CIO Canada's annual roundtable, held recently in Toronto, brought together eight prominent IT executives to discuss the impact of the economic downturn on CIOs and IT management. Here are the highlights
Tom Atkins, moderator, Tramore Group
James Betton, VP & CIO, Aegon Canada
Hugh Cumming, CIO, ADP Canada
Andrew Dillane, Group CIO, Ranstad Canada Companies
Susan Doniz, CIO, Global Business Services, Canada, Procter &Gamble
Wes Johnston, EVP & COO, Dimension Data
Alice Keung, CIO, Health Services Cluster, Province of Ontario
Lani Lindsay, VP, Business Consulting, IT, Loblaw Companies
Georgia Woods, VP, Application Management Services, Bank of Montreal
ATKINS: WHAT IMPACT HAS THE ECONOMY HAD ON YOUR IT OPERATING BUDGETS?
WOODS: It's tempting to make short term tactical reductions but these expenses simply show up in your run rate the following year. So we're looking at what we call sustainable reductions -- permanent reductions in our run rate that ultimately enhance the business. In order to do that, you have to start making different business choices that result in sustained multi-year reductions. This approach forces you to look very deep and understand your cost drivers. Where are the costs coming from? What's really behind the growth? Is it truly business volume, which is good growth, or is there something else going on? Are we getting value from the investment? Can we challenge the traditional thinking? We're finding that almost any opportunity to reduce costs is being examined more closely -- no idea is being dismissed.
JOHNSTON: There have been across-the-board cuts, and while you can mandate cost reductions on operating expenses, the folks best able to identify where they should come from are the respective managers. So I like to put out various types of scenarios. If it's a five per cent cut, where would that come from? What would it look like? What about a fifteen or twenty-five per cent cut? I like to always have a scenario that's deep and painful -- not necessarily that you're going to go there but that you know you have the ability to go there if necessary. This approach also stimulates ideas. If I said to you that you had to cut fifty per cent out of your operating budget, you'd get creative in a hurry. And some of those ideas can be brought to the surface.
ATKINS: HAS THE ECONOMIC DOWNTURN HAD AN IMPACT ON CAPITAL AVAILABILITY FOR IT PROJECTS?
DILLANE: In our organisation we review our portfolios with more scrutiny than ever before. While we haven't frozen capital spending, the focus has been on maintaining operational benchmarks and ratios that have a more immediate impact on our bottom-line. We look to contingency planning across the board to make sure that we're saving where needed to maintain key operational ratios. With IT being both an operational foundation and longer term strategic driver to the business, I would say that it's less impacted than other areas. And this seems to be consistent with what we have seen happening at many organisations; IT tends to be more resilient in a downturn.
KEUNG: In the public sector, the way we build our business case is similar to the private sector. When capital is in short supply, we put an increased scrutiny on our investments. The downturn has put pressure on the way we justify IT investments. In the Ministry of Health and Long-Term Care the focus is on enterprise applications and key deliverables that meet cross-ministry needs instead of standalone solutions. I believe that this is a sound discipline that's beneficial for both government and its citizens.
ATKINS: IN ECONOMIC DOWNTURNS THE FOCUS OF IT MANAGEMENT OFTEN MOVES FROM CREATING NEW FUNCTION FOR GREATER BUSINESS VALUE TO MANAGING COSTS DOWN. HAS THE BALANCE BETWEEN THESE TWO THINGS CHANGED OVER THE LAST YEAR AT YOUR ORGANISATION?
DONIZ: At P&G, our focus remains on value. Of course, this can mean managing costs down but it is also about looking at the big opportunities in the overall business where the model can be changed. Another interesting dynamic is that new ideas are gaining traction. Video collaboration is one good example -- that is increasingly proving a viable alternative to travel. Another, is agile office space and another would be the shift away from desktop printing and towards managed printing. The point is that we are looking much more broadly for breakthrough ideas.
ATKINS: IS JUSTIFYING INFRASTRUCTURE INVESTMENTS EASIER OR HARDER IN THESE DIFFICULT ECONOMIC TIMES?
DILLANE: It's harder, absolutely. And while I'm not an advocate of selling things through fear factor, like IT has done in the past, there needs to be a general awareness of what the longer term implications are for putting our foot on the brake. We have to educate the other business leaders -- these are the options and if we take this option, here is what it's going to look like in a few years. When the economy turns the corner and we need to grow quickly, that could be stifled somewhat if we don't continue to invest appropriately in our infrastructure.
CUMMING: There's definitely more scrutiny on infrastructure investments. In order to get support and funding approved for them it's critical to tie them to either real business metrics or to strategic projects. Probably now more than ever people are asking more questions. They're asking, how does this infrastructure investment connect to what we do every day? And you have to be able to connect those investments to things like improved response time, improved service levels, and the ability for the company to grow faster with less cost.
ATKINS: HAS THE ECONOMIC DOWNTURN CREATED CLOSER INTERACTIONS BETWEEN THE BUSINESS AND IT? IF SO, WHAT HAS CHANGED?
BETTON: It has forced a common language between business and IT. Now we're all focussing on the same thing -- we're all having that common conversation. I think probably the most interesting thing that has happened over the last year is not about the things that we say 'yes' to, but more importantly, the things that we say 'no' to. As an organisation, we've had a very difficult time saying no to things. Now we are able to say 'no', which creates a tighter focus of our resources and efforts and has a better alignment to our strategic goals.
LINDSAY: At Loblaw we're becoming more focused on the customer throughout the organisation, and specifically in IT. We encourage our IT people to go to our warehouses and our stores. We're trying to impress upon our staff that, yes, we are part of an IT organisation but we're really a retailer. We just happen to do things that help make us a better retailer in our IT jobs. So there has been a greater focus on understanding how we actually operate in the organisation, and we're developing some ways to do this. For example, we're having new hires spend time in different parts of the organisation before they even land in IT, so that they can get a business sense before they become an IT professional.
JOHNSTON: What we've been able to do is convert IT from being a support organisation, in essence, to its own leadership-based business unit. Now there's an enormous overlap between the business units and IT and the dialogue between them has changed. For example, the business units are now saying, "How can you help me grow my business?" And IT is asking, "How can you help me standardise the environment and lower operating costs?" And because they're all business leaders, they can have that dialogue. The level of insight of each business leader into the other's business is so much greater than it has been in the past, and that is driving greater strategic alignment. As an example of this, because we're a technology company, we will demonstrate our technologies as client solutions. We've been able to take IT from a support organisation to one that participates in sales calls.
ATKINS: HOW HAS THE BUSINESS'S RECEPTIVITY TO IT-GENERATED IDEAS CHANGED?
DONIZ: I think it's definitely improved, and one of the key reasons is that we've started to focus more on the information versus the technology. I almost think we should start to call ourselves Information Solutions instead of Information Technology because when you start to empower your people to think about how information flows throughout the whole company and feel that you own the information flow, versus the technology, that shifts the mindset of people and the whole idea of work processes. When you know the information up close and have the project management discipline to manage it, you enter a new ball game. And when you start to project that you own the information, then you start to own the work process, and you begin hearing yourself at the table a lot more often, because information is in everything we do, and right now nobody owns the information in the company if it's not us.
WOODS: It's improved significantly. We moved away from business units being called clients or customers and have made a strong push towards the notion of business partnership. By expanding the definition of what we bring to the table and embracing the notion of partnering, our business partners are more receptive to our ideas, because we are now integrated into many aspects of their business. We're not just providing a new application or more storage or a new desktop, we're integrated and aligned into the end-to-end business process. We are partners at the table demonstrating how technology is an enabler that enhances the customer experience and reduces costs.
ATKINS: HOW DO YOU INCREASE IT INNOVATION AND VALUE DURING AN ECONOMIC DOWNTURN?
KEUNG: To foster innovation, we are adopting an enterprise architecture approach. At the Ministry of Health and Long-Term Care, we are making sure that IT and business share the same vision and agree on the technology roadmap to get there. In creating the enterprise architecture, we have to make sure that IT is tightly integrated with the business. When IT and business work side by side, we are better positioned to be nimble and fast in delivering value and innovation.
BETTON: It starts with education. First, you have to educate your business partners so that they understand what the cost of the technology truly is. This paves the way, by having transparency, to having an open dialogue with them. And that allows you to have conversations around innovation because your business partners understand what you're doing for them, the costs and the business benefits. This helps create the trust model, which provides the framework for those true innovation discussions.
LINDSAY: One of the things we've been doing is utilising our governance and portfolio management function in order to have full transparency around what our project portfolio looks like. When we do our business cases, we're showing the five-year plan of what the impact of those projects will be to the organisation. So it's really about having the right discussions, and having the business and IT at the table. As well, we're scrutinizing every detail of everything we're doing, and making sure that we're asking the tough questions of each other. Even within IT we're asking the tough questions of our peers. Are we doing the right thing here? Are we getting the best value for our money in all situations?
DONIZ: Roger Martin, dean of the Rotman School of Management, recently spoke at Proctor and Gamble, and one of the things he said was that the best business leaders all had this in common: they were able to hold two diverse concepts in the same mind frame. One of the things I took from that was that it's really important to get different points of view into the room. And sometimes that means having the person in the room who you most don't want to be there. This is helpful because it creates two different concepts that then drive a better solution than you would normally have. And if you don't do it you'll be back at the table next year having the same discussion.
ATKINS: FOR BUSINESSES ON THE ACQUISITION TRAIL, THIS ECONOMIC DOWNTURN CAN PRESENT OPPORTUNITIES TO BUY ATTRACTIVE ASSETS AT SIGNIFICANTLY REDUCED VALUATIONS. WHAT ARE YOU DOING TO PREPARE FOR THIS FROM AN IT PERSPECTIVE?
CUMMING: We're participating more in the due diligence cycle because the business has gotten more savvy about the implications of acquisitions. We're a company that constantly looks at smaller, creative ways to grow the business, and every one of those is very different. So it's very important, from an IT perspective, to have a standardised footprint, a standardised response in terms of the due diligence process, and a standardised way of looking at those things you need to think about if you're going to bring another organisation into the fold.
KEUNG: The Ministry of Health and Long-Term Care is the steward of the health system and is not pursuing any acquisition trail. We entrust our partners and agencies to deliver the government's health agenda. As the Ministry's CIO, I support new agencies such as e-Health which are tasked to deliver on specific mandates. To prepare ourselves as we move to this different model of governance, we are leveraging process, people and technology across the various functions in our organisation, for a more effective and efficient delivery model. As well, we are modernizing our application portfolio through simplification and consolidation. I believe these initiatives will enhance our organisational capacity and capability to deliver better results.
ATKINS: WHAT KIND OF AN IMPACT HAS THE ECONOMIC DOWNTURN HAD ON YOUR VENDOR RELATIONSHIPS?
WOODS: This is a really interesting time with all of our vendor relationships. We're seeing very aggressive activities during their quarter ends, with vendors offering deep discounts. It's a great opportunity for us to leverage what has become a very competitive buyer's market We're looking at all of our vendor agreements and renewals as opportunities to renegotiate and reduce our costs. Vendors are offering free consulting engagements to review our costs and help identify options for further savings. We are also asking our larger vendors to share with us what they have done to reduce the cost of running their own business.
BETTON: I think it's a time when you start separating the vendors from the partners. The partners are the ones that truly understand what your business is about. They understand what drives you, what their value propositions are, and it can't be solely about pushing products or services. They're looking at the longer term so they're willing to invest more and understand that we're both in this together. And interestingly, when I ask some of our partners -- the ones focussed on our needs -- how their business is doing, they tell me that they've been very busy lately. Some of them are having record quarters. And that speaks to the value of the partnership model and the alignment to the needs of the business. Some vendors will evolve to that true partnership model and some will just never get it.
DILLANE: As IT leaders, one of the things that we need to be better at is providing enough transparency to vendors to allow them to be partners. That is very key -- put them in our seat and allow them to help. Allow them to tell us how they can add more value for our customers or help to save costs. We really have to be careful though when short-term opportunities are put on the table to cut costs dramatically. They can seem very appealing in the short-term but what do they mean over the long-term? Is the offering creating a sustainable business for the vendor/partner? Are we creating a win-win situation? As such, there are some significant risks that need to be managed but there may also be some opportunities to leverage existing relationships or find new partners.
LINDSAY: At Loblaw we are going through a large business/IT transformation. We hosted a vendor summit, bringing in our key vendors and sharing what our road map is, the journey we're on, what's important to us and why we're doing this. And recently I've noticed that these vendors are offering us more insight into the knowledge base of information within their companies. They're also giving us opportunities to network with clients that they may have done similar things with, as a means of showing us that they're in it just as much as we are and they want to be part of the solution. So I think that explaining what we're doing over the next five years has given them some insight into where they might be able to help in our transformation.
ATKINS: HOW HAS THE ECONOMIC DOWNTURN AFFECTED YOUR ABILITY TO ATTRACT TOP TALENT?
JOHNSTON: Attracting people is somewhat cyclical based on market conditions. What keeps me awake is retaining them. Through employee surveys, we've discovered that even though you might not be laying people off, the stress level in the employees and their households has never been higher. So we actually market to the spouses of our employees. We try to develop a relationship with the entire family. We learned through employee feedback that retention strength is greatest when you have a corporate relationship, not just with the employee but with the extended family, specifically the spouse. What concerns me most is not what's happening now but what's going to happen 24 months from now, when people have an easier ability to move. I think you earn the retention 24 months from now with programs today. And it can be simple things like sending out a breast cancer awareness packet to the spouses of male employees. That was a huge home run for us.
CUMMING: We're seeing two distinct behaviours. On one side there is some talent that is available in the marketplace that we wouldn't have had access to because of changes with their former companies. On the other side, a lot of people are digging in within their organisations and are a little harder to pull. But we've certainly been able to bring in some new, key talent which is obviously critical to the success of an IT organisation. In this type of environment, you sometimes have to be flexible and creative. If there's opportunity to hire someone who probably wouldn't have been available in a different economic time, you need to be able to look within your group and figure out how to make room for that person.
ATKINS: WHAT ADVICE WOULD YOU OFFER CIOS READING THIS ARTICLE ON MANAGING THROUGH THE RECESSION?
KEUNG: Our most important asset is our people. We need to focus on attracting and retaining the right talent. We need to coach our people on change management. Recession is about survival of the fittest. Organisations that are responsive, agile and adaptive to change will more likely be able to weather the recession and emerge stronger.
DONIZ: Keep focused on your IT road map, on your business strategy and on excellence in delivery. Use this as an opportunity to drive your partnership ever further.
WOODS: Put yourself in a position of strength so that you can leap over the competition when the market turns around. There are opportunities out there, if you have the wherewithal to capitalize on them. And part of that means to continue to invest for the future. You need to carefully balance cost reductions, which are critically important, with the necessary spending that will move your business forward to achieve your strategic goals.
BETTON: Make sure that the staff are engaged, and that you communicate, communicate, communicate. Everybody has to understand that you all need to paddle the boat in the same direction and not allow it to get off course. Focus, engagement and communication are more important now than they have ever been. LINDSAY: Ensure that you have the right forum to have open discussion around prioritisation and alignment to business strategies, and have the key IT and Business leadership around the table to make those decisions collectively.
DILLANE: Be a realistic visionary. Continue to invest and move towards your strategic direction in a way that tactically helps achieve the necessary short-term results for the organisation. JOHNSTON: Together with the business, prioritise initiatives by criteria. At any given moment you should literally be able to stack, order, and rank them. Also, invest now to retain your people when things are on the rebound.
CUMMING: Understand the cost drivers within your organisation. IT needs to be able to respond very quickly, and to do that you need to understand how the strategic drivers behind the business strategies connect to your IT cost structure.
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