The minister wants to respond to a new political or government announcement; the CEO, the latest development in the marketplace. The employees want systems up and running; the customers want ease of access; the suppliers need to be connected online. On top of this, your department is becoming responsible for more and more projects.
CIOs are in the midst of a “complexity crisis” as they have to work with the rest of the business, which itself has varying requirements, says Catherin Bennett, director IT management program for IDC in New Zealand and Australia, in her keynote speech in this year’s CIO Conference.
It will be a “rocky road” for the CIO in the next two years, she notes, and the challenges don’t stop there.
Cost containment continues and the chief financial officer, as always, wants a rapid return on investment (ROI). In fact, over a half of CIOs interviewed by IDC say they need to demonstrate ROI in two years. This adds additional pressure, says Bennett, because not every business case can demonstrate that.
A struggle continues in another area, as CEOs view the presence of IT as keeping the engines running – at least that’s what 60 to 70 per cent of CIOs in the region believe. One positive shift is more CIOs are now reporting to the CEO, as against the CFO.
The biggest “pain point” says Bennett, however, is people; staff recruitment and retention remains a key issue.
Just three years ago, recruiting and retaining skilled staff was in the bottom of the barrel of challenges – number 25 – in the IDC survey of NZ CIOs. In 2005 and 2006, it emerged at number five.
The focus for CIOs is on how to motivate the staff that they currently have, perhaps by rotating them in the business as part of a retention scheme. The technology is always changing, she says, so if staff are doing the same thing all the time, “you are going to lose them”.
A question CIOs need to answer, she says, is “What projects do you have to lock in and motivate the staff?”
Leaders and innovators
Another keynote speaker, Mike Kennedy, senior program director of Gartner’s executive programs, focuses on a different message – seizing IT’s “big opportunities” to make a positive impact on the business.
“Challenge any assumptions in your industry and avoid best practice processes,” he says.
“People who do this are aware they can not be leaders by being the same as anyone else and having a reactive set of strategies. If everybody is doing it, everybody is just imitating one another.”
He reminds the audience, “Products and services can be copied, but people and culture can not.”
He says operational innovation should be a “way of life” and not just a project in the organisation.
He advises CIOs to develop organisational change management capabilities. Kennedy raises the notion of “creative destruction” but warns it can hurt people: “Deep change is tough on leaders and the organisation, but it stops most people from imitating you.”
At the same time, organisations cannot do it constantly. He recommends “bursts of deep change”, reaping the benefits and repeating the cycle. Otherwise, people will not be able to cope.
Another strategy is to bring IT onto the board’s radar, which necessitates understanding what motivates the executive.
“You need to work with C-level executives and influential folk in the organisation. Find the people who have lots of connections, who know what’s going on in the organisation. Make sure they are on your side.”
Lessons from peers
When The Warehouse introduced fresh and frozen food in its supermarket aisles, it had implications for the IS team as the systems were initially set up for apparel and other dry goods.
But, as Owen McCall, The Warehouse’s chief information officer, explains, this is just one of the challenges of leading the IS team at the country’s largest retailer. The department has been structured to ensure it’s able to meet these kinds of shifts in the business.
The Warehouse has a history of innovation in IT, says McCall. With $40,000 budget, its founder Stephen Tindall spent $30,000 on IT and $10,000 on store fixtures. The stocks were bought on sale and return. The Warehouse wrote its own ERP system and had the largest data warehouse. “That history of innovation continues,” he says.
When McCall joined The Warehouse, the group CIO role was new, and he had around 120 IS team members in four separate groups. IS operated on what he calls a “reactive hero culture”. This means the person who got kudos had worked throughout the night to solve the problem. “It was not a proactive approach”. A benchmarking exercise found spending for IT “was about right but we were spending on the wrong things”.
He says the first priority was to define an operating model that is aligned to group and brand strategies, supports clear governance and promotes IS customer focus, among others. They also established a single point of vendor management because under the previous set-up, it was “done on a buddy system or none at all”.
Vital lessons were learnt from the restructure, foremost of which is the essence of speed. Taking too long to resolve uncertainty for the team members affected productivity. Decisions, he says, must be clear and robust. Communicating to the team is important. “Try to communicate as much as you can.”
He advises not waiting for the business to meet its agreed obligations: “Drive the process and result on their behalf.” But at the same time, he says, “Don’t stand up and pontificate to the business.”
Owen says the ITIL framework was crucial in the restructuring. “Put me down as an advocate for ITIL – it underpins everything we do for the organisation.”
From order-takers to order-creators
Contact Energy’s chief information officer Jos Kunnen’s presentation begins with Albert Einstein’s “Things should be made as simple as possible, but no simpler.”
He applied this insight to implementing effective program management at Contact Energy.
Kunnen explains Contact business had expanded quickly, creating a large portfolio of applications. The information management team was loosely organised and very fluid. Although he notes, “It worked well in the early days.”
“Part of my goal was to simplify a complex matter,” he says. “We try to make things more complex than they need to be.”
One of Kunnen’s challenges was for IT to have a “proactive engagement” with the rest of the business, which viewed IT as a delivery organisation. Or, in his words, to move away “from [being] order-takers… to order-creators”.
Kunnen says the team worked hard to create credibility and deliver to the rest of the business. Another focus for his team was operational improvement; it adopted ITIL, focused on service management and change management, and instituted overall measures on availability. This freed for them a lot of time, says Kunnen, and was good for the staff’s work-life balance.
The lessons he learned from all this, he says, are the importance of relationship building; the need for “soft skills”; and aligning the priorities of IT and business as much as possible.
Ross Hughson also designed a new IT strategy at the Inland Revenue Department. Hughson was CIO of Westpac Bank when he joined IRD to head its 320-member IT team, and work on its “IT transformation” project.
IRD has completed a five-year IT strategy plan that aims to develop optimal IT strategy through business context, applications, technology infrastructure, organisational capability and governance.
The IT components will include technology optimisation through virtualisation and rationalisation of infrastructure, IT organisational capability enhancement and IT governance and investment management.
Hughson stressed the importance of ensuring the strategy is owned by the business, and it is not seen as an IT initiative. “I want the thinking to be in the business,” he explains. And the strategy must be so clearly expressed that it can fit onto a single page, he recommends.
Hughson says IT departments may find themselves managing different things at different times. “When this happens, it’s also useful to make our own “box office hits.”
In IRD’s case, one of these hits is developing a strong online presence, and working with the other departments towards e-government. Hughson says in 2002, IRD had no web presence. Today, it has the largest single government website developed around a user-centric design.
The good, the bad and the ugly
Andrew Crabb, TelstraClear’s chief information officer, discusses ways to create a “win-win” environment for both clients and vendors.
He explains experiences with vendors can range from good (things work well), bad (when it’s a struggle) and ugly (when it’s a nightmare).
The goal of a lot of IT organisations is to have a relationship that can be described as a “partnership”.
A partnership is a “whole of business” kind of relationship, he says. “You work as a team, leveraging more than what’s on the floor.” And, he says, it is crucial to work this relationship at all levels.
Communication tops his rules of the road for vendor relationships. You must have and share clear expectations of the relationship, and involve parties in strategies. Both parties need to make a profit – and recognise their interdependence. Each party, he says, will also have individual goals – recognise and accept that. “It’s a case of carefully selecting the vendors you want to work with, work at it, and enjoy!”
Tony West, chief information officer of Land Transport New Zealand, tackles the subject of successfully structuring and negotiating a major IT services contract in the government sector. Land Transport was created by the merger of the LTSA and Transfund NZ in December 2004.
Early this year, it signed a seven-year outsourcing deal with Unisys for the infrastructure and IT management services of its Landata and Drivers Licence Register systems.
But since it has an existing relationship with Unisys, a protocol was put in place to separate the Unisys “request for information team” and the “business as usual team”. PwC provided an independent QA to look at that process. It was fair and efficient but the positive current relationship with Unisys was seen as a major risk to the other bidders. Only Unisys progressed to the next stage.
West says lessons learnt from the process include “make sure you can do business with your supplier”. Commercial arrangements are better than legal proceedings, he says. “Question everything if you need to. Don’t think questioning isn’t a valid process.”
Develop a robust contractual framework “so you’ll never need to use it”, says West. It’s also important to formulate a robust relationship framework.
And, like TelstraClear’s Crabb, West says it’s important to work at the relationship at all levels.
Get the basics right
Mark Baker has just shifted from being CIO to general manager retail operations, Foodstuffs Auckland.
He finds it useful to have a “bible” or reference book. In his case, it’s Jim Collins’ Good to Great which extols leaders who are humble, self-effacing and more concerned about the prosperity of their company than their individual success.
Paraphrasing Collins, he admonishes, “Don’t start doing anything unless you have the right people in the business.”
It’s also about doing some of the basic things right: “Ensure you identify them and have a culture of absolute discipline around them.”
He says one of the reasons he was able to move on to a general manager post was that IS was seen to be working. He stresses, however, that to deliver operational excellence and provide the required availability levels you must have standards; as well as compliance with and enforcement of these standards. “Don’t give people bloody ammunition to shoot you unnecessarily.”
Baker admits he is conservative in his approach to change management. “Steer clear of the big bang”, and if you have to do it, he says make sure you have a good reason: “it can absolutely break people”.
“Let things evolve, people will be accepting of change.” Technology is the simple part of a project implementation; getting people to change is the hard part.
Baker is all for a “dictatorship” when it comes to infrastructure: “Consensus is not a good way to build infrastructure.” Only after building the infrastructure, he says, can you put “cool stuff” on top of it.
He also advises CIOs to underscore to the business that anything that resides in the IS system, falls under their responsibility; an example being document management. “The computer does not make stuff, the users do.”
He notes document management was not an issue for CIOs when most of the data was paper-based.
Compliance in a positive light
Governance and compliance are two words currently on the radar for heads of IS organisations because they have an impact on IT structures, operations and resources.
Mike Lowe, director of Activate New Zealand, suggests looking at compliance “in a positive light”. “Look at compliance as things you want to do and not have to do, because of its benefits,” says Lowe.
In a survey of 248 CIOs around the Asia-Pacific, including 58 New Zealand respondents, Lowe says New Zealand is actually ahead in the region in implementing compliance programs. Nearly 46 per cent of respondents have already begun implementing compliance programs and a further 20 per cent plan to start one by end of 2007. In contrast, only one-fifth of their counterparts across the Asia-Pacific have already implemented regulatory compliance programs, with more than half planning to do so by the end of next year.
An overwhelming 81 per cent of respondents say compliance is important because it “allows them to meet local regulations, current and forthcoming”.
None of them saw compliance increasing their potential for being acquired by foreign companies, and only 15 per cent say compliance increases their potential to trade with foreign companies.
Most (67 per cent) of NZ companies feel the main benefit from implementing compliance initiatives is to reduce errors and risk of fraud. Less than 40 per cent, however, believe compliance initiatives would increase productivity or reduce cost.
Lowe recommends researching the potential organisational benefits from implementing regulatory compliance initiatives. He recommends CIOs to prepare a compliance strategy, an implementation plan and a business case.
They should also check out ICT governance frameworks such as COBIT, ITIL and ERM – and look at how they might improve IT policies, procedures and controls.
CIOs need to look into this issue, says Lowe, not only because NZ companies are expected to allot more of their IT budget to compliance-related initiatives in the next two years. “Commence or continue on your journey to regulatory compliance,” he says, “because the regulator is coming to get you!”
View from the bridge of the Enterprise
Marcel van den Assum, an independent advisor, says IT governance is all about maximising the opportunity and minimising the risks. The key, he says, is to create an environment where there are no IT projects, just business projects.
Governance is not only about senior management, he says. Enterprise governance should extend form the boardroom to the back office.
“But, while we live in an information age, a number of organisations still don’t see information as an asset at all,” he states.
He points out that the top performing Fortune 500 companies have CIO-level experience on the board, as well as at least one woman on the board.
Peter Harrison, director, Fujitsu Consulting, points out the paradox in information technology. “The value of IT is being increasingly questioned,” he says, “yet organisations continue to spend more and more on IT.”
Organisations, he says, should answer the fundamental question: Are they managing IT investments in such a way that they get optimal value, affordable cost and with an “acceptable level of risk”?
This means IT enables and supports the enterprise’s strategies and objectives by defining what key decisions need to be made, who is responsible for making them, how they are made, and the process and supporting structures for making them.
The challenge, he says, is to how to make the concept of IS governance more interesting to the executive. “Executives are turned off by words like architecture.”
But without effective governance in place, there will be a lack of strategic focus, projects will be approved on emotional basis, there is no strong review process and their will be overemphasis on financial ROI. These could lead to an overly diverse project portfolio, poor project execution, an underestimation of risk and cost and projects not aligned to strategy. The results will range from over-budget, delayed projects, to not meeting business needs and achieving benefits, and a lack of confidence in IT.
He echoes van den Assum’s message that governance is no longer about IT. Business needs to be the owner and driver of IT. There will be no more IT investments, but only “investments in IT-enabled business change”.
“The business governance of IT is the term we should be using,” he says.
Good value governance, he says, is based around continually asking the four fundamental “ares” from John Thorp’s The Information Paradox:
- Are we doing the right things?
- Are we getting the benefits?
- Are we doing them the right way?
- Are we getting them done well?
Harrison suggests organisations check out what he calls ValIT or “a value lens into COBIT” that is designed to reach up to the CEO level about how the value of IT can be made transparent.
Like most of the speakers, Harrison ends his presentation with a question – and a challenge – to senior IT executives: “Everyone knows the problem – the solution is in front of us. What are you doing about governance in your organisation?”
Marcel van den Assum says these are vital issues CIOs should consider. In the near future, he sees most of the enterprise leadership team coming through the ranks of IS.
“You’re in a unique position to have real influence in enterprise governance,” he says. “As a CIO, you can see across the enterprise. You operate across the organisation rather than silos.”
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