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Tom Parish
by Elizabeth M. Ferrarini

 

The Harvard Business Review article (May 2003), "IT Doesn't Matter," by Nicholas G. Carr, caught the attention of CIOs at Fortune 500 companies, academics at Ivy League universities, and executives for major computing vendors. While Carr isn't claiming that IT doesn't matter, he, on the other hand, asserts that IT has diminished as a source of strategic differentiation for an organization. Carr says that extracting value from IT requires innovations in business practices. For example, he says that organizations need to manage large portions of their IT infrastructures more rigorously to reduce capital investment requirements and operating costs.

 

No one knows the value of doing what Carr suggests than Kin Lee, senior vice president of IT infrastructure at Honeywell in Tempe, Arizona, and a graduate of Harvard Business School. Lee oversees the global voice network and data network infrastructures for the $20 billion diversified technology leader's four business groups: aerospace, automated control systems, specialty materials, and power systems. Last year, Lee reduced IT expenses for the infrastructure from $650 million to $510 million -- a $90 million cost savings.

 

"IT isn't about technology any more. It's about how do you run this organization as a business." Lee says. "If you need to provide more bandwidth to a business unit, then you have to provide an expected payback. You also have to sell your ideas, not only to corporate management, but to each business unit, which might have ideas that differ from another business unit. You have to know how to bridge these gaps so you can deploy your agenda." Lee's strong technical and strong business background have well prepared him to run his organization. He has a technical undergraduate degree, a master's degree in operations research from Northwestern University, a master's in business in finance from the University of Chicago, as well as the Harvard credential.

 

Lee recently took some time to discuss his organization's IT model, to describe the use of best practices such as Six Sigma, and, of course, to comment on the Harvard Business Review article. Here's what he had to say.

 

EL: What does the infrastructure you manage consist of?

 

KL: My organization oversees and owns 6,000 servers worldwide and five mainframes. Most of the servers are midrange AIX servers. The rest are either Novell or Windows servers. We also manage 1,000 engineering workstations, and 85,000 global workstations at 1,000 locations. We manage the wide area network, the local area networks, and all of the voice communications, and consumable communications devices, such as cell phones. About 120 employees, as well as employees from our two major outsourcing suppliers -- IBM and AT&T -- manage the entire IT infrastructure.

 

EL: Tell me why you became a shared services IT organization and how  you've driven down IT costs throughout the company?

 

KL: In 1999, we began to centralize our services as a result of Honeywell's merger with Allied Signal. Before that, each business unit provided its IT support and its equipment. Our distributed model evolved into a centralized model, which enabled us to become a shared services provider. We outsource our computing maintenance requirements to IBM Global Services and our voice communications networks to AT&T.

 

The business units have IT professionals who support business applications, not the infrastructure. We work with these folks to understand if there are any unique business reasons why they need to do something a certain way. For the shared services model, we referred to Gartner Group's technology road map, as well as called upon other industry groups.

 

We reduced costs by re-negotiating our two major outsourcing contracts based on adding volume, such as the integration and consolidation, as part of the baseline services, and redefining service level agreements.

 

EL: How have you established costs for your services?

 

KL: We have a very detailed cost structure for our services. For example, we offer several graduated types of support for servers. The enhanced support is for servers requiring 7 by 24 availability and redundancy. The base support is fine for servers that need 8 by 5 support. Naturally, the enhanced support will cost more than the base support. The business decides what type of support it will need for each class of servers and their applications.

 

EL: Every aspect of your company uses Six Sigma. However, does your organization have any experience with the international best practices for delivery of IT services, called the IT Infrastructure Library (ITIL)?

 

KL: We adopted many of the elements of the ITIL service delivery framework, such as the service desk and capacity planning, and combined them with the Six Sigma discipline as a way to measure what we do.

 

For example, many companies measure performance at a component level -- a server's uptime. This type of metric doesn't mean a lot of things to business units. They want to know if we can get the job done. A lot of components form the user's experience. So, we have to monitor the end points for business computing, and then measure critical business computing.

 

EL: What does the Six Sigma training consist of?

 

KL: Six Sigma has three levels of certification. Everyone in my organization must achieve Green Belt certification. Mastery of this expert level consists of going through the training program, forming a project team, and carrying out a specific project to demonstrate use of the appropriate tools and the ability to obtain business results.

 

The tools consist of a cause and effect matrix, and a lot of control charts, which we use to report results to the business units. We use many Six Sigma tools to report our performance measurements, as well as to show the variation of performance. Perhaps, we need to reduce some of this variation.

 

EL: What projects are you currently working on that concern the  business units?

 

KL: We're still integrating all of our business acquisitions through projects such as service domain integration, and data center integration. We have a major initiative to go global by locating many transactional servers in regions such as Eastern Europe or Asia Pacific. Some of these servers will be doing network monitoring. We're increasing the amount of bandwidth to those areas. To date, we moved several U.S. data centers to our headquarters, and consolidated two data centers in Europe.

 

EL: Can you give me an overview of how your organization manages  storage growth?

 

KL: Over the years, we have cut the cost of storage management by consolidating many storage devices on to highly available EMC Symmetrix systems, as well as on less expensive types of storage arrays. Identifying critical data is a key requirement for us. To this end, we work with the business units continuously to understand which applications are critical and where the allocated data resides for those applications. If the data doesn't need to be kept online, then we archive it either to an online device or a nearline device. The data is still available as far as the business units are concerned.

 

EL: What does your manpower requirements look like for the next  year?

 

KL: Our headcount will remain flat. On the other hand, we're changing the skill sets to put less emphasis on technical knowledge, and more emphasis on business management, program management, and supply chain management. They can demand a 100 uptime for some things, but can they afford to pay for it?

 

EL: What did you think of the Harvard Business Review article, "IT  Doesn't Matter"?

 

KL: Any one in IT would disagree with the article. If you use IT as a commodity, then the organization will loose its competitive edge. On the other hand, if IT does not provide the right type of metrics, IT can impede the organization from staying innovative. For example, we're creating a data portal that connects all of the different sets of data -- change management data, service-level performance, capacity, and financial -- onto a dashboard for each business unit.

 

EL: This is the sixth year in a row that Honeywell has received Computerworld's award for one of 100 Best Places to Work in IT. What's unique on your IT environment?

 

KL: Honeywell provides a supportive culture that enables IT professionals to have a very productive, collaborative relationship with the business units. IT professionals also work with peers from major organizations such as IBM and AT&T. These companies also have best practices they must follow. IT professionals can hone their business skills through disciplines such as Six Sigma. have to change the skill sets because our main function consists of managing our suppliers. We have a lot of people who have enhanced their technical undergraduate degrees with a master's in business administration.

 

EL: Since you service four distinct business units, how do you keep  projects straight? How do you charge for your services?

 

KL: That's always a challenge for this type of an organization. Each one of our business units has a different set of customers and requirements. When we sit down with a business unit, we always talk about their requirements from both an application and a financial perspective. Technology is a given.

 

We have a program office run by 15 individuals. They work as the liaison between IT and the business for demand planning, forecast of business growth, and specific business requirements. Once a business unit's requirements have been established, the program manager works with the engineers to create the solutions, and then communicates with the business units to make sure the solutions meet the agreed upon requirements.

 

EL: How is your organization measured?

 

KL: Our overall success gets measured based on the aggregate of how well we're doing. For example, we measure our performance by service level agreements or commitments we publish to the business units. We also have financial targets we need to meet. However, if we're meeting the service level agreements but the business units aren't happy, then we're doing something wrong. That's why were putting a lot of emphasis on managing the end-to-end user experience and expectation versus the current service level agreement.

 

We also rely on customer satisfaction surveys that allow business units to say what they like and don't like about the IT support. We try to target a rate of eight out of 10 in each of the categories on a customer satisfaction survey.

 

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Elizabeth M.  Ferrarini is a freelance technology writer based in Boston,  Massachusetts.

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Tom Parish

by Elizabeth M. Ferrarini

 

With annual revenues exceeding $21 billion and 80,000 employees worldwide, Raytheon Company ranks as an industry leader in defense and government electronics, space, information technology, technical services, and business and special mission aircraft.

 

With more than 27 years of experience in the defense industry, Rebecca R. Rhoads, Raytheon's chief information officer, oversees the development and implementation of company-wide information systems, as well as the company's technical direction in IT. Because of the nature of Raytheon's business, Rhoads also has the daunting responsibility of managing  risk not only domestically, but in all of the international facilities where the company does business. She recently talked to Enterpriseleadership.org about governance, best practices, and risk management. Here's what she had to say:

 

EL: How is the IT organization structured at Raytheon?

 

RR: The IT organization has 3,000 professionals, comprised of infrastructure and data center, engineering automation, and engineering computing.

 

We have three different organizational models for IT. Each of the seven divisional CIOs oversees specific business units, and each business unit has IT employees who report to the divisional CIO. These employees provide unique services to their respective business unit. We have a shared service environment for functions that need to be managed across the enterprise, such as data centers, and we have IT executives who function like a ship's rudder. They make sure we have a solid strategy, a robust architecture, and an air-tight risk management.

 

EL: What is your governance model for how you gauge the effectiveness  of it?

 

RR: The IT governance model mirrors the company's overall governance model for making decisions and managing investments. As a result, our decision model and our vocabulary are consistent with how we run the business and how we run the company.

 

This governance model has proven to be a big advantage for us. It's one that's easy to teach, and one people are familiar with. It provides a good way to make sure we're aligned with the business and the company, and they can engage in the decisions more effectively. They understand what their role is when we get to certain gate reviews or certain decision steps. We use this for our major investments.

 

The other IT governance we have in place consists of a CIO cabinet of the seven divisional CIOs and me. The cabinet enables us to manage across very different businesses.

 

EL: What are some of the best practices you use?

 

RR: Our Raytheon Six Sigma program provides us with important capabilities we've used to develop IT. In fact, Six Sigma is inherent in every new system, in every new process, and in every process improvement opportunity we take on. When the company first rolled out Six Sigma, we made sure everyone in IT had some type of Six Sigma training. Some people got qualified as specialists, while others became certified experts.

 

EL: Given that Raytheon is a global defense contractor, how is IT  making the company more competitive?

 

RR: First of all, we had to figure out what the role of IT was. We've grown as a merger of different legacy companies. From an IT perspective, we had one of each type of system connected to each other. We've done a lot of work to simplify our complex environment. Mission assurance is our way of removing all doubts about the quality or the performance we deliver to our customers.

 

We've created an environment that makes it easier for not only the company to work quickly and with agility, but also for the businesses to collaborate and work together. Because we have so many varied capabilities in the businesses, we had to integrate the different functions through common processes and through common systems. Now, things work together seamlessly. Bringing these capabilities together enables us to have the most competitive offering.

 

EL: A 2003 CIO magazine article talks about the high number  of IT project failures you were having. How did you improve things?

 

RR: The success of project management depends on how well you succeed with risk management. Getting risk management under control helped us to lower our project failure rate and helped us to achieve our cost-performance targets.

 

For IT, we used two risk management tools well established at the company -- decision tree analysis and, what we call, failure reporting and corrective action. We learned that many of our IT risks were self-imposed because our processes weren't very mature and weren't common processes. Once we got these things taken care of, we were able to manage risk in a more balanced way.

 

EL: Can you talk about some of the risks you've taken as CIO and what  you learned from each one?

 

RR: A big risk consisted of moving our IT structure and organization to mirror the company's structure and processes. Because we must keep everything running around the clock, I was concerned that we might run into a snag, such as a significant degradation in performance, if we were perceived as an operating model. In other words, a lot of people might not see the value of what we did until after we did it.

 

In 2005, we took another risk by creating a common control environment to manage Sarbanes-Oxley risk and compliance requirements. Because we didn't have common systems, our internal auditors and our external auditors didn't understand the value of having common controls.

 

We now have a common set of controls as you move from business to business. These controls have improved our overall risk management model significantly. At the front end, it took a lot of managing to get that done.

 

EL: What risk or risks are you now facing?

 

RR: We're facing a very big financial risk with our commitment to SAP. Instead of having each business unit carry out SAP, we've put together a strategy to carry out one SAP environment for all financials. This type of arrangement will tightly knit the company and the businesses. This initative took longer and was harder to carry out. Now that we're at the end of the deployment, we're seeing the advantages it will provide us.

 

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Elizabeth M.  Ferrarini is a freelance technology writer based in Boston,  Massachusetts.

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Tom Parish

by Elizabeth M. Ferrarini

 

CNN has expanded its reach to include nine cable and satellite television networks; two radio networks; four Web sites, including CNN.com, the first major news and information Web site; CNN Mobile and CNN Newsource, the world's most extensively syndicated news service. Turner, part of the Time Warner family of media companies, is also home to familiar cable TV networks such as TBS, TNT, Cartoon Network, and Turner Classic Movies, as well as specialized networks such as Boomerang.

 

Because of the diverse nature of the Turner family of businesses, Scott Teissler, Turner's chief information officer and chief technology officer, has the ultimate challenge of weighing technological advances versus understanding and fulfilling the needs of the advertising community. Teissler, the former senior vice president of new media strategy and chief technology officer for CNN, recently sat down with Enterpriseleadership.org to discuss how his organization pushes the technology envelope so Turner businesses always have a competitive edge. Here's what he had to say:

 

EL: Apparently, your IT organization doesn't meet the conventional structure for IT departments. Can you explain how things are set up?

 

ST: About 2,000 people report to me. What we call "IT" is organized in a consolidated technology unit, comprised of IT software development, IT infrastructure, new media software development, research and development, and broadcast technology. The entire organization shares these IT resources. The business units don't have independent technology establishments.

 

EL: Given the diverse nature of the Turner businesses, what types of customers do you have to deal with regularly and how do you make technology decisions about what's best for them?

 

ST: We have several different types of customers for our principal business, or what we call "linear networks." The primary customers consist of our distribution affiliates and satellite operators. They know how they want to evolve their services and present them to consumers. We have to be aware of their strategies, and they have to do the same.

 

Another group of customers are the ad agencies and the advertisers. They are interested in both how we're evolving our presentation capabilities within our linear products and within our networks. They're also interested in the kinds of collateral possibilities we have for presenting advertising in our new media products.

 

Our new media business has mostly advertising customers. Here, we go directly to our audience with the package through our distribution affiliates. We have a number of decisions to make about how to track the technical developments and strategies for these different groups. We also need to realize that they all have plans and notions about how their platforms will evolve. To this end, we have to stay current with those marketplaces and the technical evolutions occurring in them. We can't afford to make price decisions based on the marketplace.

 

EL: Since you have such a diverse IT organization, what does your  governance model look like?

 

ST: We're lucky at Turner. Members of the senior management team communicate very well with each other, and also trust each other. It's a stable organization. These qualities make the technology governance process more practical.

 

Most CIOs or CTOs indirectly report to everyone who runs the overall business. What you do is part of their strategy. If you over-formalize or isolate IT governance by quarter or month, you miss out on a lot of interaction with these people. The best way to handle IT governance consists of giving general management a lot of exposure to all layers of IT. Make them participants who can drill down into the IT organizations.

 

EL: Since you don't have a formal governance model, how do you gauge the  success of IT with the business units?

 

ST: You have to look at how the businesses that technology supports are doing. Our mainstream businesses tend to be number one and number two in their category, and we have an outstanding reputation for advertising support and deal stewardship. Users give high marks to our new products, such as CNN Pipeline. So, we can conclude that everyone is doing a good job, especially in the area of product development and support. Measuring problems with back-office systems requires a lot of probing. Two organizations might be delivering great support. On the other hand, one organization might be consuming more capital because it's hyper-refining some applications. It's tough to determine when the line has been crossed.

 

EL: Do you use any type of best practices, such as CobIT or Six  Sigma?

 

ST: We're aware of the science that best practices entail. However, we don't practice specific ones, chapter and verse. We're not obsessed with obtaining certification in a particular method. Why? Best practices tend to spawn industries, consisting of a software science that uses big claims to get people to use the practice uncritically.

 

We have a good program in product management discipline, we pay a lot of attention to our software development methodology, and we use cutting-edge methods. There's a positive feedback relationship between using such methods and tracking the most interesting talent in the marketplace.

 

In summary, we're trying to extract what's best intellectually from those standards and to adopt them without becoming converts to a specific one.

 

EL: You're both the CIO and CTO at Turner Broadcasting. Is this the IT  norm at the other Time Warner companies?

 

ST: Years ago we abandoned the single company-wide CIO and CTO. Each business now has a CIO and or a CTO. Our small committee of these executives meet regularly.  I chair the CTO committee; someone else chairs the CIO committee.

 

Time Warner corporate has about 100 employees who mainly engage in strategy and coordinating some activities across the companies. Operating governance occurs in each business. activities across thecompanies.  The operating governance of the company occurs in the big individual units.  Practically all of the Time Warner companies are number one or two in their industries.  That's the level each CIO and CTO has to focus on.

 

The CTO group, for example, has one challenging mission -- to make sure that general management around the company, including Time Warner and its divisions, can navigate the digital landscape ahead him or her. Digital leadership, which we call it, consists of having executives you can devise and carry out successful technology strategies.

 

To explain contingencies adequately, CTOs have the daunting task of separating policy from strategy and also from marketplace development. Many of the strategic problems don't lend themselves to consensus solutions. The CTO has to explain things to general management so it's not frustrating for both sides.

 

EL: What disruptive or innovative technologies are you considering for  your business units? Anything that really stands out?

 

ST: We have a lot of things going on. Wireless, however, ranks at the top of the list for us. For example, CNN has had a long history of product development for wireless platforms. In fact, CNN News is probably the most widely distributed wireless in the world among cellphone operators.

 

You might say that wireless will become the next generation of broadband, without a lot of broadband's current limitations. Wireless is going to be faster, less expense, and to support more programming functions than today's broadband.

 

Today's consumers turn over wireless handsets every two years. It's a completely global enterprise. There's an enormous scope still for product development and service development. All of the Time Warner businesses will use it and benefit from it. Turner has content, especially news, suited to this small form factor.

 

Something else we're looking at is how advertisers will change the nature of the selling progress. Many of the new e-commerce platforms have given us better methods for measuring the delivery of advertising-type material. Now advertisers and their agencies are finally getting smarter about how to measure their success.

 

Within the next five, to 10 years, ad-supported businesses will see a change in the way we measure our success and our ability to sell advertisers. Things are going to become more complicated, granular, and perspective. This change in how people look at advertising campaigns is going to affect a lot of big businesses.

 

EL: Do you have an innovation team or innovation centers?

 

ST: We have two parallel organizations. Platform R&D pumps knowledge into the company from external sources. This group just doesn't talk about new products, but develops and deploys prototypes. In contrast, the new products group filters ideas in order to steer resources to pre-business development efforts. Platform R&D gets ideas generated from the new products group.

 

We don't have such centers scattered around the country. Our platform R&D group will support permanent digital field trials. We'll program new content on personal video devices, and then hand them out to a panel of consumers for their review. These field trials serve as a resource to our ad sales business units, which have relationships with the advertisers and their agencies.

 

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

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Tom Parish

by Elizabeth M. Ferrarini

 

As one of the world's largest producers and distributors of flooring for residential and commercial applications, Mohawk Industries operates a large and complex business made up on 19 acquisitions since 1990. The company offers its 30,000 customers a broad line of premier carpet, ceramic tile, natural stone, and home products. In 2005, the company did more than $6 billion in revenues and acquired a Belgian company, which does about $1 billion in sales.

 

Mohawk is a vertically integrated company with 56 manufacturing locations, 56 warehouses and distribution locations, 256 sales centers that distribute products to the wholesale channel, and a transportation infrastructure of 2,000 trucks and trailers. Each business line is a start-to-finish production process. For example, the laminate floor process begins with wood chips and ends with the finished product. As a result, the IT organization must actively be involved at all levels of the company's business and strategies, down from the office of the chairman to workers on the plant floor.

 

Recently, Don Riley, CIO of Mohawk Industries since 2004, sat down with Enterpriseleadership.org to discuss the creative ways he keeps IT flexible and supportive of the company's growth.

 

EL: Can you describe some of your key applications and  systems?

 

DR: The IT organization handles everything internally, except for running the mainframe -- IBM handles that. A large component of the operation runs on fully redundant AS400s. The storage area network received an award from Storage Networking World, the major enterprise storage tradeshow, and our data centers have a good base of core technologies.

 

We also have best-of-breed, core legacy applications that provide a degree of sophistication for transportation, distribution, planning, and business. We standardized by line of business and created the concept of a global infrastructure model. We commoditized the infrastructure layers and regionalized the application layers as appropriate. By migrating all of our domestic locations to AT&T, we can leverage their links, which has been very successful for us.

 

EL: How is IT keeping the company competitive?

 

DR: First, we created a support structure that integrated key personnel with the business. We worked with them on what their challenges, issues, and long-term business strategies were, and we sat in on their sessions on business strategy to find out where they're headed in the next few years. Next, we told them the areas where we could help them facilitate and achieve their goals.

 

We've already taken on several initiatives that support the sales and marketing penetration strategy that the business has for the next several years. These initiatives will help them deliver capabilities and functionalities needed to compete in a specific channel more effectively. Along a similar line, we want to get a greater return on investment for  our sales force. So, we have initiatives that will focus on sales force productivity. Similar initiatives for manufacturing will focus on working capital or cost of goods sold.

 

Once we have the strategic direction, then we can carry out day-to-day processes that help track whether we are investing the appropriate amount of time to get those things accomplished.

 

EL:  Are you doing balanced scorecard to gauge how well IT is aligned  with the business units?

 

DR: We have an IT dashboard that drives and supports the business, and we map our  strategic initiatives to support that within IT. Next, we preplan our strategic business projects tied to the overall business strategy. The dashboard shows how we are performing on a reliability and quality basis for daily work. It also tells us how we are performing relative to our strategic IT initiatives and our major projects that help to move the dial forward for the company. We share this information with both the business units and IT team to keep everyone focused on improvement.

 

EL: Do you have other best practices besides the  dashboard?

 

DR: We're carrying out a full-scale project management office. It will help to audit our large initiatives to make sure they stay on track. We're taking the applications development team through level one to level three CMMI training.

 

EL:  What is your governance model?

 

DR: For each major line of business, I've created a relationship manager who functions as a CIO for that business. These managers are responsible for ensuring that we're providing the services the business units should be receiving, and the projects are being  accomplished on time and within budget. On top of that, our executive steering committee, which consists of the chairman's direct reports, meets quarterly, and I facilitate this committee. We have monthly sessions by key line of businesses or process areas where we review priorities.

 

EL:  Have you had any significant reductions or productivity  improvements?

 

DR: We've made material improvements in productivity, quality, and overall reliability. Because we've become more cost effective, I've been able to operate more efficiently with the resources I’ve had since I took this position. In terms of manpower numbers, this is the leanest shop I've worked in. I spent 12 years with EDS and eight years in the apparel industry prior to coming here.

 

EL: What innovative technologies are you considering for the next  year?

 

DR: We're excited about what cellular carriers are trying to do with hot points, WIMAX, and 802.11, and how the PC and PDA companies are trying to take advantage of that. We see developments helping us in customer services, sales, and the support side relative to taking advantage of some of that.

 

We're also interested in business process modeling analysis and management and its relationship to the service-oriented architecture. It can help us migrate to a more agile architecture where we can adjust processes on the fly more quickly.

 

We're taken advantage of blade servers and plan to take advantage of grid  computing.

 

EL: What role does business intelligence play in your  organization?

 

DR: We've made investments in front-end sales analysis and reporting. In fact, it will also become a key component of our longer-term strategy as we become more global and enter more regions. It will enable us to tie all of these regions together in a quick, efficient manner, and to report our performance to the company and to the market.

 

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

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Tom Parish
by Peter Armstrong

Part 1   |  Part 2

 

How Good is My Service?

Here is an interesting thing to try: Go the Web armed only with the name of your company. Now, login to your company's Web site and try and find out what your company actually does. Remember that you must not use any knowledge you already have; you must pretend to be an end user. Alternatively, ask your wife/mother/children to try this exercise, and watch what they do. You will be amazed at where they click on the screen, the paths they take, and the information they either find or fail to find.

 

I tried searching on my company's Web site a couple of years ago for a particular product. I searched by function, platform, database, and so on (I was looking for an online copy product), and found nothing. When I searched by product name (Extended Buffer Manager Snapshot Upgrade Facility), I found about 20 hits. How many customers are going to search on that name?

 

Who is using your IT systems? Why are they using them? What are you trying to sell them? Is it easy to contact you if they have problems? Is the data up-to-date? Are the systems available (and this includes performance)? What are the availability and performance requirements (some systems perform better than required, which is a waste of money)? Do you have Service Level Agreements (SLAs) in place, and are you measuring against them? Are you measuring from the end-user point of view, or from your own point of view?

 

I was visiting a major Australian university last year, and I was told that they were very happy that they had the local systems under control (which was good news as they are using my company's products). What they really wanted to know, however, was whether a potential student in South Africa was able to access their systems and apply for a place on next year's course, because this is what generated their revenue.

 

Service Measurement

Another area of concern is that of service measurement. The cornerstone of any managed services contract is the service-level agreement. This is meant to be the yardstick that measures the performance of the "service provider," but unless the agreement is written and reported with measurable and meaningful values, it can lead to very difficult situations.

 

The more vague the service-level agreement, the more chance of confusion on what should be, and has been, delivered as part of the contract. Service-level agreements need to be written with factual, measurable metrics included, and the service provider should regularly provide detailed reports based on these metrics.

 

The most common metrics tend to relate to issues such as call-response times and mean-time-to-repair faults. However, valuable as these are, they are measures after the fact. Never having to call in the first place because there are no problems is better than having a quick response rate to calls from irate users. Service-level agreements should be based on the availability and performance of the service -- not just its reaction to failure. In fact, SLAs should be based on what the business needs -- most of the time they are written from a purely technical point of view.

 

I was visiting a major customer last year, whose IT operations are outsourced to one of the major outsourcing companies. The contract is, of course, couched in terms of CPU used, number of housekeeping jobs run, number of tape mounts, and so on, and so on -- which was a totally and utterly incorrect approach, in my opinion. The bank wants a service -- how the outsourcer actually implements the service technically should be of no concern as long as it is safe, reliable, and conforms to the business SLAs. In this particular case, the bank wanted the outsourcer to install a product, which would save 20 percent CPU. The outsourcer, of course, refused, as they saw it as a means of losing money. If you stood back and looked at the bigger business picture, you'd realise that the outsourcer could provide a better service with less hardware expenditure (= no expensive upgrades, ability to handle more workload per customer, and more), and the bank would get a faster response time.

 

Reporting

Reporting is another critical area that can be overlooked. A good IT department will not only provide good service, but also prove it by providing meaningful reports. These reports should relate directly to the service being provided to the customer and should also show the value that the IT department is bringing to the equation. They should be couched in language that business people can understand -- Oracle availability is meaningless; ability to print invoices on time is significant.

 

Some More Examples

Here are a couple of examples of IT and business not coming together as well  as they should:

Example 1

I went visited a major European bank that had come to my company with a requirement to run their systems 24x7. As they were a leading-edge IT user (sysplex, sharing, dual sites, and more) we had to write some extensions to our software to cater to their environment, but it these all worked fine. I was invited in to meet the DP Manager, whom I have known for years.

 

"Do the products work?"
"Yes, no problems."

 

"Are you happy with our support and assistance?"
"Yes, brilliant."

 

"Do the products do what you require?"
"Absolutely."

 

"Are you going to sign the contract?"
"Not my decision."

 

It transpired that the salesperson had never spoken to the business manager, who had raised the 24x7 requirement in the first place and had never established what the business benefits were to the bank of a 24x7 service. I unpacked my steel-capped boots and kicked the salesperson from here to eternity. We then worked on meeting the business manager, whom we discovered had been tasked to make the bank one of the five leading banks in the world, and could not see how they could do that on an international scale without offering 24x7 services.

 

Example 2

I worked with a large European insurance company that had the requirement to extend its online day by three hours, and hence squeeze the overnight batch processes by three hours. Working with the technical staff, we determined that we could achieve this easily. I was taken in to meet the DBA manager and to explain the brilliant internals of our products and how clever we were at doing things online, which previously had to be done offline. I asked the salesperson if he knew why they needed they hours and he said he did not, so when I met the manager I asked two questions:

 

      1. Why do you need three hours?

        The DBA manager gave me six good business reasons.

      2. How much is it worth to your company?

        He had no idea, but asked if he could go and ask his boss. He came back 15 minutes later, saying that his boss did not know either, so they were going to run an internal task force and could I come back next week. One week later, we discover that the three hours are going to be worth large quantities of money to them and the IT project immediately got the blessing to proceed.

 

The Missing Pieces

Business Service vs. IT Process

BusSvcVsITProcess.gif

IT departments tend to think from the bottom up. In this diagram, they would be thinking about databases, networks, job schedules, and so on. The line of business manager, on the other hand, is thinking about whether the back-office functions are running, whether the customer-facing processes are operating efficiently, and what sort of service is being provided to the business partners.

 

A business service depends on a set of processes to ensure that it is executing and performing as expected. In not-yet-automated business services, the management is done primarily by business-side managers.; the IT organization exists to manage the infrastructure and software applications. In other words, some or all of the management of the business execution is transferred to the IT organization, and hence, businesses should understand that IT management is an integral success contributor.

 

Automated business services provide many benefits. However, they also bring with them considerable inherent risks. Computing infrastructures are extremely fragile and "dumb" by nature, and each different from the other. Due to the considerable inherent risks associated with IT-based business services, it is vitally important to the business that the environment in which the business service will execute is managed extremely well and cost effectively toward business needs and expectations. The most effective method to date to manage automated business processes is through a set of mature IT management disciplines like ITIL®.

 

IT Best Practice

No one runs technology for fun, so each component has to provide some degree of functionality to the business. Managing these components is just as critical as the components themselves, because a failure can affect the service that relies upon them. At a technical level the key issue is how the IT department actually proposes to manage the environment. The use of industry-leading solutions and best-practice methodologies should be common to all good "service providers," but they are surprisingly often absent.

 

Some IT departments see tools merely as a way of reducing their cost of operation by reducing the number of people required to manage the environment. However, the use of tools to manage technology can greatly increase the availability and performance of the infrastructure. By exploiting the functionality within the toolset and applying that functionality to best-practice standards such as ITIL, the business -- and ultimately the customer -- receives the benefits.

 

This means that not only must IT and business learn to talk to each other, but they also need new tools to make their life business-oriented. When a component fails or performs badly, you need to see the impact from a business point of view rather than a technology point of view. If you give an IT person 5 problems, they will typically work on them in a first-in-first-out order as they don't have any information to tell them not to. When you add in a business criticality view, the order of resolution of problems / performance tuning / infrastructure investment, and so on, becomes totally different and IT begins to build value for the company rather than act as a cost centre.

 

Through implementation of sensible IT processes, combined with business-related tools and methodologies, the advantage to the business is the true and correct exploitation of the IT investment. This is why the two parties need to learn to talk to one another.

 

--

 

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

Bullish on Latin America

Posted by Tom Parish Jun 11, 2006

by Rod Amis

 

With the inauguration of Chile's first female President, Michelle Bachelet, on Saturday, 11 March, 2006, any business leader looking at Latin America over the past year sees a continent where change has been breath-taking and the prospects for future investment and development might appear murky, if not challenging. At the same time, in Peru, Bloomberg reported on 27 March, 2006, that Ollanta Humala, the Peruvian Nationalist Party candidate was leading in the polls prior to that nation's 9 April elections.

 

Does social change necessarily mean a change in economic policy? Where are the most promising sectors in which to seek business opportunities in Latin America and where are the roadblocks? Let's take a look at the picture on the ground.

 

"At the moment, every global investment firm that has launched an investment fund in euros and invested in Latin American stock markets is enjoying better results. In just one month, the HSBC GIF Brasil Equity fund rose 14 percent, the equivalent of a 40 percent return over three months. It is the best short-term fund. In the medium and long term, the results are much more spectacular. For example, the Merrill Lynch Latin America Equity fund (the most profitable three-year fund) has risen 241 percent since 2003. It is followed very closely by a similar product from JPMorgan, which has earned 229 percent. The 10 most profitable three-year funds on the stock market are investing in Latin America." from "Will 2006 Be a Happy Year for Latin America" Universia Knowledge@Wharton

 

When approaching business opportunities in Latin America, we need to take two  facts under consideration:

 

      1. New partnership configurations, including joint public-private ventures may be called for in certain countries, such as Venezuela and Bolivia, when dealing with energy industries like natural gas and crude oil.
      2. One size does not fit all. Latin America is a regional, not a single political, entity and every country's economic policies will be different despite the commonality of language.

 

In this article, we'll also explore the rise of populism in the political arena and how it addresses the impatience and dissatisfaction of people in the new democracies of the region, but does not change the need for minding the balance of payments equations. Thus, many signs -- such as those exhibited during new Bolivian president Evo Morales' tour of Europe -- point to a continuation of a healthy investment climate and sustained growth in Latin American markets.

 

Dr. Gerald McDermott of the Wharton School of Business, a recognized expert on emerging markets in Eastern Europe and Latin America, has tracked the development of the economic environment in these countries for decades. One of the things he sees in South America is a stabilization of the investment environment that has evolved since the missteps of the 1980s and 1990s.

 

"Look at what happened in Argentina," McDermott told Enterpriseleadership. "The problems of the 1980s -- low growth, volatile inflation -- was in part the confluence of several points of instability as well as missteps in economic policy. For instance, Argentina was grappling with democratization, subduing the military, rebuilding the social fabric after the infamous "dirty war," and resolving the massive debt crisis that virtually locked the country out of international capital market until 1991.

 

"While the "lost decade" damaged the role of the state and the left in managing the economy, the missteps during the Menem years in budget and regulatory management as well as the financial collapse in 2001 and 2002 damaged the legitimacy of market-based reforms.

 

"There are not a lot of roadblocks to foreign investment today because the major actors are institutionally constrained. Chile was first [in opening the economy to investment], but then Lula in Brazil added a little more nuance and became the hallmark for economic growth on the continent."

 

A Regional Prospectus

Let's begin by looking at the investment opportunities and prospects on a  country-by-country basis.

 

Brazil is Latin America's largest economy. By some estimates, 40 percent of all economic activity in the region originates in that country. While President Luiz Inacio Lula da Silva came to power as a "man of the people," his economic policies have been solidly centrist, resulting in an annual growth rate of 4 percent -- 5 percent. Though Lula's administration is now plagued by a corruption scandal that will likely lead to the resignation of his Minister of Finance, Brazil's anti-inflation economic policies will likely remain unchanged.

 

Brazil, in fact, represents an interesting case study on how pragmatic reformist social policies are recognized to be only achievable by maintaining a strong economy. Other nations in Latin America are thus watching Brazil closely and taking guidance from its example.

 

As Gerald McDermott pointed out during his conversation with Enterpriseleadership, the most significant achievement of Lula da Silva's rise to political power was that he single-handedly moved to reform the labor left. "He moved it [the labor left] from being a nationalist institutional structure, much like Peronism, into being a much more pragmatic system for economic growth," McDermott told Enterpriseleadership. "Lula represents a modern alternative for the left not only in Brazil but in other countries as well. That is, leftist movements in other countries, such as in Peru, Mexico, Bolivia, and Argentina, have Brazil and Chile as potential models to follow, and not simply those espoused by [Venezuela's] Chavez."

 

One indicator of the potency of Brazil's economic policies is the real estate boom throughout the country that began in late 2004. By 2005, three sectors in particular -- middle-income housing, tourism, and "build-to-suit" industrial warehousing were beginning to show impressive growth and return on investment. WalMart moved to Brazil during 2004 while a boom in shopping center construction was taking place in Brazil's largest cities. At about the same time, the agricultural belt of the nation was experiencing local investment due to the rise in the price of soybeans. Major American, French and Spanish hospitality chains were taking advantage of the foreign investment climate to open new hotels.

 

Chile's economy has been rated one of the most stable in Latin America by analysts for years. The climate for foreign investment is positive and, while widely known for its exports of wine, salmon, and copper, one of the most exciting investment sectors in the country is in information technology training and business-to-business transactional guidance.

 

Though Chile has the most advanced telecommunications infrastructure in Latin America, due to significant investment in the 1990s, few of its businesses have yet to move their activities to the Internet. Major businesses in neighboring Brazil and Argentina use IT for an array of their business and sales processes, but those in Chile still did not in 2004. A report from the Center for Study of the Digital Economy of the Santiago Chamber of Commerce (CCS) in 2004 stated that although 69 percent of Chilean companies were connected to the Internet, digital technology covered mainly just the fundamentals. Only 25 percent of Chilean companies had their own Web site, only 11 percent used the Web as a platform for sales, and only 16 percent used it to buy online and to connect with suppliers, the report concluded. This is despite the fact that, at the time, companies could use the Internet to pay national insurance contributions to employees and apply for bank loans.

 

Part of the resistance to adopting IT in Chile was, in fact, cultural, many believed, but part of it could be attributed to lack of local investment. In response, the Chilean government began a new initiative, the Digital Agenda. The Digital Agenda's stated goal is to "… convert Chile to a digital country by 2010." As part of the agenda, business incubators have been established at University of Chile and at the University of Adolfo Ibaiaez. The Association of Chilean Information Technology Companies has established the goal of raising the information technology sector to 3.8 percent of GDP from its current 1.2 percent of GDP.

 

Jay Bryson, an economist with Charlotte, North Carolina's, Wachovia Bank, noted at the beginning of this year that Chile had taken several major steps in the 1990s to open its economy. The country, he said, " … allowed imports to come in and exports to flow out. They also have had a fairly stable macroeconomic policy over the last few years, a relatively independent central bank and they haven't jacked up taxes. That's given foreign investors confidence, so we have seen investors increase [their holdings in Chile]."

 

Bolivia is Latin America's poorest nation. Nonetheless it has massive reserves of natural gas, which -- with the help of Spain's Repsol, Brazil's Petrobras, France's Total, Anglo-Dutch Shell, and British Petroleum -- it hopes to recover and export to its neighbors, Brazil, Argentina, and Chile. The Spanish financial institution La Caixa plans to invest $800 million to this project over the next five years. In addition, Bolivia is believed to have 70 percent of the world's iron and magnesium reserves. So extractive mining and traditional agricultural will remain the basis of its future economic growth.

 

Newly-elected President Evo Morales has been more moderate in his meetings with foreign investors, as noted above, than his rhetoric at home would have led us to believe. In that European tour, he told investors in France, Belgium (at the EU headquarters,) Spain, and Holland that "…any company that cooperates and pays its taxes can recover its investments and have the right to its profits, but under the principle of balance because the State and the people must also benefit."

 

It's very likely that Mr. Morales' government will meet these goals by using what some analysts call the "Venezuela Solution, " creating companies of mixed ownership from both government and private enterprise. Such creative solutions allow pragmatic government leaders to both appease their volatile constituencies while allowing profit taking to foreign investors.

 

Venezuela, despite the rhetoric of President Hugo Chavez and his penchant for grabbing headlines, is a major source of oil for the United States and has an ownership interest in Citgo. The relationship between foreign investment -- and particularly investment from the United States -- and national stability is unlikely to change, no matter the public pronouncements of the Chavez government or the U.S. State Department.

 

The pragmatic fact is that Venezuela means to remain a player in the global marketplace and can only do so because of its oil reserves. At the same time, the political stance of the government is to address the social agenda demanded by its citizens.

 

As the suggested in the overview of Bolivia, Venezuela is providing creative solutions, much as has Brazil, to attract foreign investment in state/private partnerships while also seemingly dealing with populist concerns.

 

The recent initiative on the part of the government to offer long-term oil contracts at below OPEC rates is also a positive sign of stabilization of the investment environment.

 

Argentina, notwithstanding the upheaval of the 1990s, has instituted economic safeguards and encouraged investment during this decade. McDermott, who has been intimately involved in development in this South American country, notes that the development of infrastructure, after the stresses of the large utilities companies were overcome, is now akin to that of Chile or Brazil.

 

Now that those stresses have been relieved by a change in governmental administration, the situation in Buenos Aires is promising.

 

The Spanish Tigers

One can look to success stories for guidance. For example, the strong influence of Spanish multinationals, the new tigers of Europe, who have established relationships in a diversity of industries from telecommunications to textiles in the region since the 1990s provide insight to the fertility of this emerging market.

 

A February 2006 feature in the Economist states: "…since the return of democracy, the Spanish have rediscovered the outside world, none more so than the country's businessmen, whose exuberant expansionism has led to them being dubbed the "new conquistadores.'" Among the areas in which Spanish companies have distinguished themselves are Telefónica, the world's fourth-largest telecommunications provider and the largest in Latin America; Repsol YPF, the ninth-largest oil company, and Iberdrola, an electrical utility that is the world's largest operator of wind generators.

 

The Spanish corporations were nimble and aggressive and, with the advantage of common language and heritage, quickly pounced in Latin America. Where a decade and a half ago, a Latin America concern might have gone to Washington, New York, or London seeking capital, today they as readily talk with financiers in Madrid. In fact, Spanish banks, like their counterparts in other countries, are now acquiring American banks. That they have bankrolled some of the major projects in Latin America over the last decade should come as no surprise.

 

Capitalizing on Emerging Markets

Whether one looks at the IT infrastructure and training opportunities in Chile or to the natural gas and mining needs of Bolivia, one thing is clear: the emerging democracies of Latin America present a wide array of investment and business development options.

 

While the political winds that have swept through the South American continent could, at first glance, seem confusing or unsettling, the astute observer will note that following pragmatic economic policies can only fulfill the social and political objectives of the new governments. Foreign investment and business growth are the underpinning of policies that will meet the expectations of their constituencies and be the benchmark for the successes of their new governments.

 

By following the examples of the Spanish tigers, the French energy concerns, and other businesses that have already established relationships on the continent, and by respecting the cultural nuances of South America, the return on investment to be accrued in this emerging market is promising.

 

As Dr. McDermott emphasizes, the key word for business leaders looking to the  emerging markets of Latin America is nuance. Each government is attempting to be economically pragmatic while dealing with an inheritance of unaddressed political demands as they move from military dominance to representative democracy. The climate for investment, in part because of populist demands, has never been stronger.

 

--

 

Rod Amis is a freelance technology writer based in North Carolina. He has written for various publications on- and offline, including IT Manager's Journal, NewsForge, Silicon.com and Access Internet Magazine. He is also the author of two books and was a newspaper journalist before going completely digital.

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Tom Parish

by Deb Radcliff

 

Part  1  |  Part  2  |  Part 3

 

A "Getting-started" Policy

The first two parts of this article have shown the depth and complexity of security vulnerabilities and smart phones. Part three of this series presents the policy side of how to prevent attacks, and provides an overview of the history of mobile malware.

 

It'd be nice if organizations today could have comprehensive smart phone use policies in place and the power to enforce them, says Nick Ianelli, mobile security analyst for U.S. CERT.

 

"On company-issued phones, it'd be great to say, "No gaming," and "No software installs without the authorization of IT, and turn off Bluetooth except when synching,"" he explains.

 

It'd also be good to remotely check patch level and security software running on the device at the time of VPN connection or PC synchronization. But, we're at least a year away from standards-based vendor products delivering this level of automation. So, in the meantime, start small, say experts. They offer the following advice1:

 

      • Take a survey. Find out who's using smart phones for what type of business. Then, make a risk assessment of those applications and the data stored in them.
      • Start an awareness campaign. Educate your power users about the value of their business data, and what would happen if it were stolen or rendered inaccessible by a mobile virus. Educate all users about the dangers posed to their personal information and how they shouldn't believe what they see on their devices, just like on their PCs.
      • Don't just tell them. Show them. Make them hands-on aware of the features in their phones that are risky, and show them how to use them securely.
      • If you must issue policy around business phone usage, stick only to your power users and what you can control with today's technology. For example, all phones come with remote locking, meaning they can be shut down if they're reported lost or stolen. So that policy should be implemented on any phone containing valuable business, or regulated data.
      • Turn on encryption. Although not built to Trusted Platform specifications at this time, many mobile phone vendors have some type of built-in encryption. Third-party applications are also available. Look for easiest interface, as users will have to interact with their encryption programs.
      • Control network connections through VPN access.

 

Resources

The following comprises a brief history of mobile malware2:

 

      • Spring 2004: Mosquitos, the game infected by a Trojan, sends messages to expensive toll numbers, causing considerable economic loss to its unwitting victims.
      • June 15, 2004: Cabir.A, first Symbian worm to replicate through an active  Bluetooth connection, emerges.
      • June 16, 2004: Only one day later, Cabir.B makes an appearance, and will continue its spread mainly in China, India, Turkey, Finland, and the Philippines. To this day, this worm continues to hitchhike around the world.
      • July 2004: Duts, nicknamed the "polite virus," hits Pocket PCs for the first time and spreads to all .exe files in the directory through infected programs exchanges. When a program hit by Duts is activated, a message appears asking the user permission to proceed: "Dear User, am I allowed to spread?"
      • Aug. 2004: Brador appear. This back door creates a copy of itself in the start file on handheld devices and informs the attacker the minute the device is online. The hacker can then connect to the palmtop through the TCP door and covertly control the device.
      • Nov. 19, 2004: Skulls.A attacks Symbian-based smartphones, appearing on Web sites that allow users to download shareware applications for the Symbian operating system. If erroneously installed, the Trojan blocks the functioning of applications, allowing the user only to make or receive phone calls.
      • Nov. 29, 2004: Skulls.B emerges. As with previous Trojans, this is spread through a file called Icons.SIS, blocking the functioning of the cellular device's applications and allowing the user only to make and receive phone calls, deleting all other functions. Skulls also carries the worm Cabir.B.
      • Dec. 9, 2004: Cabir.C, D and E appear.
      • Dec. 21, 2004: Skulls.C, Cabir.F and Cabir.G appear.
      • Dec. 22, 2004: MGDropper spreads during game installs disguised as the cracked copy of the popular cellular phone game Metal Gear Solid. When launched, MGDropper installs versions of Skulls and Cabir and tries to undermine the security products installed on the phone.
      • Dec. 26, 2004: Cabir.H and Cabir.I make an appearance. Both target cellular  phones with a Symbian 60 Series operating system.
      • Jan. 11, 2005: Lasco, targeting cellular phones with a Symbian operating system and an active Bluetooth connection, combines viruses and worms and replicates the behavior of the notorious Cabir, searching for other active Bluetooth devices so it can replicate and look for .sis files to infect.
      • Feb. 1, 2005: The Locknut.A trojan (also nicknamed Gavino.A and B by some anti-virus companies) aims at phones with a Symbian 7.0 operating system. It's a Symbian SIS Trojan file that substitutes a binary file, blocking the phone and preventing any application from opening. Once hit by Locknut.A, the phone becomes unusable, even for phone calls.
      • March 3, 2005: Commwarrior.A starts creating unwanted billing for infected Series 60 users. This virus, however, adds a new layer of sophisticated intelligence, using Bluetooth during daytime for spreading and sending MMS messages at night. To become infected, the user has to accept the installation dialogue; once done, detection is difficult. The global spread of Commwarrior.A has been rapid because of the trust users have with the sender.
      • March 18, 2005: Locknut.B installs as a phony patch for Series 60 phones, rendering the operating system unusable by preventing any application to launch. It also contains Cabir V, which spreads through Bluetooth.
      • April 4, 2005: Fontal.A, a SIS file Trojan, installs a corrupted font file into an infected device, causing it to fail at the next reboot. Fontal.A also damages the application manager so that it cannot be uninstalled, and no new applications can be installed before the phone is disinfected.
      • May 9, 2005: Skulls.K replaces the system applications with non-functional versions, drops SymbOS/Cabir.M worm in to the phone, and disables third-party applications that could be used to disinfect it.
      • August 26, 2005: Doomboot.B pretends to be a utility that can be used to reboot a phone, but when a user makes use of this application, Doomboot prevents the phone from booting again.
      • Sept. 20, 2005: Cardtrap.A, a malicious SIS file Trojan, tries to disable a large number of system, and third-party applications and installs Windows malware on the phone memory card.
      • Oct. 30, 2005: Commwarrior.C installs when a user replies to a new SMS or MMS message by opening a Web page using the phone's browser, then tries to change the logo to "Infected by Conmwarrior" (observed on Nokia 660 phones).

 

Footnotes

1Sources: CERT, Kaspersky Labs, Symantec, Yankee Group

2Information provided by F-Secure

 

--

 

Deb Radcliff is an award-winning freelance writer, educator and speaker based in Northern California. She's been covering online crime and security ever since working as researcher on a book about infamous hacker, Kevin Mitnick back in 1995.

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Tom Parish

by Elizabeth M. Ferrarini

 

Can an IT infrastructure help to differentiate an organization strategically from its competitors? This question, first posed in the Harvard Business  Review article (May 2003), "IT Doesn't Matter," by Nicholas G. Carr, sent IT executives everywhere whirling around on their swivel chairs. It also caused academics to do some hard thinking, and computer vendors to rally in front of their customers. But Carr, the former editor of The Harvard Business  Review, didn't stop there.

 

His 2004 book, Does IT Matter? -- Information Technology and Corrosion of  Competitive Advantage, expands the initial premise in Carr's article by asking corporations to think about IT and its role in business strategy. The book also looks at some significant implications of the emergence of the new, shared technological infrastructure for all companies.("Sharing" means that all business units use the same IT infrastructure resources, such as storage.)

 

In an interview with Nicholas G. Carr, Enterpriseleadership.org's Elizabeth  Ferrarini asked Carr to explain himself.

 

EL: Commodity public broadband services are great for consumers, but private companies will come under the gun for more IT compliance. To this end, will IT become more strategic to the organization?

 

NC: IT will start to talk more to the business units. It's a trend we're already seeing, with IT staff being required to think in more business terms than in purely technological ones. As more of the basic components of IT become commodity items and/or supplied by utility services, then it's less important for individual companies to maintain all of the specialized technical skills that they used to. Thus, IT becomes more of a translation function in bringing the right technologies to the right business processes.

 

EL: Is the IT role going to disappear?

 

NC: Most large companies will continue to have an IT role, but it's going to change and be integrated more into the mainstream of the business. It will make sense to treat the IT function the same way companies treat other departments, such as marketing and human resources, and move toward a rotational model. This model will change how IT staff is identified -- from technicians, separate from the business, to employees who serve a specific business role.

 

EL: Are you seeing kind of a two-tier approach to IT, in which the infrastructure is under a general manager, and a business IT unit is under a CIO reporting to the CEO?

 

NC: I haven't seen this type of model, but it could well be a future trend. Today, a lot of CIOs spend their time worrying about how to manage the infrastructure. They would be better off looking at how IT can help overall business operations.

 

EL: You have been doing a lot of speaking at conferences. What's the number one topic of debate you get into with IT professionals?

 

NC: The biggest issue concerns the question of innovation and whether it still pays for companies to be IT innovators. Most companies would be better off looking at IT as a cost of doing business by getting the IT capabilities they need as efficiently, inexpensively, and reliably as possible. CIOs in many companies continue to think there is a role for IT innovation, which will give the company a competitive advantage. Maybe 70, to 80 percent of their money and attention goes to basic infrastructure.

 

EL: Is what you just said true for IT professionals who are in an industry in which IT drives revenues, making innovation important to the company's success?

 

NC: Some of it is that. It's also a sense that there are many companies that may have very specialized opportunities to use IT in a very customized way that fits their processes. Most IT leaders, at this point, see a lot of the basic systems, even complex systems such as ERP, as being more and more standard, and less strategic to the business. From an innovation perspective, CIOs are looking at more highly specialized applications that fit their particular business or industry to gain an advantage from IT.

 

EL: Are there any companies you're really impressed with as far as IT innovation besides the Amazon.coms and GOOGLEs of the world?

 

NC: I'm impressed with how some big companies now are moving aggressively to adopting a utility model. Take Qantas Airlines, for example. It's closing down its data centers and moving towards hosted applications rather than maintaining its own. This strategy is driving down the cost of computing as a result, and reducing the headaches involved with maintaining all of their assets. What excites me are the companies that are really trying to capitalize on the commodity trend. Take the 70 or 80 percent of their IT activities and really streamline, consolidate, standardize them, and in many cases, offload them to utility suppliers.

 

EL: So, you think a lot more of IT is going to be  outsourced?

 

NC: I wouldn't say outsourced in a way we now define it, which is a piecemeal process using different vendors to do specific things, and then relying on the internal IT staff to integrate everything. We're going to move from today's view of outsourcing to a utility model, which enables you to buy the capabilities you need for a monthly fee from outside utilities. More of the integration of systems will be done by these utilities.

 

EL: Technologies such as grid computing are supposed to enable companies to turn their infrastructures into utilities. Are you saying companies would prefer to buy utility services rather than build them themselves?

 

NC: Grid computing is still in its infancy. Wachovia Bank is a good example of an organization that's doing grid computing internally. As this technology and others, such as virtualization, continue to improve, most companies will look to outsiders to supply these services rather than setting up their own grids.

 

EL: During the dot.com era, we saw many startups offering a variety of utility services, from storage to maintaining the entire IT infrastructure. Given that many of these companies failed, such as StorageNetworks, can you put credence in the utility model?

 

NC: If you look at the dot.com era, many new ideas were too early. And, the entire application service provider model of hosted software and serviced didn't take off. However, technologies continue to advance. We are at a point where some of the things that didn't work five years ago can work  today.

 

EL: Are you working on another book?

 

NC: I'm just starting to work on one. I plan to write about the future of the computer, looking at how computing will be done in businesses and also the way it will be done in the home. We're starting to move beyond the personal computer age to a time when computing will be distributed in and tapped into in many different ways. For example, broadband via your personal computer is becoming less expensive than wireline telephone. Even digital TV is starting to blur the line between basic consumer electronics and computing.

 

EL: The great IT jobs that were available 10 years ago may not be there in a few years. What advice would you give to IT professionals today or those coming up through the ranks?

 

NC: Here's one way to think about it. Traditionally there have been two types of IT professionals -- those who specialize in a particular technology, such as an operating system or a hardware platform, and those who are generalists. The first group will continue to shift from the user side to the supplier side. The vendor side increasingly needs these specialized skills. This generalist model of IT professionals plays a role between the technology and the business itself. There's also going to be demand for skilled, talented people who can provide this kind of bridge between IT and its application.

 

--

 

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

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Tom Parish
by Jonathan Markworth

 

From Viewpoint:  Focus on CMDB, January 2006.

 

A federated CMDB provides a single source of critical information that enables IT to better support business goals. The right data in the right format, reconciliation capabilities, and processes to ensure quality data are the keys to making the CMDB a successful reality in your IT organization.

 

There’s a lot of excitement today about the potential of a configuration management database (CMDB) -- and, in particular, a federated CMDB -- to help organizations drive IT efficiency and truly benefit from their investment in IT assets. But there’s also a lot of confusion, misinformation, and concern about what a CMDB is and how much business value it can actually deliver. Some common questions include:

 

      • What is a CMDB, anyway? And why is federation so important? Is the CMDB a myth, reality, requirement, or just another sales and marketing ploy?
      • I already have dozens of data repositories, management consoles, and inventory databases spread throughout my organization. Can I control all the systems of record I’ll have to deal with in a federated model? Can I implement a federated enterprise CMDB without bringing my organization to its knees?
      • My people seem to be drowning in information, but they’re unable to find out what they really need to know. How will adding another tool to the mix help my staff manage the business more proactively?
      • Implementing a CMDB and maintaining configuration item (CI), attribute, and relationship data can’t be easy. Will I end up with a CMDB that propels the business forward or one that just consumes already scarce resources without a return on investment? Will the CMDB become shelfware or a powerful tool for my business?
      • Is this just going to be one more thing that my overworked staff has to deal  with?

 

What is a CMDB?

Several definitions are being offered, but it is generally accepted that the CMDB is a data repository relating to the IT infrastructure, and contains information that identifies each CI, describes attributes about each CI, and denotes the relationship between CIs. Your organization may be planning to simply deploy a CMDB as a centrally available repository of auto discovery information collected by electronic inventory tools. However, the CMDB really should be designed as a solution that enables IT to support critical business functions. As simple as this sounds, the design and implementation of the CMDB should be tailored to the goals of your organization.

 

In the context of critical business functions that are enabled by various IT services, CI information stored in an isolated data repository is virtually useless. Centralizing the repository is a good first step in deploying a CMDB. However, CMDB deployments must also have relationship information that links stored data back to the context of the business. Only then will the CMDB have the maximum effect on any anticipated process and performance improvements. Relationships are required to fully realize the benefits of a CMDB across your IT organization. It’s the relationships between CIs in the CMDB that help unravel the complex interdependencies in the IT infrastructure and link them to business services. And it’s the relationships that unite management applications and processes in a cohesive and efficient manner to drive higher levels of quality, predictability, and service impact assessment across your enterprise.

 

5 KEY BENEFITS OF A FEDERATED CMDB

  1. Achievement of a centralized view without the cost of moving all data to a  single, monolithic data repository.
  2. Ability to leverage existing investments that currently isolate critical  information.
  3. Visibility into the complex interdependencies throughout the IT  infrastructure.
  4. Greater efficiency, leading to higher productivity and lower IT costs.
  5. Enhanced ability to comply with government regulations that impact  IT.

Federated CMDB -- Myth, Reality, Requirement, or Ploy

Wouldn’t it be great to have a single, all-knowing, all-powerful, and self-maintaining tool to manage every facet of information about the IT infrastructure? Wouldn’t it be great to start over fresh -- to replace your legacy enterprise management infrastructure with tools that did everything within a fully integrated platform? The reality is that most organizations have inherited (or deployed) dozens of applications, tools, utilities, data stores, hardware platforms, and management frameworks that perform one or more of the service management functions. Each of these has a data repository that provides information to support some critical function within your current environment. In the context of the CMDB, the collection of the data repositories related to these tools contains most of the critical CI attributes that can be used to build relationship data. The key question is then how do you leverage the investments you’ve already made to build an integrated data repository such as a CMDB?

 

One method is to export the CI identification, attribute, and relationship data from each of these data sources and combine it into a single database. Over an extended period of time, this method can be very difficult to maintain and only becomes more complicated as the number of data sources grows.

 

An alternative approach is to build a CMDB that consolidates identification, attribute, and relationship data, making it readily available to all the IT processes that need it and without requiring all of the data to be copied centrally. In this federated model, the CMDB holds configuration items and a critical subset of data, but then links to other sources of related data such as service desk tickets, service level agreement definitions, or even management consoles. Deployed correctly, the federated model can facilitate the introduction of an enterprise CMDB that can span the whole IT organization, allow for a phased transition plan from legacy systems -- if that is even necessary -- and preserve the ability of the IT organization to continue day-to-day operations with fewer interruptions.

 

Too Many Screens, Too Much Data, Too Generic a Format

The volume and scope of the information stored in a CMDB can become overwhelming if not carefully managed. Providing the right information, at the right time, to the right people, and in a format that encourages the correct human or technical response is critical. Think of the user interface of the CMDB in terms of a modern fighter plane. Many years go into modeling the interaction between the pilot and the cockpit displays so that in a high-stress situation the pilot can find exactly the information he or she needs. When a virus attack hits or a major component fails, processing information from the CMDB, including the extended CMDB data, isn’t much different.

 

The technicians responding to incidents or implementing changes are the pilots of your IT environment. Give them too many screens or too much data in too generic a format and their decision-making ability and productivity will decline, and the probability of making a mistake will increase. The CMDB is no longer useful for them. The fear of crashing and burning will keep them using their old, familiar spreadsheets and databases, no matter how complete and accurate your CMDB is advertised to be. The CMDB must support views in which information is efficiently tailored for its intended use.

 

The Absolute Importance of Rules-based Reconciliation

The quality of data will vary from one source to another, and sources may have conflicting or overlapping data that use different labels for the same data. Resolving the conflicts and reconciling the data is one of the most important and most challenging aspects of maintaining the quality of a federated CMDB. In many cases, the volume of data and the number of sources make manual reconciliation impossible. So a robust, rules-based reconciliation process is a must. This is an extremely important requirement. Deploying a CMDB without an effective and efficient reconciliation engine places the entire program at risk.

 

Process Is Key to Maintaining Data Quality

When you’re using a CMDB to better support critical business functions based on configuration data, the quality of that data is crucial. Consequently, you have to define ways to measure quality. You must also consider data and data management process quality over time. An effective tool that can be used is the Roll Throughput Yield formula:

 

Bad data * Bad data * Perfect data = Less than perfect data

 

It doesn’t matter that the last step in a process produces perfect data if the steps feeding into it are of poor quality. It is critical that you are resolute and aggressive in measuring and continuously improving the processes that produce and maintain data, so that you can ensure the quality of your data. You must continue to improve quality by looking at every process to identify and eliminate redundant or error-producing steps. Lack of a structured process improvement methodology is most definitely the number one cause of poor CMDB quality that eventually results in implementation failure. Perception truly is reality in this case. The audience that receives information from your CMDB probably won’t care too much about why the data looks wrong -- just that it’s wrong.

 

The Future -- Binding Disparate Processes Together

Implementing a CMDB is complex, but the benefits are significant. A federated CMDB built on an adaptable technology enables you to start binding disparate IT systems, data sources, and processes into a cohesive environment that facilitates business goals. Having a single source of critical information accelerates the speed at which you can execute, because it provides every person in the IT organization with the information they need to work efficiently and effectively -- from the service desk agent answering the phone or the technician refreshing a router, to the mid-level manager working on next year’s budget or the CIO developing long-term IT strategies.

 

--

 

Jonathan Markworth is a managing consultant with CompuCom  Systems, Inc. (www.CompuCom.com), headquartered in Dallas, Texas. Jonathan has successfully performed a variety of functions in the IT industry during the last 20 years. He is certified in ITIL and Six Sigma, and he is a certified Project Management Professional (PMP). As part of CompuCom’s Integrated Infrastructure Management practice, Jonathan and the CompuCom Center of Excellence team are responsible for deploying effective solutions for change, configuration, release, and asset management.

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Tom Parish
by Tom Field

 

It's time for enterprises to rethink their IT infrastructure and consider implementing a service-oriented architecture (SOA). SOA is a collection of services that can communicate with each other, but aren't necessarily dependent on each other. Like the early years of spreadsheets and PCs, SOA is still "below the radar" for most organizations. However, it won't stay there. Its potential is too great, and it is likely to mature rapidly over the next few years. For instance, the senior principal engineer at a leading Web-based retailer believes SOA is destined to reshape IT on every level. "It's comparable to the dramatic transition in how things were manufactured and sold that occurred in the 19th century," when the transition from craft to mass manufacturing and distribution began, he says.

 

THE BOTTOM LINE ON SOA
According to Gartner's Massimo Pezzini, "Web services used to be a solution looking for a problem. With service-oriented architecture, it has finally found it." Gartner's view is that SOA will allow companies to reuse existing applications and data to create new business processes. That, in turn, makes the enterprise more agile and less locked-in to certain ways of doing business because applications can be changed faster and more easily.

 

THE REAL BOTTOM LINE

SOA has the potential to deliver  substantial savings.

 

According to Gartner, Inc., the Stamford, Conn. - based think tank, SOA represents a crucial step in moving toward what Gartner calls the real-time enterprise, able to respond faster to changing business requirements and to react to events in real-time. "Until now," said Massimo Pezzini, vice president at Gartner, in a statement published in 2004, "service-oriented architectures have only been implemented by a few leading-edge enterprises due to high costs and the level of technical skill required." However, he observes, Web services are now making it both affordable and possible from a skills point of view. The open nature of Web services means that any bit of code can potentially be reused and shared as needed. In addition, consolidation of security technologies and maturing standards for Web services mean security is no longer a stumbling block. Gartner predicts SOA adoption will be a mainstream phenomenon in Global 2000 companies by 2007.

 

While the idea of SOA has been around for many years, it did not have much impact. Now, with the advent of Web services, there's a nearly complete correspondence between the goal of SOA and the means to implement it. In fact, the biggest difference between SOA and Web services is that the latter has usually been implemented point-to-point where there was a complete understanding of the infrastructure.

 

What's more, the potential for reuse means software costs could begin to drop. By reusing services, IT doesn't have to spend money to create the same functionality over and over again.

 

SOA can help with many other aspects of business, some of them not obvious at first glance. For instance, compliance with the Sarbanes-Oxley Act and other regulatory mandates is easier with SOA because it provides a real-time view of who's accessing specific applications or data.

 

SOA also allows companies to be more agile by making it easier to change functionality to match business requirements, fosters information sharing, and discourages individuals and organizations from maintaining separate databases because resources are easier to share. But while SOA is exciting, there are factors that could slow its adoption. For IT organizations, there are cultural challenges in shifting away from traditional software paradigms. SOA requires contracts, policies, service level agreements, security, authentication, identity management, upgrades and governance.

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Tom Parish

A Balancing Act - Part 2

Posted by Tom Parish Jan 16, 2006

by Howard Rohm

 

Reprinted with permission from the Balanced Scorecard Institute.

 

Part 1   |  Part 2

 

Phase One: Building A Balanced Scorecard

Phase One: Building The Scorecard, consists of six steps. Step One is an Assessment of the organization's foundations, its core beliefs, market opportunities, competition, financial position, short- and long-term goals, and an understanding of what satisfies customers. Many organizations have completed this basic step, typically as a self-assessment at an off-site workshop for managers and executives. Usually, an organization's strengths, weaknesses, opportunities, and threats are developed, discussed, and documented. There is no need to repeat this "environmental scan" of an organization if the information is available and current, say within the past six months. It is important, however, to ensure that the assumptions that underlie the basis for the organization's existence and its business strategies are still valid and sound.

 

Other important aspects of the self-assessment step are to choose a champion and the core Balanced Scorecard team, set a schedule for the development steps, secure resource commitments necessary to develop and sustain the scorecard system, and develop a roll-out communications plan to build buy-in and support for the changes that will follow. Communications planning includes internal and external public information activities that will be used to spread the word about the Balanced Scorecard initiative and what it means for managers and all employees.

 

Step Two is the development of overall Business Strategy. In larger organizations, several overarching strategic themes are developed that contain specific business strategies. Examples of common strategic themes include: Build the Business, Improve Operational Efficiency, and Develop New Products. For public sector organizations, strategic themes might include: Build A Strong Community, Improve Education, Grow the Tax Base, and Meet Citizen Requirements. In addition to describing what the approach is, business strategy, by elimination, identifies what approaches have not been selected. Strategy is a hypothesis of what we think will work and be successful. The remaining steps in the scorecardbuilding phase provide the basis for testing whether our strategies are working, how efficiently they are being executed, and how effective they are in moving the organization forward toward its goals.

 

Step Three is a decomposition of business strategy into smaller components, called Objectives. Objectives are the basic building blocks of strategy -- the components or activities that make up complete business strategies. Southwest Airlines developed a business strategy to compete successfully in the crowded commercial airline market. The business strategy of Southwest includes the following components: innovation and speed in the redefinition of a marketplace; short-haul, high frequency, point-to-point routing (a significant departure from traditional hub-and-spoke routing); a high proportion of leased aircrafts; a very simple fare structure; and ticketless travel.1

 

Mecklenburg County, North Carolina developed a strategy to implement the Board of County Commissioners vision for 2015. The strategy has the following main themes: Growth Management and Environment, Community Health and Safety, Effective and Efficient Government, and Social, Education and Economic Opportunity. Strategic components include: Increased Employee Motivation and Satisfaction, Increased Employee Knowledge, Skills and Abilities, Improved Technology Capacity, Increased Use of Partnerships, Reduced Reliance on Property Taxes, Improved Service Value, Improved Environment, Reduced Crime and Violence, and Reduced Preventable/Communicable Diseases and other Health Problems, among others. 2

 

The Federal Aviation Administration Logistics Center developed two business strategies: Become Customer Driven and Increase Business. These strategies were then decomposed into actionable goals with specific performance measures (metrics) and targets.3

 

One of the military commands has developed the following strategic themes to meet its goal of Equipping The Warfighter To Win: Quality Systems Equipment, Expert Life-Cycle Management, Operational Efficiency, and High-Performance Organization. Each theme decomposes into specific objectives that drive performance and can be measured.4

 

EmpLearnGrowth.jpg
Figure 5.  Strategic Mapping

 

In Step Four, a Strategic Map of the organization's overall business strategy is created. Using cause-effect linkages (if-then logic connections), the components (objectives) of strategy are connected and placed in appropriate scorecard perspective categories. The relationship among strategy components is used to identify the key performance drivers of each strategy that, taken together, chart the path to successful end outcomes as seen through the eyes of customers and business owners. Figure 5, a strategic map for a transactions-based company, shows how an objective (effect) is dependent on another objective (cause), and how, taken together, they form a strategic thread from activities to desired end outcomes.

 

In Step Five, Performance Measures are developed to track both strategic and operational progress. To develop meaningful performance measures, one has to understand the desired outcomes and the processes that are used to produce outcomes. Desired outcomes are measured from the perspective of internal and external customers, and processes are measured from the perspective of the process owners and the activities needed to meet customer requirements. Relationships among the results we want to achieve and the processes needed to get the results must be fully understood before we can assign meaningful performance measures.

 

We use the strategic map developed in Step Four, and specifically the objectives, to develop meaningful performance measures for each objective. Thus, we look for the few measures (key performance drivers) that are critical to overall success.

 

AreWeDoingThingsRight.gif
Figure 6. Develop  Results and Process Measures

 

Figure 6 shows a continuous learning framework for measuring and managing both strategic and operational performance. We put our Performance Measurement stethoscope wherever it is required to get meaningful performance information, whether we want to measure if we are doing the right things, or measure if we are doing things right.

 

Developing meaningful performance measures (metrics) and the expected levels of performance (targets) is hard work if done correctly, and the development process is fraught with challenges. One challenge is the tendency to hurry and identify many measures, hoping that a few good ones are in the group and will "stick". The problem with this approach is that the value of information generated is limited, and the burden of data collection and reporting can quickly become overwhelming. (One of the worst mistakes I've seen made is for an organization to take measures that already exist, categorize them into four scorecard perspectives, and then announce that the corporate scorecard had been built! These "metric" scorecards are of little value to an organization, as they bear little relationship to strategy, desired results, and the processes needed to produce desired results.)

 

Another challenge is a tendency to rush to judgment -- not thinking deeply about what measures are important and why. This happens because, usually in response to pressure from a supervisor, we get in a hurry to develop a final set of performance measures ("I need some measures -- just get me some measures!!"). In most strategic plans and scorecard systems I have seen and reviewed, the development of performance measures is not taken very seriously, putting into question the value of the whole strategic and operational effort. Remember, measures are a means to an end, not the end themselves.

 

We use three different models to get to the measures that matter most. Our goal is to identify the critical business drivers, measure them, and use the information to improve decision-making. ("If it is important to executing good strategy well, and to operating good processes efficiently, measure it -- if it isn't, don't".) The three models are:

 

The Logic Model -- This model allows us to explore the relationship among four types of performance measures: inputs (what we use to produce value), processes (how we transform inputs into products and services), outputs (what we produce), and outcomes (what we accomplish). This model reinforces the logic of the strategic map by showing the relationship among the activities that produce good outcomes. For public sector organizations, and sometimes for private sector as well, we add another measure category: intermediate outcomes, to capture the important intermediate transformations that take place between what we produce and what we accomplish. This additional step is especially useful when the end outcome is far removed from the outputs produced, or when little control is exercised over the ultimate achievement of the end outcome.

 

OutputsToOutcomes.gif

Figure 7. Moving  From Outputs and Activities to Outcomes

 

As shown in Figure 7, asking a series of "Why" questions will eventually get one to outcomes. The steps required to secure an end outcome usually include several intermediate outcomes. The process works from outcomes to processes also -- just substitute "How" for "Why" in the model above. Start with the outcome and work backwards to the processes that produce the outcome.

 

Process Flow -- Flow-charting has been around for a long time, and has been a favorite tool of systems engineers and process designers, among others. We apply the technique to build a better scorecard performance system, as flow charting processes helps identify the activities (and measures) that matter most to produce good outcomes. An additional benefit of the technique is that it often identifies places where improvements in efficiency in workflow are needed and possible. And we have found that after applying the model, we usually end up identifying several new initiatives (discussed in Step Six) that can be used to test our strategic hypotheses.

 

Causal Analysis -- Causal analysis identifies the causes and effects of good performance. We start with the result (the effect) we want to achieve and then identify all the causes that contribute to the desired result. The causal model is most useful for identifying input and process measures that are leading indicators of future results.

 

It takes more work to develop a few good measures than it does to develop many poor measures. This was reinforced for me when I was training a Balanced Scorecard team in Europe; one of the team members volunteered that his group had 930 separate performance measures. I asked him if he could Outputs identify the strategic measures; after some reflection he said he didn't think that he had any strategic measures. His Performance Measurement report sits on his shelf, unused.

 

In Step Six, new Initiatives are identified that need to be funded and implemented to ensure that our strategies are successful. Initiatives developed at the end of the scorecard building process are more strategic than if they are developed in the abstract. At one organization I worked with, an improvement team, working outside the framework of a Balanced Scorecard system, identified over 100 new initiatives to pursue. Few of the initiatives were strategic in nature, and after going through the logical framework presented here, the scorecard team identified about a dozen new strategic initiatives that were not on the original list of 100. The team was surprised to have identified any new initiatives at all, given the comprehensive nature of the previous exercise. As in the previous step, be careful to avoid a rush to judgment -- initiatives are means, not ends.

 

ScorecardLogic.gif
Figure 8. Balanced  Scorecard Logic

 

Figure 8 shows the logic of scorecard development. Customer requirements drive the way an organization responds with products and services to market opportunities; vision, mission, and values shape the culture of the organization, and lead to a set of strategic goals that outline expected performance; business strategies give us the approach chosen to meet customer needs and attain the desired goals; strategies are made up of building blocks that can be mapped and measured with performance measures; targets give us the expected levels of performance that are desired; and new initiatives provide new information to successfully meet challenges and test strategy assumptions. Resource identification and budget setting complete the process of adding the new initiatives to the current operations to get a total proposed budget for the reporting period.

 

What does a completed scorecard look like? The presentation of final scorecard results takes a number of different unique forms to support each organization's unique communications and management needs. Most organizations want to see different scorecard views, including: an end outcomes view, a performance measures (metrics) view, a new initiatives view, and a strategic map. Figures 9 to 11 show examples of several different presentations. Note how an organization's vision and mission can be decomposed into strategic components that are actionable, specific and measurable.

 

FedLogisticsCtr.gif
Figure 9. Putting  It All Together - Federal Government Logistics Center

 

LinkingScorecards.gif
Figure 10. Linking  Scorecard Components

 

LocalGovLogistics.gif
Figure 11. Putting  It All Together - Local Government

 

How long does it take to build a scorecard system? Depending on the size of the organization, two to four months is typical, six weeks is possible. The drivers of "shorter rather than longer" are: senior leadership support and continuous commitment, currency of existing assessment information, size of the organization, availability of scorecard team members, willingness to change and embrace new ideas, level of organization pain that is driving the scorecarding journey, and facilitation support. (At the risk of sounding self-serving, the journey goes faster and smoother when outside expert training and facilitation assistance are used.)

 

A Balanced Scorecard system provides a basis for executing good strategy well and managing change successfully. Building Balanced Scorecard performance system using the framework described here will cause people to think differently (more strategic) about their organization and their work. For many, this is a refreshing change to "strategic planning as usual". But will also bring change in the way things are done, as new policies and procedures are developed and implemented. For some, these changes can be troubling. The realization is that the Balanced Scorecard journey involves changing hearts and minds at least as much as it involves measuring performance.

 

In the second installment of this article, in the next issue of Perform  Magazine, we will explore the steps involved in implementing a scorecard performance system throughout the organization, and discuss the implications of using and managing with a Balanced Scorecard.

 

The Balanced Scorecard Institute is a free information clearing house on Balanced Scorecard issues, concepts, and techniques, and provides training, consulting, and facilitation support to organizations all over the world. You can reach the Institute at: www.balancedscorecard.org.

 

Howard Rohm can be contacted at hrohm@mindspring.com.

 

References

Building and Implementing A Balanced Scorecard: Nine Steps to Success, Howard  Rohm

 

Performance Scorecard Toolkit, Howard Rohm

 

Performance Drivers, Niles-Gorman Olve, Jan Roy and Magnus Wetter, Wiley

 

The Strategy-Focused Organization, Robert Kaplan and David Norton, Harvard  Business School Press

 

The Balanced Scorecard, Robert Kaplan and David Norton, Harvard Business  School Press.

 

Keeping Score, Mark Graham Brown, Quality Resources

 

Measuring Performance, Bob Frost, Fairway Press

 

The Business of Government, Thomas G. Kessler and Patricia Kelley, Management  Concepts

 

Outsourcing at Southwest Airlines: How America's Leading Firms Use  Outsourcing, Michael F. Corbett & Associates, Ltd.

 

How To Measure Performance: A Handbook of Techniques and Tools, Performance-Based Management Special Interest Group, U.S. Department of Energy

 

Various Balanced Scorecard Case Studies, Harvard Business Publishing

 

End Notes

1 See Outsourcing at Southwest Airlines, above.

 

2 From Meeklenburg County, North Carolina Managing For Results  Balanced Scorecard.

 

3 Federal Aviation Administration Logistics Center Strategic  Plan.

 

4 Preliminary material from the U.S. Marine Corps Systems  Command.

 

--

 

Howard Rohm is Vice-President of the Balanced Scorecard Institute, president of Howard Rohm Consultants, LLC and an international trainer, consultant, and facilitator. He has over 25 years of government and private industry strategic planning, Balanced Scorecard, Performance Measurement, and information technology experience.

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Tom Parish

A Balancing Act - Part 1

Posted by Tom Parish Jan 13, 2006
by Howard Rohm

Reprinted with permission from the Balanced Scorecard Institute.

 

Part 1  |  Part  2

 

Developing and Using Balanced Scorecard Performance Systems

Private and public organizations find themselves continually trying to do more with less. As I visit business and government managers around the world, I am reminded of Stephen Covey's quote: "People and their managers are working so hard to be sure things are done right, that they hardly have time to decide if they are doing the right things."

 

Doing the right things and doing things right is a balancing act, and requires the development of good business strategies and efficient operations to deliver the products and services required to implement the strategies. Competitive pressures on private businesses, and performance improvement and reform pressures on public sector organizations, mandate that organizations continually worry about executing good strategy well, at the same time that they worry about running business operations efficiently. Today's organizations need to be both strategically and operationally excellent to survive and meet tomorrow's challenges. One framework that helps achieve the required balance between strategy and operations is the Balanced Scorecard.

 

The Balanced Scorecard is a Performance Management system that can be used in any size organization to align vision and mission with customer requirements and day-to-day work, manage and evaluate business strategy, monitor operation efficiency improvements, build organization capacity, and communicate progress to all employees. The scorecard allows us to measure financial and customer results, operations, and organization capacity.

 

This article discusses how to develop a Balanced Scorecard performance system, explores issues that organizations face in building and implementing scorecard systems, and shares lessons learned from organizations that have taken the Balanced Scorecard journey.

 

Originally developed as a framework to measure private industry non-financial performance, Balanced Scorecard systems are equally applicable to public sector organizations, but only after changes are made to account for the government mission and mandates, not profitability, that are unique to almost all public sector entities. (Some public organizations generate and use revenues to offset expenses and minimize the need for annual Congressional appropriations; their operations are more like a business than a government entity, and they could use the private sector scorecard model).

 

Originally developed in the early 1990s, the Balanced Scorecard has migrated over time to become a full Performance Management system applicable to both private sector and public (and not-for-profit) organizations.1 Emphasis has shifted from just the measurement of financial and nonfinancial performance, to the management (and execution) of business strategy.

 

Figure 1. Balanced Scorecard Performance Management System
BalSC-PMS.jpg

 

Balanced Scorecard systems give us the ability to view three different dimensions of organizational performance: Results (financial and customer), Operations, and Capacity, as shown in Figure 1 above. The figure also shows the components of a fully developed scorecard system: Business Foundations, including vision, mission, and values; Plans, including communications, implementation, automation, and evaluation plans, to build employee buy-in and communicate results; Business Strategies and Strategic Maps, to chart the course and define the logical decomposition of strategies into activities that people work on each day; Performance Measures, to track actual performance against expectations; New Initiatives, to test strategic assumptions; Budgets, including the resources needed for new initiatives and current operations; Business and Support Unit Scorecards, to translate the corporate vision into actionable activities for departments and offices; and Leadership and Individual Development, to ensure that employee knowledge, skills and abilities are enhanced to meet future job requirements and competition. We'll explore each of these components in more depth in this article and a follow-up article, in the next issue of Perform Magazine. In this first article, we'll concentrate  on how to build a scorecard.

 

In Balanced Scorecard language, vision, mission, and strategy at the corporate level are decomposed into different views, or perspectives, as seen through the eyes of business owners, customers and other stakeholders, managers and process owners, and employees. The owners of the business are represented by the Financial perspective; customers and stakeholders (customers are a subset of the larger universe of stakeholders) are represented by the Customer perspective; managers and process owners by the Internal Business Processes perspective; and employees and infrastructure (Capacity) by the Learning and Growth perspective.

 

Figure 2. Basic Design of a Balanced Scorecard Performance System
BasicBalSC.gif

Figure 2 shows an integrated relationship among the key parts of a scorecard system -- Vision, Strategy, and Perspectives. Balance is achieved through the four perspectives, through the decomposition of an organization's vision into business strategy and then into operations, and through the translation of strategy into the contribution each member of the organization must make to successfully meet its goals.

 

Variations in the basic design are common. Typical changes include changes in the categorization of perspectives (Innovation and Learning, or Employees, in place of Learning and Growth, for example) and the number of perspectives (adding Stakeholders as a separate, fifth perspective, for example).

 

When the Balanced Scorecard framework is applied to a public organization, such as a Federal agency, a military unit, or a state and local government organization, the framework must be changed to capture the mission-driven nature of public organizations (in contrast to the profit-driven motivation of private businesses). Also, government reform initiatives at all levels of government are placing more emphasis on accountability and results to meet citizen expectations for public services and products. The desired outcome for a private organization is a growing, profitable, competitive enterprise; for a public organization, desired outcomes center on the delivery of necessary, cost-effective services for citizens or members (for not-for-profits).

 

Figure 3. Public-Sector Balanced Scorecard
PublicBalSC.gif

 

Figure 3 shows the basic design of a public sector scorecard system. Note the changed emphasis on Mission (the key driver of a public sector organization), the change in the Customer perspective to Customers & Stakeholders (mission driven customer requirements, subject to government mandates and limitations), and the changed positions of Financial and Customer perspectives. We like to use the term Employees and Organizational Capacity for the final perspective, to reflect the importance of the human system and of capacity building through trained and knowledgeable employees and efficient information technology systems. Also, sometimes a Budget perspective is used in place of the Financial perspective, to reflect the budget formulation and execution processes associated with public accountability of funds.

 

For public organizations, the broader universe of all stakeholders becomes important as Balanced Scorecard teams account for the impacts of public programs on directly affected citizens, regulators and other oversight bodies, businesses, and the public at large. These changes are much more than cosmetic -- they represent a fundamental shift in the logic of building and implementing a scorecard performance system. But at the heart of the public scorecard system, just like for the private sector, is business strategy.

 

Strategy is the approach used to accomplish the mission and implement an organization's vision. Strategy exists at different levels within an organization, such as overall organizational strategy to, for example, address certain business markets and eliminate others, or to aggressively pursue research and development internally as a way of developing new products.

 

Organizations usually have more than one macro business strategy; typically, several common strategic themes or focus areas show up repeatedly across different businesses -- Build the Business, Improve Operational Efficiency (or Effectiveness), and Improve Product Competitiveness, for example. The same pattern is true for public sector organizations, where examples include: Meet Citizen Needs, Enhance Technology Applications, Improve Operational Effectiveness, and Enhance Community Safety and Well-Being. Each of the above strategic themes may contain one or more business strategies that determine what people do on a day-to-day basis.

 

At the next lower level of strategy, sometimes called management (or department) strategy, managers develop the strategies for their business units that support overall organizational strategy and help propel an organization to reach its goals. But before we know which strategies are successful and which are not, they must be treated as hypotheses to be analyzed and tested as data becomes available from the scorecard management system. We need a framework to develop and manage strategy, and align the work we do with the goals of the organization.

 

The decision to undertake development of a Balanced Scorecard is a decision to undertake a journey, not work on a project. While there are discreet start and stop points along the way, one should not miss the point that the real value of a scorecard system comes from the continuous self-inquiry and in-depth analysis that is at the heart of all successful strategic planning and Performance Management systems. Start your Balanced Scorecard with the idea that you are in it for the long term, and that changing behavior is at least as important as measuring performance. Start your Balanced Scorecard with the idea that you are in it for the long term, and that changing behavior is at least as important as measuring performance.

 

The scorecard journey has two phases: Building The Scorecard and Implementing  The Scorecard.

 

We use a six-step framework to build an organization's Balanced Scorecard, and an additional three steps to implement the scorecard system throughout all levels of an organization. The steps and their sequence are shown in Figure 4. At the end of the first six steps, the high-level corporate scorecard is developed and it forms the basis for subsequent scorecard development. (Sometimes a scorecard journey begins in a strategic business unit or support unit, in which case the unit scorecard is built first and becomes the basis for subsequent unit and corporate scorecards.)

 

Figure 4.

WheelSC.jpg

End Notes

1 See the description of the original study in Kaplan &  Norton. The Balanced Scorecard.

 

--

 

Howard Rohm is Vice-President of the Balanced Scorecard Institute, president of Howard Rohm Consultants, LLC and an international trainer, consultant, and facilitator. He has over 25 years of government and private industry strategic planning, Balanced Scorecard, Performance Measurement, and information technology experience. To learn more about the Balanced Scorecard Institute, visit their Web site at www.balancedscorecard.org.

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Tom Parish

by Harris Kern

 

Featuring Harris Kern's 10 Commandments

 

Part 1  |  Part  2

 

Top IT Issues and Challenges

After studying over 350 Fortune 500 and Global 2000 IT organizations, I've compiled a list of the top issues and challenges plaguing IT executives. No wonder IT is still considered a cost center by their business counterparts. Below are some of the more common issues and challenges in IT:

 

      • How do CXOs lead, educate, and partner with CEOs and the executive  management team?
      • How does IT ask the right questions and jointly specify project requirements to prevent business units from throwing project requirements over the transom (often as solutions masquerading as requirements)?
      • How do IT executives market and enhance their value to the enterprise?
      • How can IT get its business partners to communicate IT's value to the  enterprise?
      • How does IT stop purchasing technology for technology's sake?
      • How can IT stop the mistrust and develop credibility with the organization?
      • How can IT change the mindset of, "IT is for IT's sake" into a  customer-centric culture?
      • How does IT jointly develop business cases that can be used to determine  priority?
      • IT does a good job of following orders, but how does it change such a  culture to one that has creative solutions?
      • Traditional IT strategic planning is a yearly, typically static, and discrete, process. It takes considerable time (often four to six months) to produce a large, static document that details projects and timetables from a technology versus business viewpoint. How do we change this process into one that is more tightly integrated with the business?
      • How can IT do a better job of aligning with the business?
      • How can IT do a better job of thinking strategically and being more proactive instead of always being in a reactive mode in their production environment?
      • What are the minimum, yet sufficient, processes required to build the ideal  IT organization?
      • How can IT maintain centralized control for standards, processes, and  architectures?
      • Systems are often slam-dunked into production - how can IT ensure a smooth  transition from development to production?
      • How can IT become more cost effective?
      • How does IT stop "working in silos" to become a team with synergy?
      • How can IT be perceived as adaptable rather than bureaucratic?
      • How can IT use less related (isolated) communication and develop more key  relationships?
      • How can organizations retain IT staff?
      • Which IT governance model should be used and how should it be used?
      • How can management direct employees well when it is so pressed for time?
      • How can management help when an organization restructure has negatively  affected certain individuals
      • How can very entrenched mindsets be changed?
      • How can barriers that revolve around culture be bridged?
      • What can be done when staff is trying to manage their workload, but many are  failing miserably and burnout is widespread?
      • How can ownership and accountability of key enterprise-wide processes be  clarified?
      • How can IT reduce complexity?
      • How can a good balance be achieved between security and privacy?
      • How can management empower a staff that is not, or does not, feel empowered?
      • How can IT be helped to do more with less?
      • How can system management processes be made effective?
      • What to do when an annual HR performance appraisal program to evaluate  employees is not effective for IT?
      • How can quality of life be improved for IT staff?
      • What can be done when lack of patience is common among staff?
      • How can management help the IT staff manage their time more effectively?
      • What can be done when communication is atrocious between IT and the business; IT and vendors; external service providers; and within IT, especially between Applications Development and Operations Support?
      • How can a company fix its IT organizational structure when it is missing a  key function(s) or if it is not properly structured?
      • How can day-to-day behaviors be aligned with, or support, organizational  objectives?
      • What can a company do when it is faced with replacing or outsourcing  inadequate, under-performing IT operations?
      • How can IT develop an effective outsourcing strategy?
      • How can IT satisfy rapid ramp-up and/or multi-location infrastructure  requirements?
      • How can leading-edge technology and services help IT gain and maintain  market advantage?

 

These enterprises are bleeding profusely because of many years of procrastination and neglect. Years of merely focusing on new system development and technology have finally taken their toll, and it's costing companies millions. The issues are common and widespread throughout all industries (i.e., telecommunications, manufacturing, entertainment, and media). No one is excluded.

 

Executives are looking outside their confines for answers, and they're seeking guidance from infrastructure service providers for quick solutions. A word of caution to these executives-do you think these service providers -- many of which came out of the cupboards overnight -- have their act together?

 

Executives, please heed this warning: If you outsource trash, you will receive twice the trash in return, which of course means, twice as many headaches. You will have to manage two dumpsites. You will still have to deal with your customers, and in addition, with the vendor that stores your trash.

 

The only way to turn this around is to focus on people, process, and the organization structure as technology. The first step is to define the ideal IT environment.

 

The Ideal Computing Environment

My definition of the ideal IT environment is one that is  designed to exceed the enterprise's strategic goals while nurturing the  individual to achieve exceptional productivity and job  satisfaction. The follow signs are an indication of such an  environment:

 

      • Educated and committed enterprise executive management
      • Complete alignment with business goals and objectives
      • Strategic decisions that accommodate a dynamic business environment
      • Cost effectiveness
      • Common architecture (i.e., processes, tools, standards)
      • Staff is productive and has a better quality of life
      • Culture encourages honesty, mutual respect, creativity, and job satisfaction

 

When designing the ideal computing environment, a critical piece of the equation is establishing the right methodologies, or what I refer to as the 10 commandments for building a competitive IT organization. As depicted previously, most of what stands in the way of developing such an organization is not technology related. When designing this environment, the focus should be on:

 

      • People
      • Organization structure
      • Processes
      • Technology

 

Just as most people abide by a set of commandments in our everyday life, the same holds true for IT staff responsible for establishing a competitive IT organization. The following are guidelines, or what I refer to as the "10 commandments for building a competitive IT organization":

 

The Ten Commandments

I. Thou shalt focus on the thy people.

The corporate mandate is, "do more with less." In IT, we've been doing more with less for years. Arguably, running the business of IT is more difficult than managing any other business, for several reasons:

 

      • Customer demands for additional services and higher service levels at a  lower cost
      • Constantly changing customer requirements; continuous change to keep up with  business requirements
      • Rapidly evolving technology
      • Rapid ramp-up and/or multi-location infrastructure requirements for  corporate acquisitions
      • Constant threat of being outsourced as most executives feel that IT is not a core business competency and/or they perceive that vendors can provide services at a lower cost
      • Infrastructures that are complex to design, support, and maintain
      • The need to forge compromises between business and technical constraints
      • The need to enrich relationships with the business
      • Managing ambiguity
      • Managing time horizons
      • Non-IT executives' difficulty in understanding IT's value
      • Politics -- IT is the "undesirable step-child." Most executives have no idea what to expect from their IT team, and do not recognize what it takes to deliver technology solutions to the business
      • And finally, the worst catalyst for the past few years, economic downturns  and rising global competition

 

Physically and mentally, IT professionals are disheveling. IT executives are saying, "We've been lean for years and now my staff is burning out from consistently working 12+ hour days and weekends. What's it going to take to stop the hemorrhaging?" IT executives have invested in implementing key elements to build world-class organizations such as:

 

      • Best practices (i.e., processes, standards)
      • The best technology money can buy
      • Experienced employees

 

Management has also gone so far as to invest in a variety of team-building exercises over the past few years in an attempt to promote teamwork and motivate the staff, hoping they would see an increase in productivity and customer satisfaction.

 

Yet when all is said and done, the staff is still not performing at the level required to provide a satisfactory level of service to their customers. So what's it going to take? Effectively implementing best practices and acquiring the best technology money can buy will help a bit. The traditional ways of dealing with IT staff (i.e., communicating regularly, incentives, challenging people, delegating responsibility) also help, but only a bit; it will not guarantee success. The people issues today require  extraordinary measures.

 

The key to success within IT is promoting self-discipline so staff can effectively manage their own lives. My vision brings the world of IT and discipline together to properly address the people issues in IT. The goal is to arm IT professionals with the right tools to become more productive, not only in their career, but in their personal life as well. At the end of the day it's all about the people. Staff will need to motivate themselves; yearly or quarterly offsite team-building activities are not the answer. Motivation has to originate from the individual consistently. IT executives need to empower their  staff to acquire discipline to be successful.

 

The most important ingredient in one's lifetime is discipline; with it you can achieve everything; without, you will struggle to exist.

 

Yearly Performance Reviews

IT executives should also supplement yearly performance reviews (sponsored by HR) with a program I refer to as People Performance Management. Employees need to establish and monitor goals weekly. Yearly performance reviews are ineffective in IT; a year in IT seems like an eternity!

 

II. Thou shalt effectively organize to partner and align with the  business.

IT needs to be organized to rapidly respond to the needs of individual business groups. This requires a planning process tightly integrated with each of the business groups and an enterprise-wide vision within which all of these needs can be met. This can only be accomplished by establishing working relationships at individual, and group levels with all business partners.

 

Business teams, including IT as a "business," work together. Other than enterprise infrastructure, there is no such thing as an IT project. Whether IT is responsible for 10 percent of the tasks or 90 percent of the tasks, IT is merely a member of a business team led by a business project champion. All projects require business unit champions and business project champions.

 

All members of this business team are scheduled with accountabilities and deliverables, and priorities are determined through jointly developed business cases. All projects are required to build a business case; a technology case is not sufficient. Further, all business cases are required to discuss alignment of objectives with enterprise objectives. IT is inseparable from the business and requires complete alignment with business goals.

 

"Alignment with the business" needs to be more than a strategic plan or a written set of operating principles. The technology organization needs to be set up in a way that allows business alignment to flow as a natural consequence of the way the job is done.

 

To flexibly align with the business, IT needs to be able to react both functionally (e.g., deep technical skills) and geographically (e.g., globally, regionally, locally) to business imperatives. The solution is a matrix organization that combines shared services with personnel dedicated to business units at the global, regional, and local levels. This can accommodate any enterprise needs by strengthening or weakening "dotted lines" and/or "standards/guidelines."

 

The only way to align with the business is to become a part of the business. Dedicated applications development staff, physically sitting with the business, having their operational priorities set by the business, participating in business operations and strategy, and having their budget overseen by the line of business forces technology to be aligned with the business. The key to the matrix is that these groups, for all practical purposes of reporting to the line of business, are reporting on a straight line into technology and on a very strong dotted line to the business. This unit is a part of the business, but ultimately, reports to technology. The management principles to be followed are a strict adherence to joint understanding, with no surprises. The business priority is to discover and prioritize opportunities and needs, while the technology priority is to offer practical solutions. The systems manager in charge of this group must represent IT to the line of business, and must represent the business unit to IT. This position in a matrix organization requires the ability to report to multiple managers and to be an honest advocate for each. Success requires the appropriate personality as well as the appropriate culture. Taking the time to find and train capable systems managers is critical. The organization may be right, but still will not function correctly without the right people in these key positions. And they need to understand the business, the personalities, and the technology without allowing ego into the equation.

 

The systems manager is the single point of contact between business units and IT, since a many-to-many relationship is counter-productive. All activity is coordinated through the systems manager, who must avoid the trap of becoming a bottleneck. A large part of this role is like that of a traffic cop participating directly only in those activities that require a systems manager's direct involvement. The systems manager has direct control of the business unit's dedicated application development staff and coordinates the business unit's use of shared technology services.

 

Shared services provide specialty skills that may not have critical mass within each business unit, and need to be managed for the enterprise to leverage skills, obtain economies of scale, and maintain an application architecture. Specialty skills may include database administration, system administration, help desk, and network administration. Shared services are traditionally almost exclusively found in infrastructure or data center groups. Technology as a business partner has now evolved beyond this model of shared services. Personal productivity services are critical, new shared-services organizations that don't report through the data center hierarchy.

 

Personal productivity services are a group that integrates support personnel and personal productivity applications at the desktop and individual level. It is technology with a human face. It is comprised of the help desk, first- and second-level support, training, and desktop development. Desktop development was created to expose many users to IT value powerfully and directly because of the speed of implementation and the very real and immediate "quality of life" improvement. This very quick response to individual and small group needs repeated for many small groups is an opportunity to add value to the enterprise and at the same time, establish relationships across the organization.

 

IT has become mission-critical and needs to be managed as a strategic asset. IT is inseparable from the business and requires complete alignment with business goals. Successful IT executives need to consider themselves and convince others to consider them as part of the business, not separate from the business, by managing risks and expectations.

 

Continue to Part  2.

 

--

 

Harris Kern is a renowned American author, publisher, lecturer, and IT consultant, who focuses his considerable talents on simplifying IT -- and making it work. Through the Harris Kern Enterprise Computing Institute (www.harriskern.com), he has developed a powerful resource for building competitive IT organizations. Under the umbrella of the Institute, IT professionals from many of the world's leading companies come together to take advantage of leading edge disciplines and strategies for improving the IT industry.

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Tom Parish

How can a company capture attention in this, the age of the distracted customer? What happened to knowledge management? What's next for ERP? Thomas Davenport shares his insights.

 

Tom Davenport has been around the IT block. One of the pioneers of process reengineering, he has been instrumental in the development of our understanding of how businesses use information to compete. A seminal thinker in the field of knowledge management as well, he has recently focused on the critical field of attention-management. His latest book is

 

The Attention  Economy: Understanding the New Currency of Business.

 

EL: One of the things you say in your book, The Attention  Economy, is that, "understanding and managing attention is now the single most important determinant of business success." What is the attention economy and what are its implications for companies and then individuals?

 

TD:The attention economy overall is an economy in which there's way too much information and knowledge floating around for the brain cells that humans have available. So it becomes an economy where attention is really scarce and hence really valuable. And getting attention for your ideas, your products, and your information is a critical prerequisite for any kind of business success. If people don't know that your products exist and spend any time  cogitating about it, you don't stand a chance. A great example is "The Blair  Witch Project" -- $750,000 making the movie, $30 million marketing it.

 

At an individual level, you say something about "there can't be too many  initiatives at one time."

 

I see that as more of an organizational thing, but it certainly impinges on  individuals. And ultimately, any organizational initiative that's successful  comes down to individuals changing their behavior. But if they're not paying any attention to what the initiative is about, its objectives and so on, they're not going to change their behavior. Getting real change to happen in  organizations becomes a matter of individual attention. Every individual has to look at him- or herself as a consumer, and you want to be a very intelligent consumer and consume only information that's going to benefit you, your family and your organization. And you've only got so much to give out, so you've always got to be making this calculation: Is this the best use of my attention right now?

 

That's why so many employee newsletters fail, because there is so much  useless information.

 

EL: You note that there are different types of attention and certain  teams are dominated by certain types ...

 

TD: We identified, based mostly on psychological research, three overall dimensions and six types. There's front-of-mind and back-of-mind -- what you try to do there is push as much as possible to back-of-mind through repetition and practice so you can free up your front-of-mind for other things. That's one of the dimensions with the Attentionscape tool that we've developed. There's front-of-mind versus back-of-mind, voluntary versus captive, attractive versus aversive. What we argue is that you really want to try to maximize all of those six types because you're getting a maximum amount of attention if you're hitting on all of them at the same time.

 

EL: You also discuss the critical success factors there are for  getting the attention of CEOs. Can you talk about that?

 

TD: I wouldn't say CEOs -- I'd say executives. We looked at what managers, white-collar workers, and professionals pay attention to. We first asked what sort of media they pay attention to -- it turns out email is the  most attention-getting medium in our research.

 

Then we asked what attributes of the message would make it most likely to receive a lot of attention. We found out that personalization was the single most important factor. Second was keeping it short and concise. Third was emotion, having either positive or negative emotion being evoked by the message. And the fourth one was making it come from a trustworthy source. The first three are relatively easy to manipulate. I say easy, but it's actually a lot of hard work, because personalization takes a lot more effort than sending out a big group distribution email.

 

EL: What are the lessons we should learn from the online world? How do you capture and sustain attention online -- or even offline?

 

TD: Actually, the biggest attention industry, if you look at how much attention goes to it, is television. People watch it for three hours and 26 minutes a day on average in the United States. They're not online quite that much. We had a whole chapter on e-commerce and the Web. But for those industries like television, the movies, publishing and advertising -- out of each industry or sub-industry, we tried to abstract some of the lessons. So for television, it's the power of narrative. They always tell stories, make it easy to get in and get out, have a predictable time schedule, and they don't let technology get in the way.

 

For movies, we talked about age segmentation and the captive setting. We tried to point out some circumstances where people had taken some of these lessons and moved them across industries. For example, we looked at Gamesville, a Lycos entertainment Web site, and how they start new games at the top of the hour, much like a television schedule.

 

EL: Let's shift to ERP. In terms of strategic use of ERP, you are the expert. Recently, I've heard from some database gurus that ERP systems are what has really allowed companies to take all their various sources of data and normalize them, allowing for one common method of talking to each other.

 

TD: I'm pleased that you say that, but the world didn't seem to be that interested in a strategic perspective on ERP, at least at the time. I had hoped that after the Y2K thing, people would go back and say, "Gee I spent all this money and I should optimize it and get a lot of business value." But the fact is that they did not do that. They basically moved from Y2K to e-commerce. And now people are just trying to figure out how to cut costs. I'm glad I did that work on ERP -- I think it's very important. But it (Mission  Critical) certainly wasn't the most popular book I ever wrote.

 

EL: But you still have to fulfill everything, you still have to do  the back-office stuff -- ERP isn't going away.

 

TD: Exactly. SAP in its advertising now, they call it, "Solutions for the New New Economy, the one where profitability matters." Certainly, you found some pretty small e-commerce companies were putting in ERP because they knew they had to do fulfillment and be able to promise inventory, and so on. People are still doing it -- Oracle, SAP, and PeopleSoft are doing pretty well as companies. For a while they were doing extremely well. I think there's still a valid question: For any given piece of functionality, do you want to do it in an ERP system, which optimizes the integration of it all, or do you want to do it for the "best of breed" thing, which may optimize specific functions? I think it's certainly still a valid question.

 

EL: What about taking the data captured in your ERP system and extracting it and turning it into knowledge that can be acted on? Are companies finally getting better at this?

 

TD: I think they're getting a little bit better as the tools from the ERP vendors get better. But it's still not great. Too many people still only do the transaction side and don't manage the business any differently.

 

EL: Would you say that the road for ERP in the future is going to be  optimizing B2B buying and really looking at that?

 

TD: Certainly, that's part of it -- hooking up front-office and back-office stuff so you can do e-commerce and actually fulfill your orders, make your customers happy, and so on.

 

EL: What about the ASP model, in which everybody hooks into a system that's hosted somewhere else so all your suppliers can be on the same ERP system? Or a marketplace, where everybody is trying to collaborate? How do you manage the challenge of ERP talking to ERP?

 

TD: There's a huge integration challenge. I think it's fair to say that few companies or industries have solved it yet. What you're getting into is inter-organizational reengineering, and it's very time-consuming and very expensive. And I think that's one reason why a lot of these B2B exchanges, and so on, are going out of business.

 

They don't have enough capital to afford to do that kind of integration across multiple companies. Frankly, I think there will be a fair number of these consortiums, e-marketplaces and the like, that won't be able to avoid it either. It's already clear that it's taking a great deal longer than anybody thought it would to be able to do transactions without a huge amount of human intervention.

 

EL: What about companies like enterprise application  integrators?

 

TD: I think there's an appeal to being able to keep a lot of your existing applications and integrate them through some means other than one big system. It's a complex world, and even if you end up only integrating pieces of the business that you've acquired, there would be a perfectly good role for software like that. I think we'll end up using a lot of that stuff for integrating across companies. You're not going to find very many industries where every company has SAP or Oracle.

 

EL: Knowledge management turned into business intelligence and then it turned into CRM and then supplier relationship management, some even say competitive intelligence. What's going on in knowledge management these days?

 

TD: Well, the bloom is off the rose on pure best-practices sharing. But I think there is more energy now than there has been in business intelligence and I think it was a good thing to think about business  intelligence from a knowledge-management standpoint as some companies are  starting to do, because that means that you don't just assume that some  technology does it all. You don't assume that because you have some sort of data mining software, that these great insights are just going to jump out of your data.

 

The smart companies realize it takes a lot of very bright human beings around in addition to the software, and that's sort of a knowledge-management-oriented insight.

 

CRM is probably going to focus now more on customer knowledge. For some reason, companies were very slow to put customer knowledge into their knowledge-management initiatives. And what could be more important than that?

 

EL: I think your book, Process Innovation: Reengineering Work  through Information Technology, is once again required reading . Do you see a second wave of re-engineering, brought on as companies try to transform themselves using Web technologies?

 

TD: The word re-engineering does seem to be coming back into favor a little bit. We're actually doing some work with high-end knowledge workers and how you make their work more effective. High-level scientists and product developers, software architects, investment bankers, and consultants -- their work has not been touched much by reengineering.

 

EL: What are you seeing there?

 

TD: We're looking at many factors. One is technology, which is probably the least exploited thus far. Workplace design is a pretty hot issue, and more people are probably doing things with it than with technology. And then organizational design, probably the single most important factor if what you're interested in are things like innovation and creativity, and so on. We were just out at Ideo, probably the most successful product design firm. They hardly use any interesting technology, their workspaces are kind of fun but not particularly unusual, but they have a  really great culture that emphasizes innovation. And I think that's why they  succeed.

 

EL: So it's really a people thing; almost how you manage people's  spirits.

 

TD: Exactly. If you want employees to think creatively and share their  ideas and so on, you have to work on that kind of stuff.

 

EL: What do you think about what's happening with convergence? What are some of the trends you see developing in that marketplace?

 

TD: The Internet is still there, and companies are still quite interested in how to take advantage of it more effectively. We're just at the beginning of thinking about how we change our processes and our cultures and our governance structures to do anything differently with it. It takes a huge amount of time. We've had ERP for 20 years, and only a small fraction of companies have started to change the way they manage using the systems. I think that will be true of the Internet.

 

Right now, we're sort of in a period where there's no really big new ideas, and a lot of managers, employees, and organizations just want to take all the ideas that have come along for the past several years and put them together, integrate them, simplify them, and get some value out of them. They're all looking to extract some value from their existing infrastructures and, at  this moment, cut costs from their existing infrastructures.

 

EL: What about online communities? It's almost as if an online community does three things: it gets attention, it sustains attention with user participation, and it encourages knowledge sharing of the kind where a novice can learn from an expert. Do you see companies embracing the concept of communities -- internally with their own employees, and externally, with customers, suppliers, and other partners?

 

TD: I think online communities are great and they have a number of positive attributes. But I think a lot of companies try to do them on the cheap, and they don't really take experts and put them in roles to facilitate communities. It's a huge amount of work to facilitate an online community. Ultimately, within companies, we'll see online communities as kind of another  unit of organizational structure. You'll say, "Well, I'm in the accounting department, but here are the online communities that I'm really active in." And that will give you some sense of a person's view of the organizational structure.

 

--

 

Christian Sarkar is Editor-in-Chief of christiansarkar.com. You can  see more of Christian's work at onewwworld.com.

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Tom Parish

Technology On Tap

Posted by Tom Parish Nov 1, 2005

by Steve Ulfelder

 

An Executive Guide to Utility Computing -- What it is, what it isn't,  and the kind of results you really can expect

 

In the May 2003 issue of the Harvard Business Review, Nicholas G. Carr wrote  a provocative article titled "IT Doesn't Matter". As might be expected, it roiled the zone in which business and IT collide; the article immediately spurred counterpoint columns, became the subject of dozens of symposia and launched heated boardroom discussion.

 

A careful reading of Carr makes it clear that his true argument is not so much that IT doesn't matter, but that it matters so much -- has become such a slab of business bedrock -- that it is actually IT's competitive value that's no longer a potential business differentiator. This is highly arguable itself, of course; some might say that in today's business environment, technology doesn't matter in the same fashion that electricity and running water don't matter.

 

Which brings us to the concept of expecting technology to behave as electricity and running water do. Those commodities are available anytime they're needed; they stand by invisibly when they're not; the infrastructure that surrounds them is resoundingly reliable; and they are paid for based on consumption.

 

This "invisible utility" model is the promise of on-demand computing, which also is referred to as flexible computing, grid computing, autonomic computing and a host of other terms. (Editor's note: After studying these terms, we've decided "on-demand computing" is both a good description of the practice and a name commonly used in the industry.

 

The dizzying variety of names is a symptom of the wider confusion surrounding on-demand computing. The field is growing so quickly and is being "spun" so furiously by vendors, system integrators, analyst firms and other interested parties that business executives seeking to learn about and evaluate it have a difficult time getting a solid footing. "Different suppliers are offering different mixes of [hardware, software and professional services] and using the same buzzword," says Dan Kusnetzky, a research vice president at Framingham, Mass.-based IDC. "Managers are often confused."

 

IT and business leaders are taking the on-demand computing movement very seriously -- as they should -- but they are also appropriately skeptical, having seen the hype cycle at work before. Murray Horwitz, CIO at Uline Inc., a Waukegan, Ill., shipping supplies company that currently has no plans to adopt an on-demand model, speaks for many technology leaders when he says, "It's a great concept, but I don't know how you implement it, and I think [vendors and enterprises] are going to have trouble figuring out how to cost it." This article's mission is to cut through the hype, language barriers and confusion to present a cleareyed look at on-demand computing -- its genesis, potential, limitations and implications for your business.

 

Defining On-demand

Here is a simple, if circular, way to define on-demand computing: It is IT functionality on demand. At its heart, on-demand consists of two elements:

 

  • An architecture in which technology resources such as servers, storage and the network are "virtualized" and organized into pools that can in turn be allocated to end users according to business processes and policy-based service levels.
  • A demand-based delivery model that offers customers a choice of deployment and payment models for deploying the architecture. Customers pay only for the resources they use.

 

To ensure business continuity, enterprises generally possess enough IT resources to meet peak demand. During off-peak hours, a great deal of processing power, bandwidth and storage capability sits unused, contributing nothing while draining electrical power, real estate and human resources.

 

The driving question behind on-demand computing is compelling: What if businesses could buy fewer of these IT resources, pool them and reliably meet users' needs by pushing the resources wherever they were needed?

 

Frequently asked questions: Do all these resources come from our own existing IT infrastructure? Or do we let a third party own the computers, so that we simply flip a switch and watch the functionality pour out? Or are we simply reorganizing the IT resources we already own? For the purposes of this article, "on-demand computing" refers to the practice of pooling your existing IT equipment, while "utility computing" refers to buying it from an outside provider.

 

Refining On-demand

On-demand computing brings a major shift in the way enterprises think about IT challenges. For the past decade or more, the idea was to integrate -- to make disparate software applications work together.With on-demand, IT becomes a set of functions a vailable on the network. "This is an architectural change," says Jason Bloomberg, a senior analyst at Waltham, Mass., research firm ZapThink. "And software architectures have always been very difficult to understand, let alone change."

 

To devise an on-demand computing architecture, the IT organization must create what's known as an abstraction layer. This is not for the faint of heart; it's a complex, time-consuming process that must begin with an exhaustive inventory of existing IT resources, which, in and of itself, is enough to frighten off many organizations.

 

Make no mistake, integration doesn't vanish in an on-demand world -- it remains a part of the picture, but it is no longer the final goal. Bloomberg offers one helpful way to think of this transformation. Under the traditional integration view of IT, all that matters about your company's mishmash of computer systems is connecting them. To shift to on-demand, you must change the mishmash into a set of Lego building blocks. Accomplishing this won't solve all your problems -- far from it -- but it's a necessary first step.

 

The major point to remember is that we are a long way from the day when you  twist the tap and useful computing flows out.

 

Many executives wonder what on-demand will do to their investment in Web services, which are essentially a way for different software programs to communicate. Most experts say Web services will play a key role in the adoption of on-demand. The reason: The initial technical challenge is to virtualize resources -- to make them behave as if they are something they are physically not -- and it's not a stretch to say that Web services do the same for software applications. Put another way,Web services are a valuable tool in transforming the mishmash into Legos.

 

A Brief History

Like neckties, technology strategies come back into fashion if you hang on to them long enough. Veterans from the days before CIOs, when IT was the Data Processing department, may recall time-sharing. Developed at MIT during the 1950s, time-sharing became a popular way to access mainframes back when computers were as big as your shag-carpeted rec room and CPU cycles were expensive.

 

The endless boom of Moore's Law drove down the price of computing horsepower inexorably, and timesharing all but vanished. Then, in the late 1990s, the general idea made a comeback when businesses called application service providers (ASPs) appeared and attempted to rent out software applications (as opposed to actual computer processing). ASPs' pitch was that they could relieve businesses of expensive hardware purchases and IT employee salaries. This promise appealed to many smaller organizations eager to avoid up-front costs. For the most part, large enterprises weren't swayed; they already had a massive IT investment, and they were being urged to view technology as a major competitive differentiator.

 

Because ASPs tended to be startups, most failed during the Great Nasdaq Meltdown of 2000-2001. That failure sticks in the minds of some e xecutives. Michael McClaskey, CIO at Perot Systems Corp. in Plano, Texas, is bearish when it comes to on-demand computing. "I fear that just as in the ASP bust of a few years ago, users will expect commodity pricing along with significant customization of service," McClaskey says, "and the two cannot coincide in a commercially viable model." While he does not entirely dismiss the concept, McClaskey says Perot Systems won't embrace on-demand anytime soon.

 

Outsourcing, too, is hardly a new concept, and many of its goals and potential gains mirror those of on-demand: lower fixed costs, improved agility, closer alignment with strategic goals.

 

In fact, many elements of on-demand computing are already commonplace in enterprise IT. The practice is "to a large extent a financing option," points out Bruce Caldwell, an analyst at Stamford, Conn., research firm Gartner, Inc., and there's certainly nothing new about leasing or renting a server, or paying for only six processors on a 12-processor server with the option to add capacity if needed. Storage is sold by the gigabyte, mainframe power by the MIPS. Even services, such as the help desk, are contracted out and paid for by the trouble-ticket.

 

What is new, then, about on-demand? Unlike leasing and outsourcing, which are IT-organization-centric, it begins with business users' needs and works backward toward a solution.

 

Naturally (and rightfully), this is a persuasive argument for business  executives.

 

What's in it for CIOs?

For CIOs, on-demand's major draw is its ability to allow them to say, "Yes, we can do that," rather than, "Now, hold on a sec." The past decade has seen senior technologists shift from their old gatekeeper role, in which they frequently found themselves explaining why various initiatives couldn't be undertaken, to a new and welcome role as enabler. "Today, the CIO is fundamentally thinking about making IT meet the needs of the business," says ZapThink's Bloomberg. "In the past, most IT groups weren't very good at that.Well, the CIO doesn't want to be the bad guy anymore. In those C-level meetings, he wants to say, 'We have a flexible IT organization that can meet the needs of the business and do it with low risk.'"

 

According to Gartner's Caldwell, this is the factor that has CIOs from every industry intrigued by on-demand: by cutting up-front investment dramatically and offering variable operating costs, flexibility and scalability, it allows enterprises to "deploy a new system almost overnight, so you see much faster ROI," he says -- and return on investment is one of the maj or goals of enterprise IT today.

 

The Challenges

Amid all the hype regarding on-demand computing and its offshoots, it pays to take a close look at what the technology cannot do -- by itself, at any rate. For example, while on-demand may help businesses reduce their investment in IT resources, it does little to address the age-old challenge of aligning technology spending with strategic business goals. Because on demand is at its root a way to shift resources from one spot to another, its Achilles' heel is exposed when the following questions are asked:

 

  • Where is the given resource needed most?
  • How confident are we that we've answered the previous question correctly?
  • What are the risks if we answered it incorrectly?

 

On-demand computing can be very attractive. But know that, if you do it poorly, you will sometimes be under-provisioned and sometimes over-provisioned. In other words, you'll be no better off than if you had simply stuck with your old-school, overbuilt IT infrastructure. In fact, you'll be worse off, because with the old infrastructure, you were almost never under-provisioned.

 

The Marketplace

One major reason for the prominence of on-demand is that most of the world's largest technology vendors have embraced it. Hewlett-Packard, IBM, Microsoft and Sun Microsystems have all made significant investments in the initiative.

 

System integrators, too, are elbowing in. Some analysts say that if on-demand gains favor, the actual practice of system integration loses its starring role in enterprise IT -- which could place system integrators in the uncomfortable position of advising clients to undo much of the work that SIs have been advising them to do for a decade.

 

But businesses implementing on-demand will face many new challenges, and many will turn to integrators for expertise -- and indeed, much of the knowledge SIs have built around XML-based Web services and other technologies will prove valuable. Thus, according to a recent Summit Strategies report, on-demand is "a double-edged sword" for global SIs -- those firms "will certainly not be shut off from all this emerging technology," the report says, but they are "unlikely to reap huge revenue gains" from on-demand.

 

IT veterans have watched plenty of Next Big Things fizzle. In a recent IT World survey, 25 percent of all respondents called on-demand a smoke-and-mirrors technology. Uline CIO Horwitz says, "On-demand will never be as cost-effective as buying the correct size hardware and planning for peak loads. It is a great concept and could solve many issues. But most of the time as a CIO, you need to be in control of the hardware environment, and this does not lend itself to that."

 

Colin Rankine, an analyst at Cambridge, Mass.-based Forrester Research, is another skeptic -- from a value standpoint. "The pay-per-use model is intuitively appealing, but the reality is that technical and licensing issues don't allow effective resource-sharing," Rankine says. "For enterprise data centers, it's a zero-sum game; the risk and metering overhead cancel out any savings."

 

For most, merely evaluating on-demand is a challenge today, what with the rapid change and unsettled terminology that prevail in the field. However, it's a challenge

worth addressing, as on-demand may be the most significant shift in IT thinking to arise in the past 20 years.

 

Research Roundup

A LOOK AT SOME OF THE LATEST TALK AND TERMS OF ON-  DEMAND

One of the difficulties in discussing and evaluating on-demand computing is that as with most young, rapidly changing technologies, the various names and terms used to describe it are constantly in flux. For example, some use "grid computing" to refer to something quite similar to on-demand computing, while others think of grid computing as vast peer-to-peer networks of home PCs.

Confusing? You bet. "We know of no fewer than 14 buzzwords" commonly used to describe core on-demand computing alone, says Dan Kusnetzky, a research vice president at Framingham, Mass. - based IDC. We'll try to cut through the confusion and describe the types and offshoots of on-demand computing as they are most commonly used today.

On-demand computing is an enterprise computing model in which resources are funneled to users according to demand. Those resources can theoretically include servers, network bandwidth, storage, data and even software applications; moreover, they may originate with an outside service provider or within the enterprise itself.

Think of on-demand computing as the parent of many of the other terms defined here; that is, utility computing and grid computing as subsets of on-demand.

Utility computing is the on-demand subset (sometimes called pay-per-use or metered services) in which the IT resources and infrastructure are provided by an outside services firm. As the name suggests, enterprises are charged according to their usage.

Grid computing is the practice of applying many networked computers' processing power to a single problem simultaneously. It originated as a way to create a virtual supercomputer to solve complex scientific problems. Grid computing is an ingenious way to mass the power of hundreds, even thousands, of computers that would otherwise sit idle. Today, it's most frequently used in technical, scientific and academic communities; opinions are split on whether grid computing will have practical enterprise applications in the near future.

Some call grid computing "provisioning on steroids."

DCML (data center markup language): A proposed standard created by the DCML Organization aimed at describing the components running in corporate data centers. If DCML catches on, it could become an accepted metric service providers could use to charge for utility computing. EDS, Computer Associates and BMC Software are all members of the DCML Organization, but key players IBM, Microsoft and Sun have not signed on as of press time.

Virtualization, often used to describe computer servers and storage, occurs when a device is made to appear and behave as if it is something it's not. For example, a virtual storage device may actually be a pool of several devices -- but the computer's operating system treats it as a single entity.

This is an important enabling technology for on-demand because the idea is to pool multiple devices into a single virtual entity, then draw from that entity as needed.

Web services: A relatively new class of software  applications that can communicate and work with one another over the  Internet.

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