Thinking ahead

By Brian Corrigan | Friday, June 11 2010

Budget rises are not on the cards for most information chiefs this year despite the growing sense of economic recovery, so finding new ways of doing things has never been more important.

Speak to any software or services supplier and they will happily tell you that they are waving a not-too-fond farewell to the current financial year, and are looking forward to a future of renewed spending.

However, while business confidence might be on the rebound, it will not necessarily be reflected in the budgets handed down to most of the nation's chief information officers.

With little or no extra money to spend, and no shortage of work to get through, CIOs will be under more pressure than ever to investigate new ways of getting things done.

Market analysts at Gartner estimate that global IT spending fell by more than 8 per cent last year, down to levels not seen since 2005. Although the cuts were not so deep in Australia, many non-essential projects were cancelled and others were slowed, to conserve cash.

While the economy is well on the road to recovery, CIOs have told MIS that ­getting sign-off on discretionary projects is quite simply a non-starter and tech chiefs are competing with other function heads for constrained resources.

So how have senior information technology executives weathered the storm and, more importantly, just what will be ­occupying their time in the year ahead?

Optus CIO Lawrie Turner says the telco was not hit as hard by the downturn as many other companies. This is largely because the company reacted quickly to the slowdown and consumer spending held up well during the recession, even if enterprise business was a bit softer than it would have liked.

"We took some conservative measures quite early on to watch our spending levels internally so that if things did get rough we would be able to respond quickly," Turner says. "We took a measured ­approach to starting projects and committing to various things. As the year progressed and we could see how revenues were going, we would release money.

"If there was a lesson that came out of all that it would be that prudent early planning really paid off."
In the new financial year, Turner is ­focused on improving the customer experience, further developing the telco's ­online business and continuing to drive a ­mature business intelligence strategy.

Last year, Optus consolidated its outsourcing arrangements from more than 20 vendors to fewer than 10. It was a ­strategy employed by many CIOs as they looked to manage a difficult situation by forming closer ties with fewer suppliers. With that transition completed by Christmas, Turner's attentions have now turned to reaping the benefits and he plans to drive his revised supplier agreements pretty hard over the next 12 months.

"It's a good balance because you want some variety, so that there is competitive tension in the relationships, but you don't want so much variety that there's too much noise and you spend all of your time working with different companies," he ­explains. "We have had these partners commit to really good service levels and we will drive really hard on getting those systems support improvements."

Optus, like many other organisations, has made great strides in virtualising its server fleet with 800 of its 2500 machines converted. This has enabled the telco to maintain its current data centre without expanding the footprint despite enjoying business growth.

It is now trialling virtual desktops, which Turner says will eventually help simplify its call centre operations. An ­upgrade to Microsoft Windows 7 is also on the cards – a major project in itself when you have more than 15,000 desktops to manage globally.

One thing he won't have to worry about is completing the telco's $160 million Project Reitz technology transformation program, which was mothballed last July. This has transferred the major parts of its business onto a new billing and customer relationship management system but plans to move cable and business customers across have been canned.

Dymocks general manager of IT Michael Garas says his technology budget will be flat this year so the book retailer will continue to take a cautious approach to spending while at the same time staying alert to opportunities that can provide a lot of benefits.

Having completed a major rollout of point-of-sale and back-office applications in stores across Australia, New Zealand and Hong Kong, the focus is now on finding gradual improvement to make the processes even more efficient.

"Our focus in the downturn has been on reducing cost while increasing service," Garas says. "It makes you negotiate harder because you don't have that extra cash to play around with. It makes you a very good negotiator because you want a better service at a lower cost."

But this year could also see Dymocks take its first steps into cloud computing, with Garas saying he is considering the switch for business basics such as email or its file and print servers.

"We are looking at this very seriously because at the moment we are paying quite a lot of money on licensing fees," he says. "There will be cost savings but it will also improve collaboration with internal and external customers."

With cost still a major focus for CIOs and other business executives in the year ahead, consumer businesses are focused on honing online strategies to generate higher profit margins.

Garas says Dymocks was the first bookseller in Australia to get into the e-book business when it launched Dymocks Digital two-and-a-half years ago. It now has 30,000 titles available for consumers to buy and read on laptop computers.

That market will get a major kick along this year following the launch of Apple's iconic iPad. Other organisations playing in that space will be hoping to benefit from greater acceptance of the e-book format.
National Australia Bank will add mortgages to its new billion-dollar core banking system this year to build on the initial success of online savings accounts, which went live on the new technology platform during the first half of the financial year.

Addressing a media briefing in Sydney during the first week of May, NAB chief executive Cameron Clyne said its UBank online savings accounts were a demonstrable example of its new technology in action. Customers can now open an online account in less than five minutes, which the bank says helped it achieve above ­average growth in household deposits ­during the six months ended March.

And because these customers are not typically visiting the bank's branches, the cost of managing their money is far lower.

Other banks have also continued to ­invest in technology systems despite the downturn but are increasingly showing an appetite for doing things differently.

Commonwealth Bank of Australia CIO Michael Harte told The Australian Financial Review in April that CBA had teamed up with Bank of America and Deutsche Bank to create a global technology buyers' consortium designed to strip away billions of dollars in back-office computing costs.

It is a worrying development for tech industry heavyweights like Hewlett-Packard, IBM, Microsoft, Oracle and SAP that have generated huge profits from annual software licensing fees. Having watched the rise of utility computing from Google and Amazon revolutionise the consumer technology market, the banks are now ­demanding similar services from their suppliers on a pay-as-you-go basis similar to the metered charging of electricity.

"The old outsourcing model was that you gave people things to do for 10 years," Harte says. "They kept doing them the same way … with less people [while] charging you the same amount and letting all the software and hardware just slowly decay. We are not doing that any more. We will be in effect buying this stuff [at] spot [prices] at an auction."

Recently appointed information chief at Australia and New Zealand Banking Goup, Anne Weatherston, recently flagged improving customer insight, mobile strategy and managing the complexities of the bank's expansion into Asia as her key ­objectives in the year ahead.

Westpac continues to work through a merger with St George Bank that will overhaul its online systems, front-end sales systems and service desk. Chief executive Gail Kelly insists the scale of this work will rival any of the transformation projects being carried out by other banks and deliver comparable productivity gains.

In the public sector, the continued focus on cost is likely to be even more severe than in the corporate world. While business battened down the hatches to ride out the storm last year, government had to pump-prime the economy and will now be looking to recoup costs wherever possible.

While Canberra's CIOs continue to wrestle with an ICT Reform Program rubber-stamped following the Gershon Review of federal spending – that will strip $1 billion out of their expenditure over four years – the country's top bureaucrat has tabled a blueprint for public service reform that could cause the biggest shake-up of information technology in Australian government history.

An advisory group led by secretary of the Department of the Prime Minister and Cabinet, Terry Moran, has suggested major changes to improve the efficiency, flexibility and openness of the public service, putting IT changes centre stage.

The report recommended that more than 60 smaller agencies with fewer than 500 employees should transfer corporate services such as information technology to a larger agency or a shared services model.
Ovum public sector research director Kevin Noonan says some trends are likely to continue including the push towards shared services that has already led the Department of Human Services to embark on a project to pool the IT resources of Centrelink, Medicare and a number of ­other agencies under the watchful supervision of tech chief John Wadeson.

But major projects like the Australian Taxation Office's Change Program and the Department of Immigration and Citizenship's Systems for People, which are coming to an end this year, could well be the last major projects that single federal agencies embark upon for a long time.

"There will continue to be major changes but they won't be monolithic transformation programs because they are just too big and too risky," Noonan says. "It appears that the appetite for these is diminishing because they have too big a downside.

"The two-pass controls [introduced ­following the Gershon Review to restrict independent action] to just get a project going has made a big difference but also agencies have enough on their plate just to keep their own house in order.

"Budgets are still very tight so nobody is looking at days of milk and honey – it's bread and dripping."
Moran's plan has yet to be approved by the Rudd government but it is being viewed by federal CIOs as the other side of the Gershon coin. Where Gershon talked about cuts and project management, Moran is putting forward a vision focusing on the business-led side of IT development.

Government 2.0 will also be a key agenda item for Canberra CIOs in the new ­financial year, with Noonan describing it as one of the riskiest undertakings that any government could take on.

"There's great benefit in terms of ­citizen engagement but an enormous downside depending on what information is leaked out," he says. "I imagine we will see slow and careful steps down this path.

"It will stay on the agenda because ­other governments around the world are doing it but there will be guidelines, more guidelines and people will know where the boundaries are. It's in nobody's interests to have people just sounding off."

Other CIOs contacted for this story do not expect a significant rise in their budgets despite the economic rebound, and will ­focus on the detail to deliver continuous improvement. Information systems director at global law firm Allens Arthur Robinson (AAR), Chris Holmes, reports a flat budget for the year ahead.

"We've been fairly cautious, which we continue to be, but it's not causing us to do any less than we'd normally do," he says.

After spending most of last year implementing a new ERP system, it is now ­extending it into key business areas ­like client support and records management.

Holmes has a couple of projects on the go to unify messaging platforms, which will be ongoing during the year and are expected to improve productivity. Software-as-a-service is also on the agenda.

"We are seeing more and more discrete software-as-a-service solutions," he says. "You could call it cloud computing if you wanted but I think it covers so many sins that it's no longer actually meaningful."

With a building move coming up for one of its offices, AAR started to investigate outsourcing arrangements for the server room. But Holmes says implementing virtualisation and blade servers meant the amount of space required went down to just three or four racks.

"It's just amazing how what would have been configured as a 45-square-metre room five years ago is now so insignificant," he says. "The amount of power and air-conditioning going into that room has also gone down by orders of magnitude."

Ramsay Health Care operates 68 ­hospitals in Australia and 112 worldwide. As CIO of Australia's largest private health-care provider, Mick Campbell has a full schedule ahead but is not expecting additional financial support.
"Confidence is reflected in budgets and mine is going to be flat," he says. "I don't ­anticipate getting any increases in our budget – in fact I anticipate the screws ­being tightened more. It's the usual thing that you're expected to do more with less."

Ramsay embarked on a project to standardise its key systems two years ago and that budget has carried Campbell and his team through the worst of the downturn. Having grown by acquisition, Ramsay inherited a mishmash of IT systems but now has single instances for administration, payroll, finance and supply.

Going into the 2011 financial year, Campbell says it is ready to take advantage of those single systems, having previously found it difficult to do any process engineering because changes would need to be made for each of the six or eight ­systems it was running.

"Now we can do that a lot easier and are looking at varying processes to see how we can make them more efficient," he says. "We recently introduced online admission forms at some of our hospitals ... We are trying to extend that across the board to speed up processes."

Campbell is keeping an eye on cloud computing but says he wants to see some more maturity in the market before heading down that path.


MIS 100 Australia
Rank Company
1 7Eleven Stores
2 AGL Energy
3 Amcor
4 AMP
5 Asciano Group
6 ASX Ltd
7 Australia and New Zealand Banking Group
8 Australia Post
9 Australian Capital Equity
10 Australian Federal Police
11 Australian National University
12 Australian Taxation Office
13 AXA Asia Pacific
14 BGC
15 BHP Billiton
16 BlueScope Steel
17 Brambles
18 CenITex
19 CBH Group
20 CocaCola Amatil
21 Cochlear
22 Commonwealth Bank of Australia
23 Computershare
24 CSL
25 Australian Customs and Border Protection Service
26 Department of Defence
27 Department of Education and Early Childhood Development (Victoria)
28 Department of Education and Training (NSW)
29 Department of Education and Training (Queensland)
30 Department of Education (WA)
31 Dept of Education, Employment and Workplace Relations
32 Department of Health and Ageing
33 Department of Health (NSW)
34 Department of Health (WA)
35 Department of Human Services
36 Department of Immigration and Citizenship
37 Fortescue Metals Group
38 Foster’s Group
39 GHD Group
40 Goldman Sachs JBWere Group
41 Goodman Group
42 GPT Group
43 Health Employees Superannuation Trust Australia
44 Hospitals Contribution Fund of Australia
45 Incitec Pivot
46 Inghams Enterprises
47 Insurance Australia Group
48 JGL Investments
49 JK International
50 KPMG
51 Leighton Holdings
52 Lend Lease Group
53 Linfox
54 Macquarie Group
55 MAp Group
56 Mirvac Group
57 Mitre 10 Australia
58 Murray Goulburn Cooperative
59 National Australia Bank
60 Newcrest Mining
61 News Ltd
62 NSW Roads and Traffic Authority
63 Oil Search
64 OneSteel
65 Orica
66 Origin Energy
67 PFD Food Services
68 PricewaterhouseCoopers
69 Primo Smallgoods
70 Qantas Airways
71 Queensland Health
72 Queensland Sugar
73 Queensland Transport
74 QBE Insurance Group
75 RailCorp (NSW)
76 Reliance Petroleum
77 Retail Employees Superannuation Trust
78 Retravision
79 Rio Tinto
80 Santos
81 Sonic Healthcare
82 St Vincent’s Health Australia
83 Stockland
84 SuncorpMetway
85 Tabcorp Holdings
86 Telstra Corporation
87 The Good Guys
88 Toll Holdings
89 Transurban Group
90 University of Melbourne
91 University of NSW
92 University of Queensland
93 University of Sydney
94 Visy Industries
95 Wesfarmers
96 Westfield Group
97 Westpac Banking Corporation
98 Woodside Petroleum
99 Woolworths
100 WorleyParsons

This year's MIS100 is a combination of the ASX Top 50* listed companies, BRW's top 25 private companies and leading public sector organisations. Tabcorp holdings replaced LIHIR Gold after Newcrest Mining reached an agreement to acquire its smaller rival. MIS Australia