to that. We built our infrastructure as fast as we could and customers have continued to adopt it at an incredibly fast rate globally.

 

EL: You announced FedEx Institute of Technology. What will be its  focus?

 

RC: FedEx Institute of Technology, based at the University of Memphis, consists of a broad array of technology research and practical deployment. The Institute is a hub for applied IT in all different types of domains, such as bioinformatics, supply chain research, artificial intelligence, Internet-based computing, and telecommunications.

 

The Institute is a public/private partnership with the University of Memphis, FedEx, local government agencies, and area businesses throughout the South. We've used schools in the Boston area, such as Massachusetts Institute of Technology, as examples of how to grow a center for technological innovations and spin them off to support the local economy.

 

EL: To really be competitive, economist Lester Thurow, in his new book,  Fortune Favors the Bold: What We Must Do to Build a New and Lasting Global  Prosperity (HarperCollins), says that major companies need to have a chief knowledge officer (CKO) who functions like the Central Intelligence Agency. Do you have such a person?

 

RC: While we don't have a CKO, we abundantly serve this area. For the past 10 years, we've made a big investment in gathering intelligence. In fact, we've one of the world's largest information warehouses. We also have groups of brilliant PhD's who are excellent at applying customer-related information to how the business can be optimized and how customers can best be served.

 

EL: What strategic projects are you putting a lot of effort into for  2004?

 

RC: One particular project is the next generation in handheld computing, called the PowerPad, which we'll be rolling out throughout the summer. This revolutionary device takes the edge of computing all the way out to the customer. Its active communications capabilities enable it to be on the network. Embedded technology enables it to communicate with the truck, the printer, and the network components the courier has with him or her. Use of the device will change the information access the courier has when he or she is face to face with the customer. The device will also make the courier more productive while enroute to each destination.

 

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Elizabeth M. Ferrarini is a free-lance technology writer based in  Boston, Massachusetts, and is the author of two computer trade books.

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Tom Parish

by Elizabeth M. Ferrarini

 

For decades, American Water Works Company, the largest operator of water treatment and distribution plants in North American, shuttled school children and customers through its hundreds of facilities in 29 states, Canada, and Puerto Rico. Bruce Larson, American Water's security director, says, "Water was an open business. Each facility has its own security guard, set of locks, and alarms."

 

But the events of the September 11, 2001, caused management at the $2 billion company to raise the physical security bar at the 711 treatment plants. Larson says, "We realized that terrorists could kill some of our 18 million customers with our own product."

 

Post-911, Bruce Larson undertook American Water's security challenge by becoming responsible and accountable for all physical security, information security, crisis management, and business continuity throughout North American operations. He immediately put together a security plan, which became the model for the entire North American company, including the treatment facilities. And in 2003, American Water became part of RWE Thames Water, the third largest global water resource company.

 

Here's what Larson, a 17-year security veteran and consultant to a Presidential advisor on Homeland Security issues, had to say about maintaining water-tight physical security at the company's facilities.

 

EL: What does physical security include?

 

BL: It focuses on the critical operations at all of the water treatment works around the country. Specifically, we look at every aspect of security, from access control all the way to control of sensitive documents, and alarms.

 

EL: How do you know you are getting good access control?

 

BL: One of our goals includes reducing the requirement for humans to provide physical security controls. To this end, we focused heavily on automated access control, automated alarm systems, and automated video systems. To enter buildings, employees go through a turnstile with a smart keycard. Front desk security people spend their time validating the identify of visitors, and making sure they are properly escorted. Since 911, we've revised our visitation process at the treatment sites, and now focus more on where employees go in a facility.

 

EL: How do you monitor all of these systems?

 

BL: We have extensive contracts for monitoring our various systems. All 90,000 alarm points, along with badge access controls and video monitoring, feed into one, central computer system, and we can access this system anywhere in the business from a Web-based GUI. Our 24/7 central command center staff focuses on managing incidents surrounding these alarms. Each facility's monitoring station enables the staff to be the first response source. Because of the diversity of the physical operations sites and the number of false alarms, we have a standard operating procedure set for responding to alarm signs.

 

EL: How have you integrated physical security with IT?

 

BL: We've converged the business processes. However, you're always going to have different sensor systems or control systems, firewalls, and locks on doors. Right now, it's passwords and badges. Eventually, employees will be able to use the same access control keycard to log on their desktop PCs. Also, if the IT help desk gets a security-related incident, then it's turned over to my staff to manage.

 

EL: What does the security staff at a facility consist of?

 

BL: Every facility has its own set of unique challenges. Some locations might require more physical security guards than other location. Typically, each facility has an operations person who owns the business, including all local security operations, and, as a result, functions, at the central security contact. We also have certified water treatment plant operators who treat the water and make sure it is distributed. These operators respond to emergency situations first, followed by emergency personnel, if needed. An operations person at our command center is also assigned to respond to situations.

 

EL: Since 911, what new things have you learned about emergency  situations or security breaches?

 

BL: Security incidents can cause business crises, and business crises can disrupt security. For example, if a terrorist breaks into a critical operations facility, then we have a major business crisis. A major hurricane can cause a business crisis and, in turn, affect both physical and informatic security; a significant number of operations in the New Orleans areas have been challenged by Hurricane Katrina.

 

EL: How do you select the security systems you use for physical  security?

 

BL: Whether it's firewall software or a video monitoring system, we use tried-and-true systems we can configure out of the box. I'm opposed to developing any type of system. Our business is water, not security.

 

EL: You've just started to get involved in security for some of the parent company's international sites. How does physical security differ abroad from that of North America?

 

BL: In the U.S., each state has a variety of controls. Likewise, each country has its own set of legislative and regulatory controls for physical security of the infrastructure. Each country also sets a different social responsibility code. Some countries want armed guards patrolling the facility's perimeter, while the UK doesn't want to see any weapons.

 

Also, the financial impact caused by a major crisis can vary substantially. If there's an outage at a water treatment plant in London, then millions of dollars are going down the drain every second. A similar outage might have a lesser financial impact if it happened in Puerto Rico.

 

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Elizabeth M.  Ferrarini is an IT consultant from Boston, Massachusetts.

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Tom Parish

by Elizabeth M. Ferrarini

 

David Thompson, Symantec Corp.'s chief information officer, has a good track record for providing great value to both internal and external IT customers. During his tenure as CIO at PeopleSoft, he lead an enterprise transformation initiative that enabled the company to realize more than $100 million in savings and to increase the company's earnings per share. Prior to joining Symantec, Thompson was CIO at Oracle Corp. , where he oversaw the information technology group, and before that, he served as CIO for PeopleSoft.

 

At Symantec Corp., he oversees 1,300 employees located in three major worldwide global centers. His department runs all of the data centers around the world, the telephone network, all network operations, desktop support, and all the internal systems and operations, such as financial, human resources, customer relations management, and some of the line-of-business systems used to support renewals.

 

Thompson recently sat down with Enterpriseleadership.org to talk about his IT leadership efforts at both Symantec and PeopleSoft. Here's what he had to say:

 

EL: Can you tell me how you align IT with the goals of the business  so the company is more competitive?

 

DT: My role is to be the business leader of IT for my peers. I want to find out their pain and their objectives for the year. To this end, I need to make sure that my IT strategy aligns with what they're trying to accomplish and to put the appropriate infrastructure and resources behind the initiatives. We have multiple lines of business: consumer, enterprise security, and enterprise data availability. The IT organization supports all of these. For the consumer line, IT has provided an architecture and infrastructure to help customers renew their products, most of which are purchased via our Web site. Because we want our customers to extend their product subscriptions for a long period of time, we've spent a lot of time analyzing the renewals to find ways to retain our customers.

 

EL: Do you have a business intelligence system in place for the  renewals?

 

DT: Our enterprise data warehouse has analytics on top of it. At any time, we can look at our renewals customer base from a variety of ways, such as geography or demographics. The IT department has some business analysts who sit near the people responsible for querying the data warehouse for their business unit.

 

EL: What does your governance model look like?

 

DT: We have a centralized model using an IT portfolio management strategy for overseeing the intake of IT projects and the control and distribution of those projects. We use the CobIT framework for some of the major controls of IT. I chair the committee that sets the IT strategy and direction. I involve all of the key business leaders and executives of the company in this committee.

 

EL: How do you gauge the effectiveness of the governance  model?

 

DT: We measure the business value of every project that comes through our portfolio. The assigned business value metric is what we expect to achieve. Because IT is expensive, we want to maximize our investments. We go into every project knowing the costs, revenues to be generated, and the metrics we're going to have. Once the project goes live, we continue to measure our ROI.

 

EL: What is the biggest risk you've taken as a CIO and what did you  learn from it?

 

DT: It was the enterprise transformation process the CEO of PeopleSoft asked me to lead. We weren't leveraging the available products that could help us to automate a lot of our manual processes. By deploying a lot of self-service transactions, I helped the business remove intermediaries. In addition, by effectively leveraging automation, we were able to reduce headcount in IT. We realized more than $109 million in savings. This amount had a direct affect on PeopleSoft's earnings per share. The earnings conference call to investment analysts mentioned this transformation cost savings.

 

The CEO put me in a risky position. Realizing that the business leaders could gun me down at any moment, I worked carefully to understand what each one did and what their pain was. I aligned with them as a partner in this initiative. I got them to step up to the plate. I functioned as the lead project manager and the person the CEO held accountable for this initiative. In the end, I learned that if you're going to have a seat at the table, you're going to have to provide value to your internal customers.

 

EL: What innovative technologies are you considering for IT?

 

DT: We're looking at tools to help our data centers become more efficient. We have the luxury of drawing from the rich Symantec product family. For example, our Relicore acquisition provides us with some great enterprise vault technology.

 

I worked for an enterprise software company that didn't have very effective tools for doing discovery for lawsuits. In fact, I found the discovery process overwhelming. This isn't the case at Symantec. Our enterprise vault tools put e-mail in a vault by categories. When a discovery situation occurs, you can give the attorneys access to secure locations so they can back in time and find what they need for the courts. A new ruling has eliminated a lot of previous loopholes to get out of producing data for the courts.

 

EL: Do you have any comments on Nicholas Carr's book, Does IT  Matter?

 

DT: When I started to read it, I thought it was kind of controversial. The more I got into it, the more I started to understand Carr's premise -- business is the one in the driver's seat, and IT is its steering wheel. A lot of IT people put themselves on a pedestal, and then wonder why they loose credibility with the business units.

 

EL: Since IT uses a lot of Symantec products, do you still have a  vendor management program?

 

DT: I've just added a vendor management office. It's important to stay abreast of your contracts, and have governance in place so you can make sure you are getting the service the vendors have promised you. Also, a vendor management office enables you to maximize the strategic relationship you have with key infrastructure vendors.

 

EL: Do you think that IT is becoming more conservative these  days?

 

DT: It has become more rational, as well as conservative. The days of "Big-Bang," multimillion-dollar projects are gone. IT has realized that projects need to be carried out in more manageable chunks. You need to show regular delivery of business value to the entire company. IT has had to become more conservative because we're under more compliance pressure, as well as under pressure to mitigate risks.

 

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Elizabeth M. Ferrarini is a free-lance technology writer  based in Boston, Massachusetts, and is the author of two computer trade books.

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Tom Parish

by Peter Armstrong

 

Part 1  |  Part 2

 

Introduction

In The Canterville Ghost (1887), Oscar Wilde wrote: "We have really  everything in common with America nowadays except, of course, language." I have an English-American/American-English dictionary in front of me as I write this, and have learnt over the years that Americans think chips are crisps, whereas we British expect them to come covered in salt and vinegar and wrapped in a piece of newspaper. However, I digress.

 

All of this musing came about because I have the distinct feeling that IT and business people speak two totally different languages.

 

Business -- "IT spends too much and delivers nothing."

 

IT -- "They give me no budget and expect Rolls Royce service."

 

Business -- "I don't have time to learn all that techy nerd  stuff."

 

IT -- "I don't understand all that business mumbo-jumbo."

 

Business -- "I never understand the IT part of our board  meetings."

 

IT -- "I never understand the business part of our board  meetings."

 

Business -- "All I get from IT is a string of reasons why they can't  do what I want without lots of cash."

 

IT -- "They never invite me to explain what IT is doing / can do for  them."

 

Both -- "I just get the blame for everything that goes  wrong."

 

Let me try and explain why IT and business have to learn a common language and talk about some of the steps you need to undertake to get IT really working for your company.

 

A Typical Scenario

Your IT department has spent days gathering all the information on server availability, and has come to the board meeting ready to prove that they have been delivering 99.99% availability for the last week and cannot understand why anybody is complaining.

 

Unfortunately, the application is being used by online options traders who need a response time of less than 12 seconds in which to make a trade. Availability is meaningless to them without performance (a bit like giving me a Ferrari with no petrol in it: I am sure it is beautiful and works well, but frankly it is absolutely useless to me as it stands).

 

This is a simple example (which, actually happened), and you would think that it was obvious from both sides what was going on. The problem was that no one thought of explaining the issue in terms that the other side would not only comprehend, but also act upon sensibly. Had the IT department understood the fact that trades have a very short time in which they can be made, then the design of the system would have been totally different. However, would they then have had the chance to present the options available?

 

Many IT departments focus on the technology and delivery of availability of platforms, databases, and applications. Although all of these are important, it is how these elements interact to provide a business service that is the key issue. It is vital that the IT department understands not only the technology, but also the way that the technology interacts to deliver service. Dealing with technology in isolation can lead to huge problems when it comes to diagnosing service outages.

 

Say you are a car manufacturer who has just had the opportunity to try out one of your competitor's offerings, and you think that their paint finish (or whatever) is better than yours -- what do you do? You go to the manager in charge of the production line, give her a sample of the competitor's product, and ask why you haven't got the same quality. That manager will probably go away and do some cost estimates for various levels of finish, and present them back to you, possibly with some samples to match, and you will make a business decision based on costs, possible increased sales, and so on. Each side can rapidly understand what the other side wants.

 

The question is, if you were to ask your IT department about, say, availability for your applications, would you get the same level of response, or an answer couched in language that you don't want to hear, leaving you thoroughly confused? Does IT truly understand your business requirements and the options that it should be evaluating? Have you explained to them what you want in terms that they can understand?

 

Where the Problem Comes From

Background

IT managers and business managers have tended to be different types of people with different training. More and more, the need is arising for each party to be "trained" in the other's area of competence. This does not mean that business managers have to understand control blocks and log records, but they do have to understand that disaster recovery, for instance, can have multiple solutions involving varying levels of expense. How much data are you prepared to lose, how much time are you allowed for the recovery, how much money do you want to spend? The IT department can provide a solution if they are armed with the necessary business requirements, but they must also present the options in a clear and non-jargon-ridden way. They similarly need to have a fundamental grasp of business thinking. This is why more and more CIOs are being taken from the lines of business rather than a pure IT background, but they must be prepared to learn enough of the IT language to truly understand what is going on, and the IT department must learn how to communicate their options (and frustrations) to the CIO.

 

Mainframe to Distributed

The IT landscape has also become infinitely more complex. In the old days, you put in a big, central box -- a mainframe -- attached dumb terminals to it on a network, and that was it. The advent of distributed computing, with multiple storage options, all sorts of networks, and a plethora of ways to join it all together, has made it difficult for the IT manager (let alone the business manager) to keep track of all the options.

 

Dot.com Madness

Next came the era of dot.com madness, when systems were installed because it was possible to do so, not because this made sense. This meant that IT got the reputation of being able to do anything, but also the reputation for spending huge amounts of money with little (or, probably, negative) financial return. This era, thankfully, is now over. However, the pendulum has swung violently the other way, with all technology spending being seen as an extravagance, and with an almost frenzied demand for the IT department to squeeze every last drop out of the investment they have made already.

 

Obsolescence

Unfortunately, all computer equipment is designed with inbuilt obsolescence, and if you lag too far behind, it is difficult to get spare parts, maintenance, and so on. Also, user demands tend to escalate almost exponentially. In the old days, there was little or no direct contact with the end user, and hence, you could implement simple systems with crude interfaces, to be used by internal personnel only.

 

Then came the Internet revolution, and suddenly your systems were being presented directly to the end user, who wanted graphics, sound, video, and more. As a result, your network demands changed dramatically, the amount of data you had to store (for all those digital pictures and videos and audio clips) went through the roof, and you wondered what happened to all that money you spent on IT infrastructure.

 

How We Should Use IT

Requirements

Back in the "good old days" (actually they weren't totally good, but at least we did not have to watch those awful reality TV programmes), computer systems were usually designed based on user requirements. This approach got completely ignored for some years during the great dot.com fiasco, when a new method was used:

 

Can it be done technically

 

>YES, then do it and spend lots of money.

 

>NO, try to do it anyway, and spend lots of money.

 

You will notice a frightening lack of business principles being applied here -- will it save me money, will it make me money? Not difficult questions, but basically fudged for many years as they were made up from weird and wonderfully inaccurate, meaningless projections of how we were all going to use e-systems 24 hours per day and could not live without them. Not surprisingly, IT developed a reputation for spending money on stupid systems for reasons that were neither clear nor justified. A lot of the people in the dot.com arena were, unfortunately, technically brilliant, but totally business-naïve.

 

People then got more and more paranoid about what systems they should be using. Magazine management became common -- "it says in this magazine that UNIX/Oracle/SAP/SQL server/LINUX/Java/XML/SOAP/Web Services/whatever is the cornerstone of the future, we must have it." All of these are excellent in the right environment -- but are they necessarily the correct solution for every application? No. The fact that someone else is using a particular combination does not mean that you should be using the same combination -- the only advantage is that they may find the bugs (errors) first.

 

System Choice

So, what system should you be using? The only answer that I can categorically state as being correct is that there is no correct answer to this question. The choice should be based on the requirements, and they will include interface, performance, ease of use, availability, cost, and so on. Do not get hung up on what other people are running. Yes, you want to know if the combination works, but the fact that someone else is running a particular combination does not mean that it is correct for you.

 

There has also been a dreadful fear that you might be missing out on something. A few years ago, a lot of IT decisions seem to have been driven by magazine articles and comparison with other companies as opposed to the fundamental requirements of the business.

 

There is no single combination of platform, operating system, database, and so on, that is correct for all applications. Every business will run something slightly (or significantly) different, and that is correct for that  business.

 

Service

At the end of the day, the reason you are using IT should be because it enables you to deliver service to a user more cheaply, more efficiently, for longer hours, and more. In other words, you are using IT as a business tool, not to keep some IT techy happy. There are no IT projects nowadays; there are only business projects, which may or may not use IT.

 

So, IT needs to understand that its sole function in life is to enable the business to run better. This means that it is either helping to reduce costs, and/or helping to increase revenues. If it is not achieving either of these functions, then why are you using it?

 

Of course, the IT department is between a rock and a hard place as they are being told to reduce costs. So, what is by far the most important driver for IT -- quality of service -- is also the one that often gets pushed down the list of selection criteria when budgets are restricted.

 

Some managers see low cost and high quality of service as being mutually exclusive, but this need not to be the case. By using best practices, leveraging economies of scale and focusing on service delivery, IT departments really can deliver on their promises.

 

This also means that you have to start thinking about who is using the systems. Most IT systems are measured and designed from the point of view of the IT department, which is the totally wrong approach. The systems are there to service end users, so they should be designed and measured from the end-user point of view. The following are two examples to show you what I mean.

 

A few years back, my UK bank wrote to me offering 24x7 online Internet banking. Because I travel the world, and the ability to handle my bank accounts whilst on the road is very useful to me, I signed up. I started using the service, and it was frankly awful. It was nearer 19x6 than 24x7, the performance was poor, and the system was frequently down for hours at a time. So I used one of my company's products to measure the service from my point of view, printed the reports and took them to my bank manager. His response? "Thank you, Mr Armstrong, I have been asking for reports like this for years, you are the first person to show me what you are seeing. Can I have a copy?" I gave him a copy and also told him what was causing the problems (one of my colleagues used to work for them and knew what was wrong). I am glad to say the problems have now gone away, the users are much happier, and they now have an online service that is competitive, and is saving them money. And yes, I am a lot happier and decided to remain a customer.

 

Probably the longest-running, and in my opinion, best e-business service, is the ATM (cash machine). Here is the intelligent application of technology to provide a useful service to the end user, that saves transaction costs (it is much cheaper to service me via an ATM than via a human being in a branch of the bank).

 

--

 

Peter Armstrong joined IBM in 1976 and was the UK Country IMS specialist. He helped design parts of DBRC and wrote the Recovery/Restart procedures for IMS disk logging. He joined BMC Software in 1986; these days, he is a corporate strategist, responsible for the increasingly important domain of how business and information technology need to work together. Peter is also a prolific writer and has authored Database Recovery Control (DBRC) in Practice.

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Tom Parish

by Elizabeth Ferrarini

 

What has been the number one organization to work for in IT for the past two years? It's the University of Miami, according to an annual ranking done by Computerworld. Dr. M. Lewis Temares, the University's CIO and Dean of the College of Engineering, deserves the credit for shaping an outstanding work environment. CIO magazine named him a CIO 100 Award winner in 2003.

 

As the first official CIO among the nation's 4,000 colleges and university, Dr. Temares oversees the university's $35 million IT budget for the following areas: computing, telecommunications, university planning, institutional research, and testing center. His academic role consists of managing a $12 million budget in the University of Miami’s sixth largest academic unit.

 

Recently, EnterpriseLeadership.org spoke with Dr. Temares about everything from quality practices to employee retention. Here's what he had to say.

 

EL: Several years ago, you completed a $31 million telecom project on  plan and below budget. How did you accomplish this?

 

LT: We used a scope diagram to organize what our personnel resources were going to do. Our methodology consisted of Arthur Andersen's Method One. We tried to get everyone involved from the start. We told everyone, including business analysts, beforehand what they had to do to complete the project on time.

 

EL: Do you use Six Sigma or any other best practices for  IT?

 

LT: We use quality practices such as Six Sigma and the IT Infrastructure Library (ITIL) throughout our organization. In fact, our Center for Excellence in Information Technology Center program trains executives in these areas. We offer an entire suite of training for IT professionals who plan to move into the CIO role.

 

EL: Are you seeing a lot of demand for ITIL training?

 

LT: We don't know about the rest of the country, but demand for IT training and certification has certainly hit Southern Florida hard. We're seeing more and more companies sending people to get certified in ITIL. In fact, our proposals to train IT personnel for companies often include ITIL.

 

Our Six Sigma faculty includes Howard Gitlow who was a disciple of Dr. Deming who developed quality standards such as Six Sigma. Gitlow has written extensively on the subject.

 

EL: I read that you never make yourself the prime sponsor of a  project. Why not?

 

LT: The IT organization supports the business process. If the people in the business units don't need any technology, then we're wasting our time forcing change down their throat. Instead we need to introduce technology to people and explain how they can use it, and then get them to buy in and support projects. Thus, the project sponsor is always the end user.

 

EL: Do you have a governance board?

 

LT: We've an IT advisory council for the entire university. Every school and every department has a representative on the council. The dean of the Marine School, who has a background in computing, heads up the Council. It also consists of a variety of subgroups that guide IT policy and procedures. For example, the student advisory subgroup suggested we sign contracts with Napster and Microsoft. The latter contract provides us with campus wide support for all Microsoft products. This subgroup also advised us on specifics which needed to be written into these contracts.

 

EL: Since you've been with the school, the turnover in IT has gone from 50 percent to an average stay of 12 years. What's your secret for retaining employees?

 

LT: People stay because of the friendly work atmosphere and the rewarding work environment. I try to make working here both challenging and exciting. I allow my staff to try new things. We're willing to work with employees and provide them whatever training they need.

 

Following the dot.com bust, we hired a lot of good IT people to handle the expansion of our facilities. Unfortunately, we don't have as many openings now as we would like. We've an open hiring policy where we look both inside and outside for the best candidates.

 

The University also has the good fortune to have a president who is very visionary and can make decisions rapidly. She has a wonderful way of dealing with people.

 

EL: Are you working on any cost savings or cost avoidance projects  right now?

 

LT: We do continuous improvement projects on both the end user and IT sides regularly. These projects have two goals -- saving money and doing things better. Currently, we're looking at how we can use data warehousing and document management to help the business units save money. We're also consolidating our servers to reduce our telecommunications costs.

 

We've an on-going wireless project all over the campus. For example, the new student housing units will have a hardwired network, which we'll add secure wireless connectivity to. This technique provides students with the convenience of wireless from any place on campus at any time.

 

EL: Customer service is really important to you. How have you  improved it since you've been on the job?

 

LT: We're constantly doing surveys. Every time we do a telecom repair or an installation, we drop off a sheet and ask the user to tell us how we did. We analyze all of the findings and report on the results. Based on recommendations, we try to make things better.

 

We also have a 'listen to the customer' initiative where we go to each department and ask how we're doing. We complete a form that shows them how they can save money. We helped some departments realize they were spending extra for phones they didn't need. This effort helped us to save about $230,000 a year in telecommunications costs.

 

EL: What can a CIO in the private sector learn from you?

 

LT: Talk to the internal and external customers. They need to know what you're doing, what you're capable of doing, and how you're truly willing to help. Market what you do. Be nimble, quick, and visible.

 

EL: How did the Center for Excellence in IT come about?

 

LT: It came about because of some of our other initiatives to provide IT services to the private sector. For example, I just finished a grant proposal for a biosciences business virtual incubator. It would provide our resources, such as our network, to start-up biosciences businesses, enabling them to do research. As for the IT Leadership Center, we're going to have to train people in these companies to use our resources. They typically can't afford what they need for IT support. The grant will cover all of these costs.

 

EL: Are you considering any new or disruptive technologies for the  next three years?

 

LT: We're always looking at new things. We need to keep on top of how we're going to maintain a high speed network and the related services to maintain it. For example, we're changing our voice mail system because the vendor is no longer supporting it. We're changing to an integrated message system that will allow access to voice mail, e-mail, and fax in one place.

 

EL: Are you doing anything with open source software, such as  Linux?

 

LT: We do have some Linux. We're watching how well the University of Indiana uses open source software for some business applications, such as finance.

 

EL: Any comments about Nicholas Carr's book, IT Doesn't  Matter?

 

LT: He's right when he says IT is so ubiquitous and not a key differentiator unto itself. I agree with this conclusion. Anyone can buy Cisco equipment. The differentiator will always be how people deploy that technology. How do you negotiate to get the right type and amount of equipment on time and on budget? What makes Fedex, UPS, and DHL work is how they use the technology to provide good customer service.

 

Today a CIO needs to know about the technology, but doesn't have to be a hands-on expert in every aspect of it. To this end, a CIO needs to be able to bring people together to make the technology work.

 

EL: How you do divide your time between being a CIO and being head of  the engineering department?

 

LT: I spend half of my time in each place. I can only do so much in an 18-hour day. I try to give everyone my attention. I hire good people and empower them to do their job. I'm available to handle the big picture and any emergency situations.

 

--

 

Elizabeth Ferrarini is a free-lance writer and IT consultant  from Boston, Massachusetts. She can be reached at elizabethferrarini@yahoo.com.

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Tom Parish
by Elizabeth M. Ferrarini

 

During the past 10 years, the EMCOR Group has gone from bankruptcy to becoming a Fortune 500 company with $4 billion in annual revenues. Today, the company is a global leader in mechanical and electrical construction, energy infrastructure, and facilities services.

 

IT at EMCOR also has undergone a major transformation. When Joe Puglisi joined the company as chief information officer in 1999, a formal IT department didn't exist. He built a lean-and-mean, decentralized IT organization focused on meeting requirements of different businesses, grouped into specific industry segments. Enterpriseleadership.org spoke with Puglisi about the inner workings of his organization and about his traditional approach to IT. Here's what he had to say:

 

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

 

JP: The 120 individuals on my corporate IT staff oversee the company's technical strategy for the 70 companies that comprise the three major divisions -- construction, facilities, and engineering These divisions have a diverse and complicated set of requirements and businesses. Each company has either a full-time or a part-time local IT support staff, which reports directed to the operating company and to me via a dotted line.

 

Our job is to weave together all of the technologies each division uses. For example, the construction group uses technology for estimating, computer aided design, and collaborating. The facilities division has a vice president of technology who reports to me. He's put together a team of specialists who work through back-office systems and mobile technologies. Engineering is our newest division, so our role for Engineering is to help this division evolve.

 

EL: What are some of the job functions of people on the corporate IT  team?

 

JP: My staff consists of highly trained professionals who have specific areas of specialization. We deal mainly at the strategic level by working closely with our operating companies. The goal here is to understand the needs of each business. For example, the director of systems and special projects, who reports to me, does workflow analysis and introduces technologies that streamline business process.

 

We also oversee tactical and operational areas. A team of network specialists and software support specialists keep up with the daily demands of a highly technical infrastructure.

Our IT strategy is to outsource whatever doesn't add any value to our operating companies, such as desktop support and hosting servers. We also outsource applications development. We're indifferent to offshoring. We'll go wherever we can get the work done for the best price and with the best quality.

 

EL: What do you look for when you hire people?

 

JP: I look for a certain drive, or fire in the eyes. Because technical skills are easy to acquire, I place a lot of emphasis on good interpersonal skills. Being a good listener and having good business acumen rate highly with me.

 

EL: Several trade press articles have mentioned your "low-ego"  approach to project ownership. Can you explain this?

 

JP: IT isn't about our projects versus the business units' projects. We focus more on what EMCOR's customers want and how we can deliver it. The task at hand becomes, how do we partner with rest of the management team or the operations companies to show ways to improve service delivery and contain costs? We use IT as a strategy for maintaining external client relationships, as well as internal customer relationships. The business and IT can't be separated. When we work with one of the operating companies, we are essentially working with an IT professional who is an extension of my staff.

 

EL: Are you using best practices such as Six Sigma or  COBIT?

 

JP: We haven't needed to go with any of the formal best practices such as Six Sigma or COBIT. For the past seven years, we've been continuously improving the company's efficiency. The best training teaches you not to talk before you listen.

 

EL: Everyone talks about the need to align IT with the goals of the  business. How are you doing this?

 

JP: We've been doing this for seven years. Because of our strategic concentration and our decentralized structure, we're in a good position to deal with the diversity and complexity each division has. For example, every day our work-in-progress construction systems tracks thousands of jobs in hundreds of locations across the country. The system has more than 100 key performance indicators, and the information we pull together from the system regularly goes to senior management for their review.

 

EL: Do you have a governance board?

 

JP: We have the EMCOR management committee, which includes all the senior executives. Any major investments wind up for discussion at this committee's table. I chair an IT operational committee made up of the IT heads from each of the major divisions. The two-part agenda includes talking about what projects we're working on, and profiling new technologies we've encountered. We meet every six weeks.

 

Once a year, we hold a two-day, off-site IT Summit with representatives from the front lines of companies in each division. We talk about the corporate strategies and directions that we are taking.

 

Because we're a large company, we like to foster teaming by telling ourselves what we've learned from ideas in the outside world. We aren't eager to tell the outside world the good things we've learned.

 

EL: Can you talk about specific IT projects that have saved the  company millions of dollars?

 

JP: It's hard to quantify true improvements in the business based on customer delivery, customer experience (both internal and external), and increased revenue. We prefer to look at what is the relative cost of keeping a customer versus having to acquire a new customer? How do you capture all of that? We infuse efficiencies and effectiveness throughout the entire company. I don't know how you put a dollar amount on that. Things like saving the company millions of dollars by using volume purchase agreements are the tips of the iceberg.

 

EL: Are there specific platforms you use for each of the  divisions?

 

JP: We've a diverse portfolio of back-office systems, analytical systems, and tools. We're not concerned with everyone using the same tools. We're more interested in what tools will help us do specific jobs better.

 

EL: What's the biggest risk you've taken as a CIO and what did you  learn from it?

 

JP: I'd prefer to say that EMCOR has been the best opportunity of my career. I'm a triage expert. I have gone into three organizations where IT either didn't exist or it wasn't functioning at peak capacity. In each case, I created a highly functional and efficient base level and then got involved with the business to the point of driving it forward.

 

We've had 42 quarters of consecutive profitable growth. We're changing each day. The strategy for the next five years is to maintain a similar trajectory.

 

--

 

Elizabeth M.  Ferrarini is a technology writer from Boston,  Massachusetts.

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