Sweat those assets! Tighten that TCO! Pick up that ROI! Pump up the value! Pump up the value! Are we having fun yet? More than ever, businesses will be looking for return on investment in 2003 and CIOs will be in the gun to make expensive IT resources earn their keep and add value to the bottom line.
What’s that — you did okay in 2002? Not good enough. Resting on laurels, it seems, is not an option in the current low-fat climate; constant scrutiny is the order of the day.
Just ask Pip Scrivener, IS manager of Genesis Power, which last year achieved one of the best scores ever recorded in the Asia-Pacific region for total cost of ownership, according to the independent research firm HP.
Despite the near-perfect result — just 10% off what is deemed theoretically possible by the Gartner Rapid Assessment TCO measurement tool — performance is constantly monitored. In fact a benchmarking system, comparing Genesis’ IS effectiveness against that of similar-sized utilities and other organisations, will be added to the TCO best practice model this year.
But without constant assessment, Scrivener says, a best practice standard doesn’t count for all that much.
“I think that there are a lot of organisations in New Zealand that actually have best practices in place,” he says. “I just don’t think they take the time to measure. It’s something you’ve got to do as a discipline. You’ve got to recognise that you want to do it and then you’ve got to continue doing it.
“We’ve agreed, within the company, that we’ll spend the money measuring ourselves. This was the first one we did. We’re doing another one now, with the object of doing it every year as part of our measurements on IS.”
Scrivener says the TCO-measuring exercise “was used to give the executive a measure of comfort that the approach we were taking was actually working and it was working in the areas that it needed to work”. In other words, he says, it was producing value by “controlling — managing — the expenditure of IS on an ongoing basis, rather than me saying hey, everything’s under control guys, don’t worry about it”.
The state-owned power generator and retailer was created out of the split-up of ECNZ (Electricity Corporation of New Zealand) in 1999. About four months later Scrivener, who’d been in IS management “for — well — some years” was brought on board to build an in-house IT team to replace consultants and help set up the “Genesis environment”.
“Because we had inherited the old ECNZ environment, we actually had something like three or four different domains and different sets of structures, so it wasn’t a cohesive unit at all,” he says. “There was a lot of work done in those three years [up to 2002] to standardise things across all the sites — the desktops, the network, the IT environment, the security environment, the applications environment. There was a whole pile of work done in that first three years to get us to a stage where we said right, wherever you go in Genesis you know what you’re going to meet, what you’re going to work with it, it’s going to be there.”
Genesis chief executive Murray Jackson has attributed a good part of the TCO result to this early establishment of best practices — and the company’s ongoing strategic commitment to following them.
Also instrumental in setting up the new infrastructure was Axon, which now runs the managed environment that Jackson has praised as a “major contributor” to last year’s record TCO rating. Axon’s Sitecare service, based on its AME (Advanced Managed Environment) tools, says Jackson, “manages the honouring of Genesis’ commitment to best practices … across all activities”.
Scrivener says the outsourcing of IT was “to a large degree” already in place with the ECNZ environments that Genesis incorporated.
“When the corporate office was established it was decided to bring in the head consultants. Azimuth was the main party that helped establish Genesis as an environment and Axon was brought in as the service provider to establish infrastructure for the corporate office.” Management of applications and databases was put under the care of Theta Systems.
Other service providers also came with the ECNZ split, “but we reduced them quite quickly. Again, it’s TCO best practice to reduce the number of service providers you have”.
While Scrivener is quick to acknowledge the importance of a managed environment in supporting TCO best practice, he’s equally adamant that the “philosophy and approach” to managing an organisation’s IS assets must first be nutted out.
“It’s developed over a period of time from your own experience of what works and doesn’t work, and what you’re comfortable works within the organisation,” he says.
“You’re looking for a way of managing the costs. Your ongoing operating costs are the big push behind this. If you can manage those, get them under control, understand what they are and therefore when you make changes what the effects of those changes are going to be in relation to costs, then you’re a long way towards being able to put out a three- to five-year plan to the executive and to the board that ‘this is what your costs are going to be — and, by the way, if you do this, the costs are going to be this’. It enables you to plan, not just manage.”
Scrivener believes IS savings come with standardising wherever possible. Among the key areas where costs have been reduced are:
1.Desktop, servers and providers
“We have a very, very mixed business requirement. We are generation and retail, environmental, trading, thermal and hydro in generation – a very mixed environment,” Scrivener says. “Could you meet all those different specialist needs with an almost standard-type desktop?”
The answer, he says, is yes, “but how you go about it is where you either succeed or fail”.
They decided to try to limit the number of hardware suppliers and software environments, opting mainly for Compaq HP on the desktops, with either Unix or NT servers, depending on applications.
“So desktop, servers, your whole service environment and your service providers — you try to get commonality of service providers so that your partners, your outsource service providers, cover a range of areas rather than just a specialist area. And you try and reduce the number of service providers so the contact points for the customers are simplified.”
“You try to have a security policy in place that is understood by everybody, so the connections and the touch points within the organisation and external to the organisation are standard rather than individual approaches. It’s a matter of putting standard interfaces in place within the organisation and out.”
3. Policies and procedures
“This is a big one. If you’ve got a managed environment it’s important that people understand the processes that are followed, and those processes have got to enable things to happen rather than stop them happening. They’re continually evaluated as new challenges get thrown up.”
“You try to use standard, well-supported applications, even in specialist areas … so you get commonality of application delivery.”
Scrivener says they’re still rationalising applications, but currently, on the retail side, the main ones are the billing engines that produce invoices for the mass market and major customers. In the power generation area, the two major applications are a Maximo asset management and maintenance scheduler, and a real-time event-logging system providing information on plant. Oracle looks after financial systems and most of the company’s databases. The Cognos suite of business intelligence tools sits over the data warehouse and Pivotal is the CRM tool of choice in retail.
“To me, it’s just a matter of managing an asset and managing it effectively with an eye to keeping cost under control,” Scrivener says. “That and being able to justify why the costs are there. It’s not necessarily a cost reduction, it’s a matter of keeping them under control and being able to explain them and justify them.
“It’s difficult to build on if you don’t know what the costs are going to be. If you suddenly branch out and you get a new acquisition, you need to know what the costs are going to be associated with running that on a day-to-day basis, let alone your set-up costs. Because if you’ve got no idea, then you’ve got real problems trying to forecast.” In other words, he says, you should be able to put a cost “on anything that happens within your organisation”.
The Genesis CIO is not about to put a dollar figure on IS, however. “That’s commercially sensitive,” he says. “But the cost isn’t necessarily your operating budget, because there’s real cost and indirect costs and what TCO does is put a measure across the indirect costs as well.”
While Scrivener and his in-house team retain overall control of IS strategy and work with business units on their IT needs, Axon implements solutions within its operational brief. The helpdesk is part of this managed environment, and Axon remotely manages servers, desktops and application servers, also working with other service providers like Theta when system changes are needed.
To get the most from outsourcing, Scrivener believes, it’s important to first establish what the service providers are bringing to the party and what skills are needed in-house.
“I mean, if you haven’t got the in-house area first, you can’t outsource everything with business decisions. We work with the business units, not the service provider; the service providers actually work with us. Their particular areas of expertise add value to the business, certainly, but we’re the main interface — our customers are the business units, except in helpdesk matters.
“Axon has experience of working in areas with other customers that we can take advantage of and bring those skills onboard when we need them for a particular reason or approach or project or anything like that. So it’s a very good working relationship, very much a partnership role.” He adds that an “open-book policy” by the service provider keeps him up to date on costs.
Genesis’ retail assets cover the country from Northland to Southland. Its electricity is generated at Huntly (thermal); at Te Awamutu and Kinleith (co-generation); by hydro schemes at Waikaremoana, Tongariro and Kourarau; and from a wind farm at Hau Nui, on the South Wairarapa coast. It also owns 70% of the Kupe gas field.
With assets ranging far and wide, there is the potential for huge support costs and Scrivener says the managed environment helps keeps these costs to a minimum.
“It enables you to reduce the onsite support that’s required. All [trouble-shoot] calls go into the help centre and they’re usually resolved at first level or second level. It’s only if you need a hardware replacement or an upgrade that requires hardware that they need to put and engineer onsite.” Software is pushed through the network.
“We’ve got field engineers on-site at Huntly because of the numbers down there and the complexity of the environment. The other sites are normally visited on an as-required basis. Tokaanu, for example, is visited once a month.”
Retail offices are supported out of Axon’s regional offices in Wellington, Palmerston North and New Plymouth “on an as-required basis or if we do some major enhancements where we need to put bodies onsite”.
But most of the support is carried out by remote access from the help centre in Auckland. “They have the ability to dial in and we do a lot of pushing with patches for new applications and things like that — that’s all part of the managed environment,” Scrivener says. “You can do an awful lot [of trouble-shooting] from a central point; you don’t necessarily need bodies on the floor.”
Another big advantage of the managed environment is that any Genesis user can sign on and work from anywhere within the network without needing to carry around a laptop. “If I go down to Tokaanu for the day I can log on as me and I can operate within the privileges that are set up for me to operate,” says Scrivener. “You don’t get a different access when you go somewhere else.”
Scrivener admits that the ME concept had to be sold to the company, particularly its engineers.
“Engineers are by nature an intelligent bunch of people and like to try things, like to prove things, like to develop things,” he says, “so they’ve got a lot of initiative. And within this company there’s an awful of very good, very clever people.
“What you’ve got to do is manage that process; you can’t necessarily allow things to go off haywire when there’s a corporate requirement on the information that’s supplied and things like that. But, by the same token, you’re not to restrict initiative … because out of a lot of those initiatives or those prototypes or those early developments come something the company can use in the larger scale.”
Overall, Scrivener says, ME is “reasonably well accepted”.
“There are exceptions to the managed environment and we have ‘managed exceptions’,” he laughs. These, he explains, are specialist areas, particularly within engineering. Usually, if an application is going to three or more people on an ongoing basis it will be packaged as part of ME. The company utilises something like 340 managed applications.
If a potentially restrictive managed environment required a sales pitch, Scrivener says, IS itself is firmly accepted and supported by the business, from the chief executive down. The company operates an information services steering committee — an IS initiative — made up of its general managers, with the chief executive in the chair. All proposals for IS projects or action are presented in laymen’s terms to the committee, along with costs and other associated details, for approval. The committee meets bi-monthly or when required. Executive also receive monthly reports from IS.
“The steering committee’s there for strategy and approval,” Scrivener says, “where new technologies are going or where they might be adapted for Genesis’ benefit, or things we might need to consider for business initiatives.”
Rather than just an approval mechanism, he says, the steering committee enables “heads up, here we are, this is where we’re going, this is what we need to think about” input from both sides.
“It’s a very strong part of IS governance within this company,” he says, “and I think because of that we have excellent support from the executive for IS and its initiatives”.
And, he adds, TCO will not work unless management “adopt it, accept it as a philosophy and back it”.
Scrivener admits he was surprised and “very pleased” with last year’s TCO result, which certainly didn’t do any harm to IS’ standing with management, although the appreciation comes with high expectations for the future.
“Now,” he says with a chuckle, “the challenge is to maintain that. And one of our measures is to maintain it within 15% of the … Utopia. So the next measurement’s going to be interesting, because there’ve been changes.”
The changes include putting a storage area network environment in place and the consolidation of service and applications. “The exercise is to go back and measure those changes and see what it’s done to your TCO, whether you need to adapt your best practices to some degree because of the changing technology. Nothing stands still.”
Total cost of ownership, Scrivener points out, is only one measure of effectiveness. The company currently uses other gauges “like normal budget management” and will implement benchmarking from March.
“The intention is to say, ‘where does Genesis IS fit with utilities, similar industries, similar-sized organisations?’. TCO does some of that, he says, “but benchmarking will look at where you’re going with things and what you’re doing in relation to new technologies”.
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